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Understanding Escrow Services

The term Escrow is a legal concept describing a financial instrument and is used when assets are held by third party on behalf of two contracting parties, subject to a transaction, such as a contract of sale, between them being completed, until certain obligations or conditions under the agreement have been met.

Escrow is a process used when two parties are in the process of completing a transaction, and there is uncertainty over whether one party or another will be able to fulfill their obligations. Frameworks that use escrow include; internet transactions, banking, intellectual property, real estate, mergers and acquisitions, and many more.

Escrow services can be applied to straightforward or complicated agreements involving domestic or multi-currency, multi-jurisdictional transactions within varied accounting and legal frameworks.

Types of escrow transactions

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Corporate

These include warranty claims, deferred considerations and shareholder payments.

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Capital

This can be investor aggregation and disbursement, settlement of shares and cash consideration and coupon collateral.

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Commercial

This includes proof of funds and payment security, collateralised lending structure and collateral management.

Steps involved in escrow process

Generally, the following steps are involved in the buy and sell transaction of escrow process:

  • The contracting parties sign an escrow agreement, and an escrow account is opened at a bank;
  • The buyer deposits funds in the escrow account;
  • The escrow agent confirms receipt of the escrow funds to both contracting parties;
  • Usually, provision is be made for a due diligence procedure between the contracting parties for inspection of goods;
  • Confirmation of positive due diligence outcome will be provided by the buyer to the seller;
  • Subject to any further terms and conditions being met, the payment event is triggered and both the buyer and seller will notify Sovereign for the release of the funds;
  • Completion of the transaction takes place and we release the funds to the seller in accordance with the terms of the escrow agreement.

Advantages of Escrow Agreement

An escrow agreement provides the following advantages:
  • Protection – Escrow agreement protects the interest of both transaction parties because funds are held by a neutral, trusted third-party escrow agent.
  • Reduced risk– Escrow agreement minimise the market risks.
  • Assurance – Under escrow agreement an escrow agent provide independent assurance of escrow objectives.
  • Speed – Setting up an escrow account is straightforward and quick.
  • Efficiency – An escrow account helps in facilitating efficient transactions for the parties involved in escrow agreement.
  • Confidentiality – Chandrawat & Partners is the escrow account holder, so the details of the parties to the agreement do not appear on any public register.
Moreover, Escrow services can be used in situation where money or property is involved and being transferred between parties. It can be recommended for the following types of transaction:
  • Joint ventures
  • Mergers and acquisitions
  • Corporate finance/capital raising
  • Charitable fundraising
  • Asset sales
  • Securitisation of assets
  • Regulatory requirements
  • Real estate
  • Legal settlements
  • High value private trades

Why choose us for your escrow and settlement?

Tailor-made

Our dedicated team of experienced professionals around the world offer flexible solutions for a wide range of corporate transactions. Our escrow services can be tailored to meet the requirements of many different parties, situations and jurisdictions.

Support

Our team focuses virtuously on the management, administration and oversight of all of our escrow accounts, guiding the clients through set-up, maintenance and closure of each escrow account.

Efficiency

Our commercial team, including legal, accounting and compliance specialists, is fully integrated with our dedicated payment and client on-boarding teams, and enable us to draft arrangements, process documentation and conduct due diligence rapidly.

Effectiveness

Even in the most complex transactions, we seek to implement simple and cost-effective structures using straightforward legal documentation, making it easy for you and your legal counsel to work with.

Security

Our escrow services ensure security for all parties to a transaction Interested in Escrow Services.

Quick, Reliable and Responsive Services

 Agreements, claims, and disbursements are reviewed promptly and comprehensively by our escrow services team.

Integrated Solutions

 We offer a variety of investment, foreign exchange and payment services to support the transaction.

Escrow is a process used when two parties are in the process of completing a transaction, and there is uncertainty over whether one party or another will be able to fulfill their obligations. Frameworks that use escrow include; internet transactions, banking, intellectual property, real estate, mergers and acquisitions, and many more.

Author: Chandrawat & Partners

Date: August 2022

Topic: Escrow Services Guide

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Chandrawat & Partners is a leading full service firm in Hong Kong. We provide a wide range of high quality consulting services to domestic and international clients. With a strong network of professional advisors worldwide, we have a wealth of first hand experience and expertise in providing effective solutions to the complex issues.

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