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Escrow services
The escrow account is a special kind of account, that is used for depositing the material or immaterial funds
in the transaction between two parties to secure its closing. The subject of depositing can be the sales price
for the sales -purchase agreement, financial instruments like shares, bonds, debt notes, intellectual property rights, documents, software, data etc.
All that you need to know about
the transactions with escrow services.
The history of escrow, step-by-step guidelines for the contracting parties, pros and cons
of the escrow mediation/interference
Description
Escrow account usage and global practices
Transactions by means of escrow accounts are popular
in the purchase, where an independent party is required
for the safekeeping of the funds
Escrow account
The deposit remains in the escrow account last till the occurrence of some event or till
the fulfilment of the obligations of the escrow
account by the parties to it.
In the international legal practice escrow services are wide spread and are offered by natural and legal persons, banks, financial intermediaries and other authorized subjects depending on jurisdiction.
Transactions by means of escrow accounts are popular in the purchase of real estate, trading with goods and services, shipments of raw materials in huge volumes and other transaction, where an independent party is required for the safekeeping of the funds.
In the international legal practice escrow services are wide spread and are offered by natural and legal persons, banks, financial intermediaries and other authorized subjects depending on jurisdiction.
Transactions by means of escrow accounts are popular in the purchase of real estate, trading with goods and services, shipments of raw materials in huge volumes and other transaction, where an independent party is required for the safekeeping of the funds.
There are usually several parties involved in the escrow transaction
The beneficiary and the contributor can be either legal entity
or natural person. The legal capacity of a person is the only
possible limitation that exists. In case of incapacity the person
may be represented by the legal guardians
The beneficiary
Who receives the escrow funds when
the escrow agreement conditions are met
Parties of escrow agreement
The contributor / depository
Who transfer the escrow funds to the escrow account
The escrow agent
Who controls when the conditions specified
in a contract are met. The escrow agent distributes
the escrow funds according to the escrow agreement
Escrow agent and the main requirement to the escrow agent
Both, natural person and legal entity may act as escrow agent. Nevertheless, the legal requirement of the country of legislation
shall be fulfilled.
The function of an Escrow Agent in Switzerland may have natural persons like Attorney-at-Law (Bar members) and fiduciary, and legal entities with membership of the Self-Regulatory Organization (SRO)
The function of an Escrow Agent in Switzerland may have natural persons like Attorney-at-Law (Bar members) and fiduciary, and legal entities with membership of the Self-Regulatory Organization (SRO)
Escrow trust compliance
The nature of the escrow account opening presupposes the trust-based relations between parties. In most cases the escrow services fall under the anti-money laundering provisions (GWG) and supervision
Agent criteria
Regulations
In practice, this requires special authorization, adherence to anti-
money laundering (AML) and anti-terrorism rules, and appointing an AML/Compliance Officer or outsourcing these functions to an external service provider
Insured escrow services
An important criterion for choosing
an escrow agent is professional insurance for potential issues.
Goldblum and Partners offers
insurance of 1,000,000 CHF,
ensuring our clients feel protected
The procedure of escrow account opening and drafting of the escrow agreement
If there is no conflict of interest and compliance department
does not report anything suspicious, we will issue an invoice
for prepayment and after receiving the payment will start drafting the escrow agreement. If the escrow fund is in monetary form, we will initiate the procedure of the escrow account opening for depositing
the escrowed funds
As the result of these actions, the escrow account
opened and ready for receiving the escrowed funds,
the escrow agreement is agreed and signed by all parties
01
Escrow process initiation
Escrow account setup
After we receive a request for escrow services from one party, we ask
for the detailed information about the planned transaction. If the nature of the transaction - we will ask to provide the documents of the parties for the identification (KYC), compliance and conflict of interest checkup
Contributor deposits the agreed escrow funds to the escrow account, which will be released upon the fulfilment of the obligations according to the escrow agreement by the beneficiary. Some of the examples
of the action required from beneficiary for the dissolution of the escrow funds are transfer of ownership rights on the real estate, securities, goods shipment etc.
In case of the documents escrow, the documents
are usually transferred to the beneficiary after the payment.
For example, the documents of legal entity will be sent
to the Escrow Agent, and after the payment and occurrence
of the described in the escrow agreements events,
the documents will be transferred to the beneficiary
02
Escrow fund release
After the detailed checking of the fulfilment of all the conditions
in the escrow agreement and upon receipt of the necessary confirmations, we will complete all necessary payments
and transfers of escrowed funds to the parties
The escrow bank account will be closed
and the agreement will be stored as a record
03
Escrow completion
Escrow agreement: requirements
Agreement essentials
There is no specific requirement to the escrow agreement usually.
It has to contain the information about the parties, subject of
the agreement, obligations of the parties, descriptions of the escrow fund, escrow period, conditions for dissolution of escrowed funds
The escrow transaction involve also the bank that opens the escrow account. For this reason the ban conduct the compliance procedures identifying the parties who are or will be beneficial owners of the funds as well. This reduce the risk of fraud in escrow deals to minimum
The escrow transaction involve also the bank that opens the escrow account. For this reason the ban conduct the compliance procedures identifying the parties who are or will be beneficial owners of the funds as well. This reduce the risk of fraud in escrow deals to minimum
Banks for the escrow accounts
Preferred banks
We prefer to work with first rang Swiss banks such as UBS, Julius Bär and also with private and cantonal banks. The requirement
and the procedures are usually very similar, but the fees are different. The plus will be if the party or parties have the bank account
in the bank where opening of escrow account is planned
+10 Banks
In which cases we recommend to use escrow services?
The escrow service is popular in the real estate deals, trading transactions, where the participation of the independent third party as depository will be a guarantee for the fulfilment of all conditions
Choosing authorized agents
Our advice is to pay attention when choosing escrow agent. It should be the attorney at law, fiduciary
or authorised subject. The escrow service provision
has to be authorised by the official bodies of the state
Recommendation
Ensuring professionalism
The escrow procedure requires a legal work with documentation and high level of responsibility from
the escrow agent. Therefore, avoidance or ignoring
of such formalities has to be the first sign
of unprofessional attitude of the escrow agent
Attention
Pay attention to the enforceability of the contract:
the English law systems differ for the continental,
which the law of the Swiss confederation belongs to
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Professional - Reliable - Independent
The fees for the escrow agent participation in the transaction
are usually not less than 10'000 CHF, therefore, the parties should consider the costs with the future benefits. The conclusion might be that the escrow service is unnecessary and economically inconsistent
Certified
escrow services
The legal counsels of Goldblum
and Partners are happy to offer
you their services: our firm is SRO Member and is authorised for
the escrow service provision
Why Goldblum?
Insured legal expertise
We offer professional liability
insurance of 1,000,000 francs, guarantee a thorough analysis
of client goals, prompt responses, and fixed fees based on our
extensive experience
Guaranteed
data privacy
The Client-attorney privilege
is a guarantee for safekeeping
of all the data received even during the initial stages of the contact
with our clients
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Practices
Locations
Stockerstrasse, 45,
8002 Zurich
8002 Zurich
Baarerstrasse, 25,
6300 Zug
6300 Zug
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Disclaimer: The information on this website is not intended to constitute legal advice or to create an attorney-client relationship. The information, documents, or forms provided here in are intended for general information purposes only and must not be regarded as legal advice. Laws change periodically; therefore, the information on this website may not be accurate. It is imperative that you seek legal counsel to ascertain your rights and obligations under the applicable law and based on your specific circumstances
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