When funds or other assets are held in escrow by a third party pending completion of a transaction, both purchasers and vendors can have peace of mind, and be assured that the terms of the agreement have been met and that the funds are available.
Although all escrow arrangements function in essentially the same way, the rules and regulations that govern whether escrow is allowed or prevented for certain transactions or how the escrow is executed differ in various jurisdictions around the world. Knowing how to navigate the local requirements is essential for success and efficiency.
The differences in escrow rules and regulations globally are generally around whether escrow is required or not for certain transactions, whether governing laws recognise the concept of holding funds on behalf of two or more parties and specific operational requirements. For any corporation, it is almost impossible to keep up with the local and cross-border implications of outbound escrow activity. A London-originated escrow arrangement in Vietnam may be significantly different than the same escrow arranged in Colombia. The complexity increases when multiple financial and regulatory regimes are involved.
An example of the nuances found at a market level can be found in India, Bangladesh, Pakistan and some other South Asian countries. The laws contain language relating to escrow that potentially expose counter parties to risk of criminal liability. As a result, transaction parties often want escrow assets held in escrow rather than trust (as can often be drafted into Escrow Agreements). Another similar local pitfall exists in China, where an escrow can be documented contractually, but would not be recognized as legal if tested, because the rule is that you can't hold funds for two parties – only one. In situations such as these, an escrow agent with deep local market knowledge is essential to arrange cross border escrow transactions.
TMF Group has access to cross-border knowledge and capabilities through our global footprint in our network of offices across 80+ jurisdictions. . TMF Group is well positioned to help navigate the local escrow requirements globally and locally, whether you have a single transaction or are looking at multiple transactions across international borders. TMF Group services and administers clients' escrowed assets, such as cash, securities, property (including intellectual property), contracts or other collateral. We support escrow requirements for a wide variety of transactions and services including mergers and acquisitions, asset sales/divestitures, real estate sale and leasebacks, account bank services for private equity firms and more.
Why work with us?
Choosing TMF Group's escrow, account bank and cash management services provides a number of advantages.
- Expertise: as one of the largest providers of financial transactions, we have a pool of talented staff with industry experience. We allow our clients to focus on their key strategic goals, rather than the day-to-day management.
- Flexibility: we provide a broad range of services for clients on escrow, account bank and cash management.
- Single point of contact: we can provide an experienced person to act as a single point of contact for you and coordinate internally within TMF Group.
- Independence: TMF Group is not tied to any financial institution, law, tax or accounting firm. Our independence guarantees that we always put the interest of our clients first.
- TMF Group is not a bank, but we have strong relationships with a number of financial institutions and can either make an introduction, or work with your preferred bank in support of your escrow transaction.
What sets our Escrow, Account Bank, Cash Manager and Account Bank services apart?
Our governance and compliance knowledge, paired with our deep understanding of the capital markets and adjacent, financial, transactions. Combine this with our ability to support, often complex, transactions from A to Z, and we're able to offer a comprehensive and unrivalled service across our global network.
We deliver tailored solutions that allow you to operate smoothly from day one. To find out exactly how we can help you, make an enquiry with us today.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.