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    Escrow

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    Konan Snowden
    An escrow account is a third-party held account that ensures obligations between parties in a contract are met. Funds or assets are deposited in the account and held until the terms of the contract are fulfilled by one of the parties. Escrow accounts are commonly used in lending, project financing, mergers and acquisitions, share buybacks, and real estate transactions to ensure funds are available if contractual obligations are not met. For example, an acquiring company opening a tender offer will need to deposit funds in an escrow account equal to a percentage of the offer amount based on the size of the deal to ensure payment if the acquisition is completed.

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    Escrow

    Uploaded by

    Konan Snowden
    116 views4 pages
    An escrow account is a third-party held account that ensures obligations between parties in a contract are met. Funds or assets are deposited in the account and held until the terms of the contract are fulfilled by one of the parties. Escrow accounts are commonly used in lending, project financing, mergers and acquisitions, share buybacks, and real estate transactions to ensure funds are available if contractual obligations are not met. For example, an acquiring company opening a tender offer will need to deposit funds in an escrow account equal to a percentage of the offer amount based on the size of the deal to ensure payment if the acquisition is completed.

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    Escrow

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    65950902-Escrow

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    An escrow account is a third-party held account that ensures obligations between parties in a contract are met. Funds or assets are deposited in the account and held until the terms of the contract are fulfilled by one of the parties. Escrow accounts are commonly used in lending, project financing, mergers and acquisitions, share buybacks, and real estate transactions to ensure funds are available if contractual obligations are not met. For example, an acquiring company opening a tender offer will need to deposit funds in an escrow account equal to a percentage of the offer amount based on the size of the deal to ensure payment if the acquisition is completed.

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    116 views4 pages

    Escrow

    Uploaded by

    Konan Snowden
    An escrow account is a third-party held account that ensures obligations between parties in a contract are met. Funds or assets are deposited in the account and held until the terms of the contract are fulfilled by one of the parties. Escrow accounts are commonly used in lending, project financing, mergers and acquisitions, share buybacks, and real estate transactions to ensure funds are available if contractual obligations are not met. For example, an acquiring company opening a tender offer will need to deposit funds in an escrow account equal to a percentage of the offer amount based on the size of the deal to ensure payment if the acquisition is completed.

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as PDF, TXT or read online from Scribd
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    Escrow Account

    Third party account. The third party agrees, by contract, with party A to hold funds in an account until party B fulfills some obligation..

    Escrow Account
    Escrow a/c refers to an arrangement where assets or revenue streams are held in the safe custody of a Bank as safety against a situation when a contract isnt fulfilled. The escrow arrangement ensures that obligations between parties are met with and transactions are operated in terms of the underlying agreement.

    An Escrow account is typically used for lending arrangements, project financing, securitisations, M&A's, buy-back of shares, take-overs, custody, litigations, purchase & sale of land, custody of software source code, etc.

    Escrow Amount is to be calculated


    Suppose Sonal ltd. Want to acquire Bharti ltd. Before making the Public Announcement, the SONAL LTD has to open an escrow account in the form of cash deposited with a scheduled commercial bank

    Sonal Ltd. Open offer 3 crore of Rs. 10 FV

    Bharti Ltd. Paid up capital 10 crore of Rs. 10 FV

    Market price Rs. 150 per share In future, this process should flow in a underlying agreement for that Sonal Ltd. maintain Escrow Account.. Market price * share issued 150 p.s. * 3 crore = Rs. 450 crore

    Escrow Account condition:


    If amount is Rs. 100 crore -- directly maintained 25%

    If amount is more than Rs.100 crore

    So, Sonal Ltd. Need to deposit Rs. 450 crore in Escrow account First, Rs. 100 crore 25% = Rs. 25 crore Remaing, Rs. 350 crore 1o% = Rs. 35 crore Total = Rs. 60 crore

    In case, the acquirer fails to make the payment, MB has a right to forfeit the escrow account and distribute the proceeds.....

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