WHAT IS AN ESCROW ACCOUNT?

Escrow account is an account placed in trust with a third party usually a bank to hold money which belongs to others. The release of money parked in escrow account will be dependent on conditions agreed to by the transacting parties. The Escrow services are offered to meet diverse requirements of clients that include Sale purchase transactions,     Share Buyback and Mergers & Acquisitions,     Revenue and Profit sharing transactions. The holder of the escrow account would ensure that the appropriation of cash flows is as per the agreed terms and conditions between the transacting parties. In India escrow account is widely used in public private partnership projects in infrastructure. The beneficiary of the account can get the money after fulfilling the prescribed conditions. Reserve Bank of India has permitted Banks (Authorised Dealer Category I) to open escrow accounts on behalf of Non Resident corporates for acquisition / transfer of shares/ convertible shares of an Indian company.

In the judicial context, the defendant pays the total amount of the judgment (or settlement) to the court-administered or appointed escrow fund, and the fund distributes the money.