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Third party account. The third party agrees, by contract, with party A to hold funds in an account until party B fulfills some obligation…..
purchase & sale of land. etc. M&A's. take-overs. The escrow arrangement ensures that obligations between parties are met with and transactions are operated in terms of the underlying agreement. custody of software source code. custody. . project financing. buy-back of shares. An Escrow account is typically used for lending arrangements. securitisations.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 isn’t fulfilled. litigations.
Escrow Amount is to be calculated Suppose Sonal ltd. Want to acquire Bharti ltd. 10 FV Bharti Ltd. 150 per share In future. the SONAL LTD has to open an escrow account in the form of cash deposited with a scheduled commercial bank Sonal Ltd. Market price * share issued 150 p. 450 crore . this process should flow in a underlying agreement for that Sonal Ltd. 10 FV Market price – Rs. Open offer 3 crore of Rs. * 3 crore = Rs. maintain Escrow Account. Paid up capital 10 crore of Rs.s. Before making the Public Announcement..
. MB has a right to forfeit the escrow account and distribute the proceeds. Sonal Ltd..100 crore So..Escrow Account condition: If amount is Rs. 100 crore -. 100 crore – 25% = Rs. Rs.. 60 crore In case. the acquirer fails to make the payment.directly maintained 25% If amount is more than Rs. 35 crore Total = Rs.. 25 crore Remaing. Need to deposit Rs. 350 crore – 1o% = Rs. 450 crore in Escrow account First. Rs.