About


Escrow is the term used when assets are held by a neutral third party on behalf of two contracting parties, subject to a transaction (such as a contract of sale) between them being completed, until certain obligations or conditions under the agreement have been met.

As an escrow agent, Sovereign will hold funds in an escrow account at a bank in Hong Kong on behalf of clients in accordance with the terms and conditions of an escrow agreement, until we receive the appropriate instructions or until predetermined contractual obligations have been fulfilled.

This service can be applied to straightforward or complicated agreements involving domestic or multi-currency, multi-jurisdictional transactions within varied accounting and legal frameworks.

The escrow process


Typically, the escrow process for a buy and sell transaction involves the following steps:

  1. The contracting parties sign an escrow agreement (which is drafted subject to the terms of the principal agreement) and an escrow account is opened at a Hong Kong bank;
  2. The buyer deposits funds in the escrow account;
  3. The escrow agent confirms receipt of the escrow funds to both contracting parties;
  4. Generally, provision would be made for a due diligence procedure between the contracting parties for inspection of goods;
  5. Confirmation of positive due diligence outcome will be provided by the buyer to the seller;
  6. Subject to any further terms and conditions being met, the payment event is triggered and both the buyer and seller will notify Sovereign for the release of the funds;
  7. Completion of the transaction takes place and Sovereign releases the funds to the seller in accordance with the terms of the escrow agreement.

Advantages of an escrow agreement


Advantages of an escrow agreement


  • Protection – the interests of both transaction parties are protected because funds are held by a neutral, trusted third-party escrow agent;
  • Reduced risk – counterparty or market risks are minimised;
  • Assurance – the escrow agent provides independent assurance of escrow objectives;
  • Speed – setting up an escrow account is very straightforward;
  • Efficiency – an escrow account helps facilitate efficient transactions for the parties involved;
  • Confidentiality – Sovereign is the escrow account holder, so the details of the parties to the agreement do not appear on any public register.

 

Where can escrow services be used?


Escrow services can be used in almost any situation where money or property is being transferred between parties. It can be recommended in particular for the following types of transaction:

  • Joint ventures
  • Mergers and acquisitions
  • Corporate finance/capital raising
  • Charitable fundraising
  • Asset sales
  • Securitisation of assets
  • Regulatory requirements
  • Real estate
  • Legal settlements
  • High value private trades

Why use our escrow service?


Why use our escrow service?


Parties to escrow arrangements can range from end users like corporate or multinational companies to professional intermediaries like law firms and accounting firms. They can also serve government agencies engaging in national infrastructure projects.

Sovereign’s escrow services offer the following client benefits:

  • Flexible – our escrow services can be tailored to meet the requirements of many different parties, situations and jurisdictions
  • Efficient – our group legal, accounting and compliance capabilities enable us to draft arrangements, process documentation and conduct due diligence rapidly
  • Effective – even in the most complex transactions, an escrow agreement will help make the transfer as smooth as possible
  • Robust – our agreements are detailed and robust
  • Secure – our escrow services ensure protection for all parties to a transaction
Get in Touch

Please contact us if you have any questions or queries and your local representative will be in touch with you as soon as possible.