Bank Account Control Agreement
An admission by the custodian bank that DACA must certify the lender`s “control”; A statement from the deposit-making bank that the accounts concerned are “deposit accounts”; An agreement by the deposit-taking bank not to change the name or number of the deposit account without the lender`s written consent; An agreement between the deposit bank and the borrower to notify the lender before the closing of the deposit accounts and allow the lender to adopt a new DACA for all deposit accounts in which the borrower could defer cash security; and – An agreement of the deposit bank to subordinate all the pledge fees it has to the account and waive its right of clearing on the deposit account, with the exception of the amount of deposits credited to the account that are not repaid and the ordinary service charges charged by the deposit bank. The first instruction — An instruction given to the bank comes from the lender, which orders it to stop following the debtor`s instructions. The initial statement often contains a disposition order from the secure part, which allows the insured party to manage the flow of money from the deposit account. Instructions – An instruction to the bank that manages the sale of funds in the account. Prior to opening or replacing a deposit account, the debtor has: (a) the written authorization of the majority creditors for the opening of such a deposit account and (b) has encouraged each bank or financial institution in which it wishes to open a deposit account to enter into a deposit account control agreement with the secured party in order to give the insured party control of that deposit account. A deposit account control agreement (DACA), also known as a control agreement, is a tripartite agreement between a deposit client (the debtor), a client`s lender (the guaranteed party) and a bank. Advanced Security Interests – During the execution of the DACA, the insured party will be granted an advanced security interest that granted it, under the Single Code of Commerce, exclusive rights to control the debtor`s deposit account. A lender can establish “control” in one of the following ways: (i) the borrower holds his deposit account directly with the lender; 2. The lender becomes the effective owner of the borrower`s deposit accounts with the borrower`s custodian banks; or (3) the lender and borrower enter into a deposit account control agreement (known as DACA) with the borrower`s deposit bank.
These agreements apply in all cases in addition to the guarantee agreement by which the borrower grants a security interest on his deposit accounts. The first step a deposit bank needs to take to protect itself is to start with a good DACA form. DACA forms made available to a depository by a lender are not established taking into account the unique operational, commercial and legal needs of the custodian institution. And they are more likely to contain provisions that are more favourable to lenders than the industry market. By creating and emphasizing the use of its own DACA form, a filing institution can be assured that its individual operational needs are taken into account, including communication information and the time provided for the implementation of other parties` instructions. In addition, individuals who implement DAC with the custodian become more familiar with the depository`s obligations under the DACA using their own form, which reduces the likelihood of an error or error in implementation.