Deposit Account Control Agreement Means

Article 9 of the Single Code of Trade (UCC) defines a deposit account as a claim, time, savings, passport or similar account held in a bank. Unlike most types of guarantees, filing a UCC-1 financing return is not a perfect pledge to an account account. A lender can only perfect a pledge right to an account by obtaining „control“ over the 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. First, there are two types of account control agreements: assets and liabilities. Debtor (client) – As one of the three parts of the DACA, the debtor provides the security and receives the deposits into the deposit account. Regions have a centralized and experienced account control team that can offer a number of benefits to lenders and clients as well as their law firms. DACs are tripartite agreements between a lender (also known as a guaranteed party), a borrower and a custody institution.

The purpose of a DACA is to allow a lender to take control of its borrower`s deposit accounts held by a deposit facility other than the lender, in order to allow the lender to enhance its security interest in deposit accounts. Some DACs are structured so that the lender has exclusive control over deposit accounts immediately after DACA der. Other DADs allow the borrower to access deposits, withdrawals and transfers to deposit accounts until the lender informs the custodian institution that the lender is taking exclusive control and the borrower no longer has access, withdrawn or transferred deposit accounts. Secure Part (Lender) – part of a DACA that borrows funds and obtains a perfect security interest on the debtor`s deposit account when executing the contract. 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. The lender should obtain a DACA from each third-party bank from which the borrower has a deposit account. A deposit bank that signs a DACA agrees to follow the lender`s instructions regarding the borrower`s money paid, without the borrower taking further action or the borrower`s agreement. Such an agreement gives the lender „control“ of the deposit account required for perfection under the UCC. For a secure lender, cash is often the most critical piece of security.

Borrowers hold cash deposit accounts in a bank. Thus, a lender will want to obtain a sophisticated security interest for these deposit accounts in order to have an advanced security interest in this cash. 1) Accept a DACA form that has not been specifically established by this depository for use by this custodian; UCC No. 9-104 — The „Single Code of Trade“ section that deals with deposit account control. This section enhances the security interests on deposit accounts as an original guarantee. Each custodian bank often has its own form of DACA, although the above elements are common to each form. The DAC is the subject of discussions and negotiations. Therefore, borrowers and lenders should be aware that it may take some time before a DACA is agreed and signed by all parties, so that the lender can obtain a perfect security interest on a deposit account. Instructions – An instruction to the bank that manages the sale of funds in the account.