In the first place, there are two types of deposit account control agreements: assets and liabilities. A lender may establish “control” in one of the following ways: (i) the borrower maintains his or her deposit account directly with the lender; 2. the lender becomes the beneficial 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 custodian bank. In any case, these agreements apply in addition to the hedging agreement by which the borrower grants a hedging interest for his current accounts. Regions has an experienced and centralized deposit account control team, which can offer a number of benefits to lenders and clients as well as their law firms. The lender should receive a DACA from any third-party bank with which the borrower has a checking account. A custodian bank that signs a DACA agrees to follow the lender`s instructions regarding cash paid by the borrower without further action or agreement from the borrower. Such an agreement gives the lender the “control” of the current account necessary for perfection after the INVESTIGATION PERIOD. Advanced Security Interest – Once the DACA is executed, the secured party will be granted an advanced collateral right which, in accordance with the Single Commercial Code, gives it the exclusive right to control the debtor`s current account. Secure Party (Lender) – part of a DACA that lends funds and receives an advanced security interest on the debtor`s checking account upon execution of the agreement. There are two main forms of ACTA, each sufficient for control and perfection within the PEA.
A “frozen” control agreement provides that the borrower does not have access to funds in current accounts and that the lender has full control of the funds. The more common springing control agreement provides that the borrower can access current accounts until the lender provides the depositary bank with a notification of sole control. As a general rule, such termination can only be made by the lender if the borrower is late below the underlying credit. Once such notification has been made, the depositary bank must cease to comply with the borrower`s instructions regarding the current account(s) and to follow the lender`s instructions. Typically, a DACA emerging as an exhibition involves some form of proprietary control communication. The first step a custodian bank needs to take to protect itself is to start with a good DACA form. DACA forms made available to a deposit-taking institution by a lender are not prepared taking into account the unique operational, business and legal needs of the deposit-taking institution. And it is very likely that they will contain provisions that are more favorable to lenders than the market in the sector. By creating and emphasizing the use of its own DACA form, a deposit-taking institution can be confident that its unique operational needs will be taken into account, including notification information and the time required to implement other parties` instructions. In addition, individuals who implement CADs with the deposit-taking institution are better acquainted with the deposit-taking institution`s obligations under DACA by consistently using their own form, which reduces the likelihood of there being an error or oversight in the implementation.
Often, those responsible for implementing AACs are not familiar with the verification and interpretation of agreements. Therefore, an unknown DACA form will be difficult to interpret to understand all the obligations of the custodian bank. . . .