A New Way to Protect Assets

On June 1, 2018, changes to the Civil Code of the Russian Federation came into force, which will also apply to the escrow or escrow agreement.

How can such an agreement be of interest to both legal entities and individuals?

Let's explain now.

An escrow agreement is that one person (depositor) transfers property (any property, except real estate) to another person (escrow agent), and upon the occurrence of conditions specified by the escrow agreement, such as the provision of documents, the occurrence of certain deadlines, etc., the escrow agent transfers this property to a third party - the beneficiary.

EXAMPLE:

Company A entered into an agreement with company B. Company A transferred the money under the specified agreement to an escrow agent, who will transfer it to company B only after fulfilling the terms of the agreement and providing supporting documents. An escrow agent is an independent person (individual, legal entity or notary) who is not a bank and takes a fee based on your agreements. Company B is confident that if the contract is fulfilled, it will receive its money, and company A has protected its assets and is guaranteed to fulfill its obligations.

What's new?

• Previously, only a bank could be an escrow agent. Now - any person.

• In essence, an escrow agreement is a new way of settling transactions without the participation of banks in this chain, and, therefore, there are no costs for bank commissions, since the remuneration of the escrow agent can be as determined by the parties to the agreement. In addition, the agent has no right to withhold remuneration from the value of the deposited property.

• An escrow agent can act as a formal intermediary and check the documents according to formal criteria, or can conduct a detailed check of the fulfillment of obligations by the beneficiary, and if he considers the documents unreliable or the obligation unfulfilled, refuse to transfer the deposited property, which undoubtedly protects the interests of the depositor.

The main advantage of an escrow agreement that everyone (both individuals and legal entities) should keep in mind is:

Foreclosing on deposited property, seizing such property or taking interim measures against it for the debts of the escrow agent or depositor is not permitted.

Thus, this escrow agreement is a universal method of protecting assets.

Note:

The duration of the contract cannot exceed 5 years. The agreement is also subject to notarization, with the exception of certain cases.

 

Anastasia Zaitseva,
lawyer in maritime practice at Stepanov and Aksyuk Law Firm, associated office of GRATA International