Escrow Services For Private Placement and other Transactions
Prospectus.com Can Serve as your Trusted Escrow Agent
Our team of attorneys can assist with creating and managing your escrow service needs. Our staff can create an escrow account in a matter of hours and set up your company to begin receiving subscriptions quickly.
Private Placement transactions that are typically carried out between two or more parties often utilize an escrow agent and an account for purposes of holding funds. Our team member will create the escrow account for the sole purpose of holding investor funds, or other instruments on behalf of one party, which will only be released to the issuing company when a specified condition or event occurs or a milestone is met.
Why Use Escrow
Creating an escrow account is a secure way for two parties or more to safely conduct a transaction. In the case of a private placement offering, where an investor was given a prospectus a private placement memorandum or an offering memorandum, there may be escrow clauses in the document itself. If there is no escrow language but you wish to open an escrow account to receive subscription, our staff will adjust your offering documents or prospectus to disclose the escrow clauses.
Private Placements and Subscriptions
Before an escrow payment can be released to the company certain obligations must be met. One of the more common escrow clauses found in private placements worldwide is the maximum dollar amount a company needs to run and grow its business. For example, if a company is seeking $10 million in funding – and they cannot run the business with anything less than $10 million – normally all funds up to $10 million would be placed in escrow until the full amount is raised. Otherwise the initial investors, such as those that invested a relatively small amount (for example, $50,000) would be taking a massive risk. If the company selling securities begins to spend the initial capital but has not reached their funding goal the first investors would be out of luck and most likely out of their money. Thus, in many private placement offerings all proceeds of the offering would be escrowed until the full amount, or the amount specified in the business plan or prospectus offering document, is noted. Often this initial amount is referred to as the “Minimum Offering”.
Holding Escrow Proceeds until the Minimum Offering is Subscribed
Any well written prospectus or private placement memorandum or private offering memorandum will stipulate that all funds raised up until a minimum threshold will be put in escrow and will be unable to be accessed until a per-determined milestone is met. Once the minimum offering is met the escrow agent will then disburse the subscription funds to the issuer of the securities. If the minimum offering is not raised, or even the maximum as we saw above, all funds will be returned to the other investors. Such escrow information must be noted in the memorandum or prospectus. If you need our assistance with drafting prospectus or a memorandum for private offering feel free to get in touch with us anytime.
Here are some Reasons to use Prospectus.com’s staff for your Private Placement Escrow:
- Our team will create an escrow account that will be first and foremost utilized to ensure that the funds or instruments held is not released until all the conditions of the transaction have been complied with.
- Our escrow team and agent are disinterested 3rd-parties who have no claims to any funds, and simply administer the escrow account.
- Our attorneys can create your escrow agreement paperwork. The terms and conditions of the escrow account are detailed in the escrow agreement.
- The escrow agreement imposes the duties of a legal trustee on the escrow agent.
- Our attorneys act as your escrow agent and handle all your escrow arrangements, quickly and cost effectively.
- The escrow agent holds a contractual and fiduciary duty to safeguard the funds or instruments held in the escrow account.
Prospectus.com Escrow Services Sample
Our attorneys and staff can hold and transfer your shares or stock or units to the investors.
Step 1: The seller or issuer of the securities will deliver copies of the original certificate of ownership, such as share or unit or stock certificates, to the escrow agent or if decided to be undertaken electronically via a clearing system;
Step 2: The purchaser of the securities will wire transfer the subscription price into the escrow account. The escrow account will be specifically created for this type of transfer;
Step 3: The seller of securities will deliver the original certificates of ownership or if agreed via electronically, often to the escrow agent, Prospectus.com in this case;
Step 4: The escrow agent will deliver the certificates (physical or electronic) to the subscriber of the securities, once all conditions of the escrow agreement have been met.
Our Team Can Help
Prospectus.com’s staff and attorneys can serve as your escrow agent for your transaction and handle all your company’s escrow needs. Whether you need us to draft the entire prospectus offering documents, or just edit your existing memorandum with the proper escrow clauses, or write your escrow agreement, or just setup up and manage your escrow services, we can help.
For more information on our escrow services please contact us.
- Prospectus Writing
- IPO Stock Exchange Listing
- Bond Offerings
- Feasibility Study
- Hedge Funds and Mutual Funds
- Offering Memorandum
- Private Placement Memorandum
- Offering Circular
- Explanatory Memorandum
- Information Memorandum
- Fund Setup Formation
- Securities Identifiers
- Registration and Filing
- Legal Work
- Escrow Services
- Business Plans