At closing, the buyer may deposit a portion of the purchase price into an escrow fund that is established so the buyer will be able to recover money that may be due to it under the merger agreement without filing a lawsuit. A buyer may be entitled to the money in escrow for a variety of reasons. For instance, the buyer could suffer damages if something represented as true by the selling company turns out to be false.
Residual funds are distributed to securityholders according to their pro rata share of the escrow after the scheduled escrow expiration date. A typical timeline for the distribution of funds after an escrow expires can be found here.
Escrow funds cannot be released (and an escrow account cannot be closed) until the pre-determined escrow expiration date, as escrows do not represent guaranteed funds. They are similar to a check that hasn’t cleared; the money is not available even though you can often see it in your account.
Please contact us at firstname.lastname@example.org with any additional questions.
Posted in: Clients: Escrow Accounts