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What is a business escrow holder?
In California, for business sale-purchase transactions of all sizes and shapes, it is common to have an escrow agent serve as a neutral independent fiduciary, communications link and closing facilitator. The escrow agent ensures regulatory compliance, prepares routine transaction documents and closing statements, and handles administrative details in a very cost-effective manner. Business escrows protect the interests of buyers and sellers, and are used extensively by transaction attorneys and intermediaries throughout California.
What do they do?
Typical duties of the escrow holder in a business asset sale/purchase transaction include:
- Preparing escrow instructions reflecting the terms of the purchase agreement.
- If applicable, the instructions will include a Notice to Creditors of Bulk Sale.
- Requesting publication, recording and UCC lien searches for state and county
- Complying with Bulk Sale statutes (publication), as applicable
- Notifying the county tax collector
- Requesting a beneficiary's statement if debt or financial obligations are to be taken over by the Buyer
- Requesting demands from existing lien-holders, receiving claims
- Notifying and obtaining clearances from County, State and Federal agencies as required
- Routine consultation regarding problems that arise
- Complying with lender's requirements, securing loan documents and receiving funds
- Obtaining and holding purchase funds from the buyer
- Prorating taxes, interest, rents, security deposits, etc., as instructed
- Preparing routine legal documents such as notes, security agreements, personal guarantees, amortization schedules, deeds of trust, UCC-1 financing statements, bill of sale
- Can prepare fictitious business name statements
- May prepare routine amendments to agreements
- Securing releases of all contingencies or other conditions imposed on the particular escrow
- Preparing estimated closing statements prior to close of escrow
- Preparing final closing statements for the parties, accounting for the disposition of all funds deposited in escrow
- Obtaining appropriate signatures on all documents
- Close escrow when all instructions of buyer and seller have been carried out
- Disbursing funds as authorized by instructions, including commissions and payoff liens
- Preparing and recording UCC-1, UCC-3 and deeds of trust, as needed
- Securing tax clearances
- Distributing final transaction documents to all parties
This is a generic list. Stock sale escrows are much different. The escrow tasks performed in an actual transaction will depend on the transaction type and circumstances, and will be clearly explained in a set of instructions prepared by the escrow holder when escrow is opened.