“Escrowed share” or “Escrowed securities” is a financial or business term, which defines a service where a third party holds the shares until certain conditions are not fulfilled by the buyer of those shares. This service attempts to reduce the counterparty risk in the transactions.
Escrow is a service used when the transaction between the parties is not completed yet, and there is the uncertainty that regarding any one of the parties involved in the transaction. For example, if A is the buyer of the shares and B is the seller, now if B does his part and transfers the shares but he is uncertain as to whether A will transfer the amount or not, now this is exactly where the escrow service is used. BY using an escrow account, there is an involvement of a third party in the transaction that makes sure that each party performs his part of the transaction. Most of the time escrow agreements are put forth so that there is the surety of the transaction being completed by all the parties involved. Business is a field that requires trust between the parties, but t times, there needs to be a surety that things will get done as decided by the parties without any obstacle. This is where one should opt for an escrow agreement and the involvement of a third party, that acts as a watchdog.
Escrow service is used in multiple fields such as internet transactions, share transfers, real estate, etc. Concerning the stock market, when an escrow is done, it happens in a manner where the shares are in the name of the shareholder however, the rights of the shareholder on those shares that are being transferred through escrow are limited. For the purpose of escrow, there is an escrow agreement signed by the parties, where they appoint a third party who handles the escrow account. The agreement acts as a legal document that outlines the terms and conditions on which both the parties have to agree. An escrow agreement needs to outline all the conditions in detail between all the parties involved in that transaction.
The escrow agreement works in a manner, where the depositor deposits the assets until the contract is fulfilled. Once the conditions of the contract are met, it is the duty of the escrow agent, the third party, to transfer the assets to the buyer and complete the transaction.
This Article Does Not Intend To Hurt The Sentiments Of Any Individual Community, Sect, Or Religion Etcetera. This Article Is Based Purely On The Authors Personal Views And Opinions In The Exercise Of The Fundamental Right Guaranteed Under Article 19(1)(A) And Other Related Laws Being Force In India, For The Time Being.
