08/08/2023 Corporate & Commercial By LawWiser

The deals in mergers and acquisitions have been expanding so far, as diversification and access to technology have become backbone of developments in many firms across the country. Similarly, relatable aspects emerge from a very long time that contains paramount importance to light upon.

One such aspect is definable as “Escrow Account in M & A Transactions. Let us have a brief talk about the topic while understanding the crucial points and recent changes that have taken place.

Tune into this video, where LawWiser takes you through the concept of ‘Escrow Accounts in M & A transactions’.

Watch Prabhjot Singh explain the role of Escrow Accounts in Mergers and Acquisitions, the laws related to it, and the changes that have taken place through the guidelines released by the RBI.


An Escrow Account can be notably is definable as a process when a particular portion of funds or assets is trustily kept in the third party’s account.


Account Although Escrow Accounts are in use for mergers and acquisitions and cross-border transactions.

The use of such accounts is not neglectable in the transactions related to financial services and real estate matters.

What can be some situations in which the parties use escrow accounts in M & A Transactions?

1. First and the most obvious reason for using such an account can be highlightable as the extra degree of safety that the parties generally opt for.

2. Secondly, such accounts are usable by the parties who live in different parts of the world.

3. Lastly, it is usable when the transactions contain some percentage of complexity.

For processing with such accounts in mergers and acquisitions.

Escrow agreements are made for a view to make it much easier and convenient for the parties involved in such deals. No lets connect these threads with the law and recent changes that have taken place in a while.


Is there any specific act that governs these accounts in India?


Currently there are prominent laws which forms the structural part concerning these type of accounts such law can be prominently followable in SEBI (SAST) Regulations, 2011.

The regulation 17(1) says that not more than 2 working days prior to the DPA of open offer for acquiring share.

The acquirer shall create an escrow account in respect of security for performance of his obligations.


What are the recent changes that have taken place in this area ?


Some fundamental changes have occurred in the same field through an official circular releasable by RBI on August 6, 2020 –

-Which directly relates to escrow accounts.

As per the notification-

RBI has been directed to allow banks to open some accounts fixable under various statutes.

Such “specific accounts” also include escrow accounts.

The exact guideline relatable to the such accounts is stated as Escrow Accounts of payments for specific activities permissible by DPSS(Department of Payments and Settlement Systems) AND RBI under PSS Act, 2007.


While escrow accounts are leading their way to create trust among the citizens.

it is reasonable to believe that there are still some improvements need able to make these accounts more understandable and approachable for the public. Visit us at

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