Springing Deposit Account Control Agreement

Advanced Security Interests – During the execution of the DACA, the insured party will be granted an advanced security interest that granted it, under the Single Code of Commerce, exclusive rights to control the debtor`s deposit account. Secure Part (Lender) – part of a DACA that borrows funds and obtains a perfect security interest on the debtor`s deposit account when executing the contract. The Uniform Trade Code (UCC) defines a deposit account as a need, time, savings, passbook or similar account managed by a bank. This excludes investment real estate or accounts submitted by an instrument. Unlike most types of guarantees, filing a UCC-1 financing return is not a perfect pledge to an account account. A lender can only upgrade a pledge to a borrower`s deposit account by obtaining „control“ of the account, which requires one of the following provisions: 1) the borrower keeps his deposit account directly with the lender; 2. The lender becomes the effective owner of the borrower`s deposit accounts with the borrower`s custodian banks; or (3) the parties receive a deposit account control contract (DACA) with the borrower`s deposit bank. Alternative (3) is often the only viable option. This would be in addition to the guarantee agreement by which the borrower would grant the lender its cash deposit accounts as collateral for the loan. UCC No. 9-104 — The „Single Code of Trade“ section that deals with deposit account control.

This section enhances the security interests on deposit accounts as an original guarantee. The deposit body. In most cases, it has its own form of DACA. The three parties concerned should, first of all, negotiate on different terms and conditions in form. For the lender, the objective is to insure the loan it has granted to the borrower and the borrower does not want to risk the deposit funds. The two parties must find common ground and the former should ensure that there is no default on their part. According to the UCC, the lender still needs to take some control over the deposit account, but at least the borrower will have access to its funds through such negotiations. During the due diligence process, the lender should request information about the custodian banks where the borrower`s deposit accounts are held, the purpose of each account and the amount of cash the borrower holds in each account.