Account control generally includes the following important provisions: an account control agreement (DACA), also known as a control agreement, is a tripartite agreement between a deposit client (the debtor), the lender of a deposit client (the part linked to the guarantee) and a bank. 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. 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. The lender should consider that the borrower retains a minimum balance on the account or accounts under the lender`s control and limits the borrower`s ability to open other deposit accounts that are not subject to the lender`s control. The lender should also monitor balances on the borrower`s deposit accounts. In a spring control agreement, a borrower if necessary could withdraw money from the deposit account before the lender could pass on its notice of control of the suspensions to the custodian bank.
The first instruction — An instruction given to the bank comes from the lender, which orders it to stop following the debtor`s instructions. The initial statement often contains a disposition order from the secure part, which allows the insured party to manage the flow of money from the deposit account. For a secure lender, cash is often the most critical piece of security.