Blocked Account Control Agreement Template for the United States

A Blocked Account Control Agreement is a specialized legal document that gives secured lenders control over borrowers' deposit accounts as collateral in financing transactions. Under United States law, this agreement ensures compliance with the Uniform Commercial Code while protecting both lender and borrower interests in secured transactions involving cash collateral.

When do you need this document?

You need a Blocked Account Control Agreement when entering into secured financing arrangements where deposit accounts serve as collateral. Asset-based lenders frequently require these agreements to perfect their security interests in cash proceeds from inventory or receivables financing. Project finance transactions often utilize BACAs to control construction loan disbursements and ensure funds flow according to approved budgets. Commercial real estate transactions may require blocked account arrangements for rent collections and operating expense reserves. Acquisition financing deals commonly employ these agreements to control target company cash flows during due diligence and closing periods.

Key legal considerations

The agreement must clearly establish the secured party's control rights while defining operational procedures for account management. Account control provisions should specify circumstances triggering lender control, notification procedures, and permitted account activities during normal operations. Security interest clauses must comply with UCC Article 9 perfection requirements, including proper identification of collateral and priority arrangements with other creditors. Bank acknowledgment sections should confirm the institution's understanding of control arrangements and agreement to follow secured party instructions. Operational terms must address routine banking activities, including deposits, withdrawals, and account maintenance while preserving the secured party's control rights. Default provisions should outline specific events triggering enhanced control measures and remedies available to the secured party.

Legal requirements in United States

United States blocked account control agreements must satisfy UCC Article 9 requirements for perfecting security interests in deposit accounts through control arrangements. The agreement must establish that the secured party has obtained control as defined in UCC Section 9-104, either through becoming the account customer or by agreement with the bank. Federal banking regulations require compliance with Bank Secrecy Act provisions, including customer identification and anti-money laundering requirements for all account relationships. The USA PATRIOT Act mandates additional customer verification procedures and ongoing monitoring obligations that affect account control arrangements. Securities-related accounts may trigger Securities Exchange Act requirements if the controlled funds relate to investment activities. State variations in UCC adoption may create additional compliance requirements depending on the account bank's jurisdiction and the parties' locations.