Collateral Account Control Agreement Template for the United States

A Collateral Account Control Agreement is a fundamental legal document that enables secured parties to establish and maintain control over deposit or securities accounts used as collateral in financing transactions. Under United States law, this agreement creates the legal mechanism required by the Uniform Commercial Code for perfecting security interests in financial accounts while defining the roles and obligations of all parties involved.

When do you need this document?

You need a Collateral Account Control Agreement whenever you're involved in secured financing where deposit or securities accounts serve as collateral. This typically occurs in commercial lending arrangements where banks require security interests in borrower accounts, structured finance transactions involving multiple layers of collateral, and securities lending operations. Asset-based lenders frequently use these agreements to secure lines of credit, while private equity firms and hedge funds employ them in leveraged buyouts and margin lending arrangements. The agreement becomes essential when the secured party needs to ensure priority over other creditors and must comply with UCC perfection requirements.

Key legal considerations

The agreement must satisfy specific control requirements under UCC Article 9 to achieve perfection of the security interest. Key provisions include establishing the secured party's right to exclusive control through written notices to the account bank, defining the account bank's obligations to comply with control instructions, and addressing potential conflicts between competing control agreements. The document should clearly specify the scope of collateral covered, including future deposits and investment property, while addressing setoff rights and the account bank's compliance obligations. Critical clauses must address termination procedures, liability limitations for the account bank, and coordination with other security documents. When securities are involved, the agreement must comply with federal securities laws and consider custody arrangements under the Investment Company Act.

Legal requirements in United States

United States law requires strict compliance with UCC Article 9 control provisions, which vary depending on whether the account contains deposit funds or investment securities. For deposit accounts, control is typically achieved through a control agreement between the secured party, debtor, and depositary bank, requiring the bank to comply with the secured party's instructions without further consent from the debtor. Securities accounts must meet additional requirements under UCC Article 8, often requiring the account bank to act as securities intermediary. Federal banking regulations impose additional compliance obligations, including Bank Secrecy Act and USA PATRIOT Act requirements for account monitoring and reporting. The agreement must also consider FDIC insurance implications and ensure compliance with applicable state banking laws where the account bank is located.