Deposit Control Agreement Template for the United States

A Deposit Control Agreement is a specialized legal document that establishes control arrangements for deposit accounts used as collateral in secured transactions. Under United States law, particularly UCC Article 9, this agreement allows secured parties to perfect their security interests in deposit accounts through control rather than traditional UCC filing statements. The agreement creates legally binding relationships between three parties: the account owner (grantor), the secured party (typically a lender), and the depository bank holding the account.

When do you need this document?

You need a Deposit Control Agreement whenever deposit accounts serve as collateral for loans or credit facilities. Commercial lenders require these agreements to secure their interests in borrowers' deposit accounts, ensuring they can access funds if borrowers default. Asset-based lending transactions commonly use these agreements when cash deposits back credit lines or equipment financing. Acquisition financing deals often require deposit control agreements to secure buyer financing with target company deposit accounts. Additionally, you'll need this document in workout scenarios where distressed borrowers pledge deposit accounts as additional collateral to avoid default.

Key legal considerations

The agreement must clearly establish the secured party's control over the deposit account while defining each party's rights and obligations. Critical provisions include the depository bank's agreement to comply exclusively with secured party instructions regarding the account, restrictions on the account owner's access during control periods, and notice requirements for exercising control rights. You should carefully address the priority of the security interest, especially if multiple creditors claim interests in the same account. The agreement must specify conditions triggering the secured party's control rights, such as loan defaults or covenant breaches. Consider including provisions for account sweeps, setoff rights, and the handling of incoming deposits during control periods.

Legal requirements in United States

Under UCC Article 9-104, a secured party obtains control of a deposit account when the depository bank agrees to comply with the secured party's instructions without further consent from the account owner. The agreement must satisfy UCC Article 9-312 perfection requirements, which generally mandate that control be established through explicit written agreements rather than mere security interest filings. Federal banking regulations, including Regulation CC and Regulation D, may affect fund availability and reserve requirements that impact the agreement's operation. State-specific banking laws in your jurisdiction may impose additional requirements on depository banks' obligations and the enforceability of control provisions. The agreement should comply with Federal Deposit Insurance Act requirements and Bank Secrecy Act customer identification procedures, particularly when control arrangements affect account access or monitoring.