Escrow is a function involved in commerce throughout recorded history, that describes use of a stakeholder to make sure all parties get what they expect from a transaction. It has a critical role in the sale of businesses, making sure the seller gets the funds or other compensation agreed on, and the buyer simultaneously becomes legal owner of the assets being purchased in exchange for that compensation. In its role in a business sale, the escrow also takes on other duties, such as collecting taxes due on the sale, paying off debts of the business, and making sure that promissory notes, releases, titles, licenses, required government filings and other needed documents are properly executed and provided to the parties meant to receive them as part of the transaction.
A typical escrow conducted for sale of a business occurs at a meeting of the buyer, seller and interested parties, such as any business intermediaries who introduced the principle and secured their agreement to the terms of the transaction. Presiding over the meeting is an attorney or escrow officer.
Laws governing business sales ordinarily require the seller to publicly announce, several days before the escrow is to be held, the date, time and location of the meeting, along with names of parties and business involved. This announcement usually is accomplished when the escrow officer publishes a notice of bulk transfer in a general circulation periodical that uses print or the Internet to make the public aware of legal notices. Purpose of this notice is to alert creditors to the fact that the business is being sold, giving them opportunity to submit their claims before the deal is finalized.
Although these meetings usually are routine and--to an observer with no stake in the matter--rather boring, any experienced escrow officer can tell amusing and dramatic stories about escrows they have conducted. One complains about the sale of a business at which she was required to verify payment of the purchase price by counting seventy-two thousand dollars in smelly currency that had been buried in the buyer s back yard. Another escrow professional recounts the meeting at which a buyer vs. seller disagreement resulted in a brawl that destroyed her office lamp and miniature sneezewort plant. And there have been more than one escrow that couldn t be completed because claims against the business exceeded the value of the deal.
