Is Your Escrow Agreement Signed by and for the Right Parties?

When an escrow agreement is activated, the exact wording of the agreements becomes critically important. What initially appeared well-structured on paper may turn out to be less robust when scrutinized in detail.

Ensure the Escrow Agreement Is for the Correct Entity

In practice, we occasionally see that, when handled without the guidance of a professional party like ours, escrow agreements are signed for the wrong organizational entity.

This often happens when the supplier’s organizational structure hasn’t been clearly analyzed. Here’s how it typically unfolds: companies often have one or more operating companies and one or more holding companies. Without asking the right questions, you risk making agreements with the wrong entity—one that might not even have the authority to make such agreements.

Ownership Declarations Are Key

It’s not uncommon to find that the legal entity providing your license—let’s call it “SoftwareMaker BV”—is not the actual owner of the software. Instead, the intellectual property (IP) rights might belong to the parent company, “SoftwareMaker Holding BV.”

In such cases, it’s essential that both entities sign the escrow agreement, even if the signatory is the same individual for both. This kind of detail often emerges only through targeted inquiries. After all, there’s no public registry where software ownership can be definitively verified.

Agreements Must Be Unambiguous

An agreement must be open to interpretation in only one way—this is the crux of the matter. Clarity is vital when enforcing an escrow agreement, such as in cases of bankruptcy. Involving multiple parties—like a trustee or other stakeholders—shouldn’t introduce confusion or disputes over the terms of the agreement.

Make Irrefutable Agreements

In short, every detail must be carefully considered, clearly agreed upon, and meticulously documented to avoid errors or complications. For example, the escrow agreement should specify whether it can be used for certain branches or subsidiaries. Overlooking such details can result in significant—and avoidable—damage.

Choose the Right Partner

Escrow4all is the most innovative escrow provider in the Netherlands, holding ISO 27001 certification for over a decade. With our expertise and experience, we ensure that the intellectual property of ISVs and SaaS vendors is securely protected, while also safeguarding the user’s interests.

Our proactive approach and transparent communication are highly valued by clients in the Netherlands and beyond. We are committed to sharing our escrow knowledge to benefit our customers.

Interested in leveraging our expertise or discussing a specific case? Don’t hesitate to contact us—completely obligation-free.