The investor’s field guide · E
Escrow
An arrangement in which money or assets are held by a third party and released under agreed conditions.
Explained by the editorial team
Escrow places funds or assets with a third party under agreed release instructions. In an acquisition, part of the price may be held to support specified claims or until a condition is resolved. The escrow agreement determines what protection actually exists.
An illustrative situation
A portion of the sale proceeds is held for a stated period to cover eligible warranty claims. If no qualifying claim is made, the agreement may require release to the seller. If a claim arises, disputed amounts may remain held while the parties follow an agreed process.
What to examine
Check who holds the funds, how they are segregated, who receives interest and what happens if the provider fails. Read the release triggers and dispute procedure carefully. Escrow is not identical to a buyer simply withholding an amount, and it is not a guarantee that every loss will be covered. Costs, tax and legal treatment depend on the structure and jurisdiction.
General information, not investment, legal or tax advice. Examples are illustrative. Read the disclaimer.