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A Control Agreement lets a lender maintain a security interest in a borrower's deposit accounts or investment accounts at a bank or securities firm. It's a three-way contract between the lender, borrower, and the financial institution holding the accounts, giving the lender certain rights over those assets.

Under Article 9 of the UCC, lenders need these agreements to perfect their security interests in financial accounts. The agreement spells out when the bank must follow the lender's instructions about the accounts and blocks the borrower from freely withdrawing funds without the lender's permission. This protection is especially important in commercial lending and asset-based financing.

Control Agreements become essential when your business needs secured financing using deposit accounts or investment accounts as collateral. Banks and lenders typically require these agreements before extending significant commercial loans, especially in asset-based lending arrangements where accounts serve as primary security.

The timing is critical - you need the Control Agreement in place before the loan closes. It's particularly important when dealing with multiple financial institutions, restructuring existing debt, or setting up new credit facilities. Many businesses put these agreements in place during major financing rounds, acquisitions, or when expanding their borrowing capacity using existing bank accounts as collateral.

• Direct Control Agreements: Give lenders immediate, complete control over the account. The bank must follow the lender's instructions without first checking with the borrower. Common in high-risk loans.
• Springing Control Agreements: Allow borrowers to keep using their accounts normally until a specified trigger event occurs. The lender only takes control after default or other conditions.
• Shifting Control Agreements: Start with borrower control but gradually transfer rights to the lender based on financial metrics or time periods. Popular in stepped financing deals.
• Hybrid Control Agreements: Combine elements of direct and springing control, often using detailed notification requirements and specific control triggers.

• Secured Lenders: Banks, financial institutions, or creditors who require control over deposit accounts as collateral for loans. They initiate and enforce the agreement.
• Account Holders/Borrowers: Businesses or entities that own the deposit accounts and need financing. They agree to give lenders certain rights over their accounts.
• Depository Banks: Financial institutions holding the accounts. They must follow the agreement's terms about account access and control.
• Corporate Attorneys: Draft and review Control Agreements to ensure compliance with UCC requirements and protect their clients' interests.
• Compliance Officers: Monitor adherence to agreement terms and handle any control transitions or disputes.

• Account Details: Gather complete account numbers, types, and locations for all accounts covered by the agreement, plus exact legal names of account holders.
• Party Information: Collect legal entity names, addresses, and authorized signatories for the lender, borrower, and depository bank.
• Control Terms: Define specific trigger events, notice requirements, and control mechanisms that will apply.
• Security Details: Document the underlying loan agreement details and collateral descriptions.
• Operating Rules: Outline day-to-day account access rights, permitted transactions, and notification procedures.
• Template Selection: Use our platform to generate a legally-sound Control Agreement that includes all required elements for your jurisdiction.

• Party Identification: Full legal names and roles of lender, borrower, and depository bank, with authorized signatories clearly listed.
• Account Details: Specific account numbers, types, and locations covered by the agreement.
• Control Provisions: Clear terms defining when and how the lender can take control of accounts.
• Notice Requirements: Procedures for communications between parties about account access and changes.
• Default Triggers: Specific events that activate lender control rights.
• Representations: Bank's acknowledgment of the security interest and agreement to comply.
• Termination Terms: Conditions and process for ending the agreement.
• Governing Law: Usually the state where the account is maintained, compliant with UCC Article 9.

A Control Agreement differs significantly from an Access Control Policy in both scope and legal function. While both deal with managing access to assets, they serve distinct purposes in business operations.

• Legal Authority: Control Agreements create legally binding rights for lenders over specific financial accounts, while Access Control Policies are internal governance documents that set rules for general resource access.
• Parties Involved: Control Agreements require three parties (lender, borrower, bank) with specific legal obligations. Access Control Policies typically involve just the organization and its employees.
• Enforcement Mechanism: Control Agreements are externally enforceable contracts under UCC Article 9, while Access Control Policies are enforced through internal disciplinary measures.
• Purpose: Control Agreements secure lending arrangements by giving creditors rights over collateral accounts. Access Control Policies manage day-to-day operational security and resource access.