A depositary agreement, also known as a custodial agreement, is a legal contract between two parties. The agreement outlines the terms and conditions of the deposit of assets or securities by one party (the depositor) into the custody of another party (the depositary).
The primary purpose of a depositary agreement is to ensure that the assets or securities deposited are securely held and protected by the depositary. The agreement typically includes provisions for the depositary to exercise control over the deposited assets, including the right to transfer, sell, or pledge them as required.
There are several types of depositary agreements, each with their own specific terms and conditions. One common type of depositary agreement is a securities depositary agreement, which is often used in the securities industry. This agreement involves the deposit of securities into the custody of a depositary, such as a bank or brokerage firm, which then holds and manages the securities on behalf of the depositor.
Another type of depositary agreement is a trust or escrow agreement. These agreements involve the deposit of funds or assets into a trust account or escrow account, which is then managed by a trustee or escrow agent.
Depositary agreements are often used in complex financial transactions such as mergers and acquisitions, initial public offerings, and private equity investments. In these types of transactions, the depositary agreement is used to ensure that the deposited assets are held securely and are available to be transferred or sold as needed.
Overall, the depositary agreement is an important legal contract that helps to ensure the safe and secure custody of assets or securities. By clearly outlining the terms and conditions of the agreement, both parties can have peace of mind knowing that their interests are protected and that the assets are in safe hands.