Why Escrow Account is maintained and what are the partners to it? Calculate the escrow amount, if the consideration payable for an escrow account for a transaction under the public offer action is ₹860 crore.

What is an Escrow Account and its partners? An escrow account is a financial arrangement in which a third party holds and manages funds or assets on behalf of two other parties involved in a transaction. This third party, known as the escrow agent or escrow holder, is typically a trusted and neutral entity, such as a bank, attorney, or escrow company. Why Escrow Account is maintained? The primary purpose of an escrow account is to ensure that both parties fulfil their obligations and that the transaction proceeds smoothly. Escrow accounts help mitigate risks for both parties involved in a transaction. They provide a neutral play that ensures the terms of the agreement are met before releasing the funds or assets. This arrangement adds a level of security and trust to complex or high-value transactions. Calculation of Escrow Amount: The escrow amount shall be calculated in the following manner, as specified in Regulation 17 of the SEBI (Substantial Acquisition of Shares and Takeovers) Regulations 2011 (SEBI (SAST) Regulations), for consideration payable under the public offer: On the first ₹500 crores - 25 per cent of the consideration On the balance consideration - An additional amount equal to 10% of balance consideration. If an open offer is made conditional upon minimum level of acceptance, hundred percent of the consideration payable in respect of minimum level of acceptance or fifty per cent of the consideration payable under the open offer, whichever is higher, shall be deposited in cash in the escrow account. In case of indirect acquisitions where public announcement has been made in terms of clause (e) of sub-regulation (2) of regulation 13 of the SEBI (SAST) Regulations, an amount equivalent to hundred per cent of the consideration payable in the open offer shall be deposited in the escrow account. Calculation for the given case (Consideration payable = ₹860 crore): On First ₹500 crore: 25% of ₹500 crore = ₹125 crore On balance consideration (₹860 crore - ₹500 crore = ₹360 crore): 10% of ₹360 crore = ₹36 crore Total escrow amount = ₹125 crore + ₹36 crore = ₹161 crore. So, an amount of ₹161 crore has to be maintained in the escrow account.