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A Control Agreement lets lenders maintain security over bank accounts in Hong Kong while allowing borrowers to keep using them day-to-day. It's a three-way contract between a lender, borrower, and the bank holding the accounts, commonly used in secured financing deals.

Under Hong Kong law, these agreements give lenders practical control over the secured accounts without freezing them completely. The bank agrees to follow the lender's instructions about the account, especially if the borrower defaults. This setup protects the lender's interests while letting business continue smoothly - a crucial balance in trade finance and corporate lending.

Consider implementing a Control Agreement when your company takes out secured loans but needs to keep accessing its bank accounts. This is especially common in Hong Kong trade finance, where lenders want security over operating accounts without disrupting daily business operations.

The arrangement works particularly well for revolving credit facilities, inventory financing, and working capital loans. Banks in Hong Kong typically require Control Agreements when lending against accounts receivable or when the borrower's cash flow is a key part of the security package. It's also essential when dealing with multiple currencies or cross-border transactions where account control becomes more complex.

• Basic Account Control: The standard Control Agreement used for single bank accounts, giving lenders oversight while allowing normal business operations
• Multi-Account Structure: Covers multiple accounts at the same bank, with different control levels for operating and collection accounts
• Springing Control: Lets borrowers freely use accounts until a specified trigger event occurs, then transfers control to the lender
• Full Blocked Control: Requires lender approval for all transactions, typically used for high-risk facilities or special purpose accounts
• Hybrid Control: Combines different control levels based on transaction types or amounts, common in complex Hong Kong trade finance deals

• Lenders: Usually banks or financial institutions who want security over the borrower's accounts while extending credit facilities
• Borrowers: Companies seeking secured financing while maintaining operational access to their bank accounts
• Account Banks: Financial institutions holding the controlled accounts, responsible for following the Control Agreement's instructions
• Legal Counsel: Both in-house and external lawyers who draft and negotiate the agreement's terms
• Corporate Officers: Company directors and authorized signatories who execute the Control Agreement and manage compliance

• Account Details: Gather complete bank account information, including account numbers, types, and currencies
• Party Information: Collect legal names, registration details, and authorized signatories of all parties
• Control Mechanics: Define how account control will work, including transaction approval thresholds and notification requirements
• Default Triggers: Specify events that change control levels or activate lender's rights
• Operating Rules: Document daily transaction limits, permitted payment types, and reporting requirements
• Bank Requirements: Confirm the account bank's specific format and operational requirements for Control Agreements

• Party Identification: Full legal names and addresses of lender, borrower, and account bank
• Account Details: Precise description of all controlled accounts and their purposes
• Control Mechanisms: Clear procedures for account operation and control transfer
• Notice Requirements: Communication protocols between parties, especially for default events
• Bank's Rights: Set-off rights, fees, and operational requirements
• Governing Law: Explicit choice of Hong Kong law and jurisdiction
• Termination Terms: Conditions and process for ending the agreement
• Amendment Process: Rules for modifying agreement terms

A Control Agreement differs significantly from an Account Agreement in both scope and purpose. While both deal with bank accounts, they serve distinct functions in Hong Kong's financial landscape.

• Purpose and Control: Control Agreements specifically grant lenders security rights over accounts while maintaining borrower access. Account Agreements simply establish the basic relationship between a bank and its customer.
• Parties Involved: Control Agreements are three-way contracts (lender, borrower, bank), while Account Agreements are bilateral (bank and account holder only).
• Security Interest: Control Agreements create enforceable security interests for lenders. Account Agreements don't establish any third-party rights.
• Operational Flexibility: Control Agreements include specific provisions for changing account control levels based on triggers. Account Agreements maintain static operational terms throughout.