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A Control Agreement lets lenders maintain control over a borrower's financial accounts while still allowing the borrower to use them. In India, these agreements are crucial when creating security interests under the SARFAESI Act, especially for bank accounts, securities, and other financial assets used as collateral.

The agreement involves three parties: the lender, the borrower, and the account provider (usually a bank). It gives the lender the right to freeze accounts or redirect funds if the borrower defaults, while ensuring daily business operations can continue smoothly. Banks commonly require these agreements before accepting accounts as security for loans.

Use a Control Agreement when setting up secured lending arrangements where the borrower needs ongoing access to pledged accounts. This becomes essential for Indian banks and financial institutions extending loans against deposit accounts, mutual funds, or securities accounts as collateral.

The agreement proves particularly valuable during debt restructuring, project financing, or when dealing with multiple lenders who need assurance about their security interests. It helps prevent disputes by clearly establishing control rights while letting businesses maintain daily operations. Many Indian lenders now require these agreements before accepting financial assets as security.

• Direct Control Agreements give lenders immediate authority to control accounts after default, commonly used in straightforward lending arrangements
• Shifting Control Agreements allow borrowers more operational freedom until specific trigger events occur, popular in working capital facilities
• Multi-Party Control Agreements coordinate rights among several lenders and account holders, essential for syndicated loans
• Hybrid Control Agreements combine features to balance operational flexibility with security, often used in complex project financing

• Banks and Financial Institutions: Act as lenders and control parties, requiring these agreements to secure their interests in financed assets
• Corporate Borrowers: Need to maintain operational access to their accounts while providing security to lenders
• Account Banks: Execute the agreement as custodians, managing account access and following control instructions
• Legal Counsel: Draft and negotiate Control Agreements to protect their clients' interests and ensure RBI compliance
• Company Directors: Sign on behalf of borrowing entities and remain responsible for agreement compliance

• Account Details: Gather complete information about all financial accounts being controlled, including account numbers and types
• Party Information: Collect legal names, addresses, and authorized signatories of the lender, borrower, and account bank
• Security Terms: Define specific control rights, trigger events, and operational permissions clearly
• Documentation: Obtain copies of loan agreements, board resolutions, and existing security documents
• Compliance Check: Verify alignment with RBI guidelines and SARFAESI Act requirements
• Access Rules: Specify day-to-day operating procedures and emergency control mechanisms

• Party Identification: Full legal names, addresses, and registration details of lender, borrower, and account bank
• Account Details: Comprehensive description of controlled accounts and permitted activities
• Control Mechanisms: Clear procedures for exercising control rights and handling default scenarios
• Operating Instructions: Specific rules for daily transactions and restrictions on account access
• Notice Requirements: Communication protocols and timeframes for important actions
• Governing Law: Express statement of Indian law application and jurisdiction
• Termination Provisions: Conditions and process for ending the agreement

A Control Agreement differs significantly from an Access Control Policy. While both deal with managing access to assets, they serve distinct purposes and operate differently in Indian business contexts.

• Legal Nature: Control Agreements are three-party contracts creating enforceable rights over financial accounts, while Access Control Policies are internal documents setting organizational rules
• Purpose: Control Agreements secure lenders' interests in specific accounts while allowing borrower operations; Access Control Policies manage general system and facility access across an organization
• Enforcement: Control Agreements are legally binding under Indian banking laws and the SARFAESI Act; Access Control Policies are administrative guidelines without direct legal enforceability
• Flexibility: Control Agreements require formal amendments with all parties' consent; Access Control Policies can be updated internally as needed