Also, the law does not establish a uniform form of agreement on the creation of a collateral special account, so it will differ depending on the bank. Information about the financial organization and parties to the agreement must be provided, as well as the following information:
- requisites;
- obligations of all parties;
- terms of the contract;
- bail amount.
It is very easy to use this service at any major bank. It is used not only to pay for goods and services, but also for additional safety of funds from bankruptcy.
What is a security account?
A collateral account is an account in which funds are deposited. They are subject to collateral. The definition of LC is given in Article 358.9 of the Civil Code of the Russian Federation. Let's look at the essence of the account using an example.
Two participants enter into a transaction with each other, the subject of which is real estate. One of the parties sells production premises to the other. A collateral account provides financial security. First, a contract for the sale of real estate is drawn up. Then the participants go to the bank. The buyer deposits funds for the purchase of real estate in a collateral account. Funds are blocked. That is, the seller cannot remove them. He gets access to the funds only after he has completed all the real estate documents in the name of the buyer. After all the terms of the agreement have been fulfilled, funds can be withdrawn from the account. Upon completion of the withdrawal procedure, the account is considered closed.
What are the restrictions on the disposal of funds in a collateral account ?
Let's look at the basic provisions regarding a collateral account:
- Before opening a contractual agreement, it is not necessary to draw up a transaction agreement.
- The bank's obligations are not confirmed by securities.
How is a bank account recognized as a collateral account ?
Collateral accounts have a number of advantages:
- Eliminating the risk of fraud.
- Simplification of debtor lending.
- Fast collection of funds by the lender.
IMPORTANT! Funds under the LC are not subject to the principle of compulsory insurance.
Collateral in lending
Most often, collateral appears in the lending industry. Banks can issue loans secured in the form of collateral, which can be:
- Borrower's residential property: apartment, house.
- Non-residential real estate: land, dacha, garage. But non-residential properties are rarely accepted as collateral.
- Commercial real estate: offices, warehouses, industrial and retail premises, etc. Standardly used in the field of business lending.
- Vehicles. For individuals - cars. For business - buses, trailers, trucks, special equipment, etc.
If the loan is issued by a legal entity or entrepreneur, the collateral can be acquiring turnover, commodity turnover, expensive equipment, inventory balance, etc.
Microfinance organizations cannot issue loans secured by real estate. Their range includes only PTS loans.
Most often, the collateral remains in the possession of the borrower, but with restrictions specified in the agreement. Until the obligation is repaid, the borrower has no right to sell the pledged property or transfer it to another person. The encumbrance is removed only after the loan is repaid.
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How to open a security account
Opening a collateral account is carried out in the standard manner. However, there is a caveat: you need to provide information about both participants. They are important parties to the transaction. All funds in the account are considered collateral. Other conditions that are convenient for both parties are also possible. However, they must be recorded in a separate order. A certain limit is set. It assumes the following provisions:
- The entire account balance is collateral.
- There is a certain amount of funds that are considered solid. That is, they cannot be used as long as the pledge agreement is in effect.
The form of the pledge agreement is not established by law. It can be developed by the banking institution itself. The execution of an agreement requires the presence of three parties: the banking institution, both parties to the contractual relationship (mortgagor, pledgee). Article 358.10 of the Civil Code of the Russian Federation states that the pledge agreement must necessarily contain this information:
- Account details.
- List of obligations of the parties.
- Time frame.
- Amount of the deposit.
A collateral account can be involved in various transactions. However, usually their participants are a creditor (having the right to claim) and a debtor (having obligations). These statuses are determined in relation to the subject of the obligation.
Participants' rights
The creditor has the following powers:
- Obtaining information about the status of the collateral account, which may be a bank secret (ground - paragraph 2 of Article 358.12 of the Civil Code of the Russian Federation).
- Imposing restrictions on the disposal of funds. That is, the creditor can prevent the debtor from using the collateral funds (clause 4 of Article 358.12 of the Civil Code of the Russian Federation).
- Instructions to the bank regarding the write-off of funds in favor of the pledge holder (clause 1 of Article 358.14 of the Civil Code of the Russian Federation).
FOR YOUR INFORMATION! Collateral accounts as a banking service have appeared relatively recently. In particular, corresponding amendments were made to the Civil Code of the Russian Federation in July 2014.
FAQ
What is collateral?
This is a form of security for obligations. The pledgor leaves his property as collateral; the pledgee has the right to seize this property if the obligation is not fulfilled. It is used in lending, customs regulation, and crime investigation.
What does it mean to be out on bail?
At the stage of preliminary investigation, the suspect or accused can leave his property or money as collateral and be released from custody. The obligations in this case are to appear before the investigator or in court. If the obligation is not fulfilled, the deposit is forfeited.
What is a pledge in civil law?
The concept of pledge is disclosed in the Civil Code of the Russian Federation, Article 334.
What does a real estate pledge mean?
During the conclusion of the contract, an encumbrance is placed on the mortgagor’s property, which makes it impossible to change the owner. If the mortgagor does not fulfill his obligations, the mortgagee has the right to go to court and seize the property.
What if the collateral is greater than the obligations?
In this case, if the terms of the agreement are violated, the pledged item is confiscated by the pledgee. He covers his losses and returns the remainder to the mortgagee. If we are talking about property, it takes time to sell it.
Sources:
- ConsultantPlus: Article 60. Cash collateral of Federal Law 289.
- ConsultantPlus: Civil Code of the Russian Federation Article 334. The concept of pledge.
- Wikipedia: Pledge (civil law).
about the author
Irina Rusanova - higher education at the International East European University in the direction of "Banking". Graduated with honors from the Russian Economic Institute named after G.V. Plekhanov with a major in Finance and Credit. Ten years of experience in leading Russian banks: Alfa-Bank, Renaissance Credit, Home Credit Bank, Delta Credit, ATB, Svyaznoy (closed). He is an analyst and expert of the Brobank service on banking and financial stability. [email protected]
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Bankruptcy Collateral Account
A collateral account may be used when bankruptcy imposes restrictions on the offset of counterclaims. The regulations contain a ban or restriction on the offset of claims within the framework of bankruptcy (Articles 81 and 142 of Federal Law No. 127 “On Insolvency” of October 26, 2002). In some situations, the right to challenge the offset carried out before the initiation of bankruptcy is also given (Article 61.6 of the Federal Law “On Insolvency”).
Therefore, it is risky to use certain instruments (for example, a security deposit) in the relationship between the bank and its clients. If the customer initiates bankruptcy proceedings, the bank will not be able to offset the deposit against losses that the user of banking services must pay. In such a situation, it is convenient to use a collateral account.
How does this happen? The amount that is the security deposit is credited to the security account. The bank becomes the mortgagee. Funds are kept in the account even if the client is declared bankrupt. Upon initiation of insolvency, the collateral holder receives at least 70% of the collateral amount. If there are no preferred creditors, the mortgagee gets 90-100% of the volume of the pledge (based on Article 138 of the Federal Law “On Bankruptcy”).
The collateral account can also be used to finance the bankruptcy process.
Let's look at an example. A person finances the activities of a bankrupt company. In this case, it risks having its funds placed in a bankruptcy account. In this case, they can be used for purposes far from their original ones. For example, there is a risk of funds being written off in favor of the tax authorities, and a risk of embezzlement by an insolvency administrator.
An alternative option is to deposit funds into a collateral account. In this case, the person who deposits the funds becomes the mortgagee. It receives rights to control expense transactions on the account. The person has a real mechanism for returning funds.
What happens to the account in the event of bankruptcy of the mortgagor
This special account is beneficial to use if the client decides to start bankruptcy proceedings. But only in the case where the law does not allow the debt to be repaid through offset. Restrictions are established by Art. 81 and Art. 142 of the Federal Law “On Insolvency (Bankruptcy)” No. 127-FZ.
The money received as a deposit guarantee can be used by the company in certain circumstances. They can also be used as collateral. And in this case, the bank will become the mortgagee.
Despite the bankrupt status, funds for the salary are retained. Therefore, the mortgagee will be able to receive up to 70% of the entire collateral amount to cover his losses. And if there are no other applicants for payments, the organization will receive up to 100% of all money.
Can tax debt be collected from a collateral account?
There is Central Bank instruction No. 153 “On opening bank accounts” dated May 30, 2014. It indicates that the collateral account is special. That is, special rules apply to it.
The provisions of Chapter 45 of the Civil Code of the Russian Federation apply to the agreement on the opening of a legal settlement. The account is opened regardless of whether there is an agreement on the pledge of rights under the bank account agreement on the opening date.
The pledgor, without the permission of the pledgee, has no right to give orders regarding the use of funds. If such orders appear, banking institutions cannot satisfy them.
That is, the mortgagor does not have the right to independently dispose of the funds located on the property. They are subject to collateral. The mortgagor-taxpayer has only limited ownership rights to the funds.
The rules for writing off funds specified in Chapter 45 of the Civil Code of the Russian Federation do not apply to money that is the subject of pledge. Consequently, tax collection actions cannot be taken against funds held in the collateral account. This is due to the fact that the money does not fully belong to the mortgagor.
Seizure of collateral account
Is it possible to seize a collateral account? Federal Law No. 229 “On Enforcement Proceedings” dated October 2, 2007 contains the following provisions:
- Collection can only be made for obligations that are secured by collateral.
- Collection is also possible if there are claims of creditors that must be satisfied before the claims of the tax holder.
The last option is possible only if the debtor’s property is not enough to satisfy the priority requirements. Otherwise, you need to pay with this property. That is, the seizure of the collateral account is not carried out in most cases.
Is it possible to recover funds?
A security deposit is a special type of account, as indicated by Bank of Russia instruction No. 153-I. Therefore, special rules apply to it, which makes the AP in a sense untouchable when it comes to tax penalties.
The mortgagor-taxpayer does not have the right to fully dispose of the balance specified in the pledge agreement. This applies especially strictly to the minimum balance. Simply put, this money ceases to fully belong to the pledgor, since now the pledgee is also interested in it. And any movement of funds requires his consent. This is precisely the main obstacle to the imposition of sanctions by the Federal Tax Service.
In such cases, tax officials always turn to current accounts, and not to special ones. Moreover, the letter from the Ministry of Finance dated February 14, 2017 clearly states that the LC cannot be used to fulfill tax obligations.
But every rule has an exception. Write-off of funds is possible if the debtor’s other finances are insufficient to meet tax requirements.
