La convention de blocage de
compte : notions de base (article en anglais)

30 octobre 2019

For a lender providing an asset-based loan, establishing control over a borrower's collections accounts may be essential to ensuring the repayment of loans made to the borrower. Ideally, a borrower would be required to maintain its accounts with the lender providing the asset-based loan to provide the lender with control over the revenue received. However, if the lender is not a bank or does not have branches in all of the locations that a borrower receives revenue, a third-party bank must be used. That raises the issue of control over those accounts, as the asset-based lender will be unable to make sure that the funds on deposit with the third-party bank will be directed to repay its loan.



To establish control over a borrower's revenue deposited at a third-party bank, a blocked account agreement (a "BAA") may be used to require the third-party bank to direct and pay these revenues to the lender. A BAA will be among the lender, the borrower, and the third-party bank providing the borrower's collections account(s). While a blocked account will remain in the name of the borrower, its rights to access and transfer funds in the account are "blocked" by the terms of the BAA and can only be exercised by the lender, who will be the sole authority for providing instructions related to the account. Other rights of the account holder that may be "blocked" by a BAA include the rights to direct the sweeping of funds, the right to transfer ownership of the account, and the right to close the account. Depending on the terms of the BAA, the lender may be able to exercise these rights from the outset and throughout the term of the loan or only after a triggering event. Similarly, the terms of the BAA may provide that once an account is "blocked" the lender must provide instructions to the third-party bank to perform certain actions, or that the third-party bank is obligated perform certain actions upon the account being "blocked" with no further instructions from the lender required.

One act that a third-party bank may be required to perform pursuant to a BAA is the sweeping of funds from one or more blocked accounts into a consolidation account. Sweeping is important as it will concentrate the funds into a single account from which payments to the lender can be easily made. If the lender is a bank and maintains the consolidation account into which funds are swept, it, and not the third-party bank, will have control over the funds. To achieve this, a lender may require frequent sweeping to minimize the risks associated with a potentially less credible bank holding the funds. This may be a point of contention with the borrower as more frequent sweeping could lead to increased costs from transfers and administrative fees imposed by the third-party bank.

As the third-party bank is not a party to the lending relationship, a lender may need to negotiate certain terms in order for the third-party bank to agree to be bound by a BAA. The time period in which a third-party bank must comply with a lender's direction to block an account may need to be negotiated, as shorter periods may impose a greater burden on the third-party bank while longer periods expose the lender to the risk that the borrower may move funds elsewhere. A third-party bank may seek to reduce its liability to the lender for actions directed by the borrower before an account is blocked or before it complies with an order to block the account. Similarly, a third-party bank may require the lender to indemnify it from certain losses, including where the third-party bank sweeps funds from a payment which is later returned or dishonoured. Despite these limitations, a BAA is an effective tool for a lender to obtain control over funds held by its borrower in a third-party bank.


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