Newsletter-21

10 NEWSLETTER 2016 Escrow Agreement in Turkish Law and Its Application in Mergers &Acquisitions* Att. Sezi Demircark Introduction Escrow 1 mechanism is a common practice in mergers and acqui- sitions aiming to secure the performance of the obligation at a later time if immediate performance is impossible or not preferred. This is a practice whereby the obligations of the parties to the underly- ing agreements in mergers and acquisitions are entrusted with a third party named as the escrow agent in an effort to secure the performance of the obligations (i.e. transfer of the purchase price and/or shares) arising therefrom. In this respect, the parties to merger and/or acquisi- tion transactions and a trustee ( escrow agent ) enter into an escrow agreement setting forth the terms and conditions for returning the sale shares and/or consideration. It is intended with this article to provide the reader an insight regarding escrow mechanisim and its implementation to mergers and acquisitions under Turkish Law. Relationship between Escrow Agreement and Merger & Acquisition Agreements The aim of the escrow agreement is to secure the performance of the obligations arising from the merger and/or acquisition agreement. An escrow agreement is based on the agreement of the merger or acquisition transaction. Within this context, there are two separate agreements having different parties with varying rights and obligations. * Article of August 2016 1 Since the Turkish translation for the word “escrow” cannot fully correspond, and it may cause confusion or ambiguity, the word has been used in English.