Escrow Agreement for a Private Placement: The Terms That Matter
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The escrow agreement is the contract between the deal company and the bank that holds investor money until the deal closes. It names the parties, says where investors wire, sets the release conditions (usually a minimum raise and the property closing), sets a deadline, and says what happens if the conditions fail by that date: the money goes back to investors. It also covers interest, fees, who can give instructions, and how the bank is protected. Rule 10b-9 is the reason the refund terms matter: it makes it a deceptive practice to tell investors an offering is "all or none," or that their money will be refunded if a minimum is not met, unless the offering is really set up so the money is promptly refunded. In a DoorRaise deal, the escrow agent is Enterprise Bank & Trust.
This post is part of our guide to real estate syndication. For how escrow works day to day, see escrow in a syndication; for the investor's view, see what happens to your money in escrow.
Who are the parties?
| Party | Role |
|---|---|
| Issuer | The deal LLC. It opens the escrow and gives instructions with the sponsor's authorized signers. |
| Escrow agent | A bank that holds the funds and follows the written instructions. |
| Investors | Wire into the account. Usually beneficiaries of the refund terms, not parties. |
| Sometimes a broker-dealer | If one is involved, it may sign too, because of Rule 15c2-4. |
The escrow agent's duties are only those written in the agreement. Banks keep them narrow on purpose: the agent does not judge the deal, review the documents or decide disputes.
The terms to read closely
1. Deposits
Where and how investors send money, and who may deposit. In Regulation D deals funding is almost always by wire. Look for a rule on deposits from someone other than the investor, and on what the bank does with a deposit it cannot match.
2. Release conditions
What must be true before the bank releases funds to the deal company or the closing agent. Usually: the minimum raise has been received in cleared funds, the property purchase is closing, and the issuer has delivered a signed release instruction. Some agreements also require a certificate that the minimum was met. See the minimum raise.
3. The deadline
The date by which the conditions must be met. If the date passes, the agreement should say the escrow terminates and funds are returned. An extension should need the same notice the PPM promises investors.
4. Return of funds
How and when money goes back if the raise fails, to whom (the account it came from), and who pays the outgoing wire fees. Investors should get back the amount they sent. In DoorRaise deals, if a raise fails DoorRaise covers the wire fees so investors get 100% of what they wired back.
5. Investment of funds and interest
Whether the bank holds funds as cash in a deposit account, invests them, and who keeps any interest. Many agreements let the bank keep it. If so, the PPM must not suggest that investors earn anything while funds sit in escrow.
6. Instructions and authority
Who can instruct the bank, how instructions are verified (for example, a callback to a known phone number), and what the bank does if the issuer and an investor disagree. Strong verification is the best defense against wire fraud. See wire fraud.
7. Fees, indemnity and resignation
What the bank charges, how it is protected from claims, and how it can resign. These are standard. In DoorRaise deals the sponsor never sees or pays the escrow agent's fees.
Why Rule 10b-9 matters
Rule 10b-9 says it is a manipulative or deceptive device to represent that a security is offered "on an 'all-or-none' basis," or on any other basis where money "will be refunded to the purchaser if all or some of the securities are not sold," unless the offering is made on the condition that the money "will be promptly refunded" if the specified amount is not sold at the specified price within the specified time.
So if your PPM, deck or webinar says "if we don't hit the minimum, you get your money back," the escrow agreement and the actual practice must deliver that: a specified amount, a specified deadline, and prompt refunds. An escrow at a bank, with the minimum and the deadline written in, is the clean way to make that promise true.
Is Rule 15c2-4 required?
Rule 15c2-4 applies to "any broker, dealer or municipal securities dealer participating in any distribution of securities, other than a firm-commitment underwriting." When the offering is contingent, such as all or none, that firm must deposit investor money in a separate bank account as agent or trustee, or transmit it to a bank that has agreed in writing to hold it in escrow. A sponsor raising its own deal without a broker-dealer is not directly subject to the rule, but the rule describes good practice, and Rule 10b-9 still applies to everyone.
A checklist before you sign
- The release conditions match the PPM, word for word in substance.
- The deadline and any extension rule match the PPM.
- Refunds go to the sending account, promptly, with fees covered as the PPM says.
- Interest terms match what investors are told.
- Instructions need verification by a known phone number.
- The authorized signers are current.
- The account is at a bank, in the deal company's name or held for its investors, never the sponsor's personal account.
How DoorRaise fits in
DoorRaise is a technology platform, not a law firm, broker-dealer, investment adviser or funding portal, and it never holds investor money. Each deal's escrow is at Enterprise Bank & Trust, an FDIC insured bank in Clayton, Missouri. Investors fund by wire only, wire instructions appear only once the deal's escrow is open, and escrow earns no interest for investors (the bank keeps it, and the offering documents say so). If the raise fails, investors get 100% back. See escrow, offering documents and pricing.
FAQ
What is an escrow agreement in a private placement?
A contract between the deal company and a bank acting as escrow agent that holds investor money until set conditions are met, and returns it if they are not met by a deadline.
Is an escrow agreement required for a Reg D offering?
Regulation D does not require escrow. But if you tell investors their money will be refunded if a minimum is not met, Rule 10b-9 requires the offering to really work that way, and a bank escrow is the usual way to do it.
Who signs the escrow agreement?
Usually the deal company and the bank. Investors are typically beneficiaries of the refund terms, not signers.
Do investors earn interest on money in escrow?
It depends on the agreement. Many let the bank keep any interest. In DoorRaise deals, escrow earns no interest for investors.
What happens to escrowed funds if the deal does not close?
Under the agreement, the funds go back to investors after the deadline passes or the deal is called off, usually to the account they came from.
Sources
- 17 CFR 240.10b-9: Prohibited representations in connection with certain offerings (Cornell LII)
- 17 CFR 240.15c2-4: Transmission or maintenance of payments received in connection with underwritings (Cornell LII)
- Investor.gov: Private placements under Regulation D
- FDIC: Deposit insurance
This post is general information, not legal advice. Talk to your own attorney about the escrow terms for your deal. Information is as of November 2026. DoorRaise is not a law firm, broker-dealer, investment adviser or funding portal.