VLP Legal Press #19
Escrow Arrangement
When parties buy or sell something valuable—such as land, a business, or company shares—they often worry about trust. The buyer wants to be sure they will receive the asset as promised. The seller wants to be sure they will receive the money.
This is where an escrow arrangement becomes useful.
What is an escrow arrangement?
An escrow is an arrangement where a third party (i.e., an escrow agent) holds money or documents for parties of a transaction until both sides meet their obligations or conditions set by the parties are met.
Who can be an escrow agent?
A neutral and trusted third party acting as a “middle person”. In Cambodia, escrow services are commonly offered by banks and professional service firms that meet regulatory requirements.
What is the role of the escrow agent?
verify that the buyer has deposit money into a secure account with the escrow agent.
verify with the buyer that the asset (property title, shares, contract rights, etc.). is successfully transferred.
only when everything is properly completed and the buyer provides a written confirmation that the money can be released, the escrow agent releases the money to the seller.
How does escrow work in a sale and purchase?
Below is the typical flow:
Parties sign a sale and purchase agreement (SPA): The SPA sets the main terms such as price, conditions to be met, timeline, etc.
Parties appoint an escrow agent: They sign an escrow agreement with the agent. This agreement clearly sets out:
what the agent will hold (money, documents, or both)
conditions to release funds or documents
fees and responsibilities
Buyer deposits funds into the escrow account: The money stays secure and cannot be touched until conditions are met.
Seller fulfills their obligations: the obligations may be transferring title, delivering documents, completing business filings, etc.
Escrow agent verifies completion with the buyer: The agent follows only the agreed instructions mainly from the buyer whether the seller has carried out all the seller’s obligations.
Funds/documents are released to the right party: money goes to the seller and title or documents go to the buyer.
Why use an escrow agent?
Ensures trust and security by preventing either party from losing money or assets unfairly.
Protects against fraud by releasing funds only after all agreed conditions are verified.
Provides a clear and transparent process with step-by-step obligations and dispute procedures set out in the Escrow Agreement.
Offers a neutral, independent safeguard, as the escrow agent cannot take sides or act without proper instructions.
Supports complex transactions, especially those involving multiple steps, government approvals, overseas buyers, or seller conditions before payment.
How is escrow regulated in Cambodia?
In Cambodia, escrow arrangements are supported by:
Civil Code for contract formation principle;
Banking regulations for escrow services provided by banks;
Trust Law (2021) and Sub-Decree on Trusts (2023), which allow licensed trust companies to act as escrow/trust service providers;
Real estate and company registration regulations, depending on the asset being transferred (e.g., land title, shares in a company).
This is for general reference only and does not constitute legal advice. For further guidance, contact us at: