Most wind-downs are planned around legal structure requirements, from appointments and notices to asset realisation and creditor agreements. The architecture for actually disbursing funds is often considered only once the process is underway. Addressing disbursements early and planning them alongside the legal structure can prevent delays.
Liquidators, insolvency practitioners and restructuring lawyers often need to set up new accounts for the entity in liquidation, create an auditable payment process, and validate large groups of beneficiaries.
This article sets out how an escrow and paymaster structure can be built into a wind-down plan from the outset, enabling practitioners to make efficient, controlled disbursements.
Escrow, safeguarding, and disbursement: How a purpose-built escrow and paymaster structure works in practice
A wind-down escrow and paymaster structure separates two things that the traditional model conflates: holding funds securely and executing payments. Both elements have a distinct role to give practitioners control and visibility throughout.
How escrow controls the release of funds
Escrow defines when funds can be released. A bespoke agreement sets out the release events upfront. Examples of release conditions include a court order or a practitioner's sign-off.
By having funds held in escrow, they are ring-fenced from the provider’s balance sheet, thereby protecting them in the event of the provider's insolvency.
What a paymaster does in a disbursement
A paymaster governs how funds are released and oversees execution. Every beneficiary is screened for sanctions and AML before bank details are validated ahead of payment.
Where the beneficiaries span multiple jurisdictions, currency becomes part of the process. Disbursements are made in the beneficiary's local currency, where required, with FX execution built directly into the payment run.
Together, the escrow and paymaster give practitioners a mandate that is secure, controlled and accountable from start to finish.
A real-world view: How a UK insolvency practitioner structured a complex multi-jurisdictional distribution
An insolvency practitioner, working alongside restructuring lawyers, was appointed to a multi-jurisdictional distribution mandate. Their existing account structure did not provide the right assurances to the parties involved and the large number of beneficiaries who required processing.
By engaging Ebury, an escrow facility was established to hold the funds with a neutral third party during the liquidation process. And a paymaster facility was set up to handle the distribution itself. The practitioner retained full authority and oversight while the operational complexity moved to an infrastructure designed to handle it.
What to look for when appointing an escrow and paymaster provider
When assessing whether this structure is appropriate for a given mandate, the key considerations are:
- Does the escrow agreement clearly define release events, signatories, and reporting?
- Can the paymaster handle the required payment, currencies, and volumes?
- Is FX priced transparently, and is there cashback on held balances to offset costs?
- Does the provider offer a full audit trail for completed transactions?
Summary
Across the wind-down and asset realisation, liquidators, administrators and insolvency lawyers are no longer treating payment infrastructure as an afterthought to the legal mandate; they are building it from the outset.
Escrow and paymaster infrastructure will not change the legal complexity of a wind-down, but it can remove the operational drag that slows the process down.
If you are working on a wind-down, asset realisation, or large-scale client distribution and want to discuss how an escrow and paymaster facility could be structured for your mandate, we would welcome the opportunity to discuss. Send our team a message.
