Source code escrow

Definition

A third party holding the code, released to customers if the company fails to support it.

Why It Matters

Enterprise contracts often require one, and a small software company that signed the clause without setting up the arrangement has a contractual breach sitting in its largest accounts. It cuts both ways at a sale: an escrow that exists is an obligation the buyer inherits along with the release triggers, and one that was promised and never established is a reason a customer can walk at renewal. Ask which contracts require it, whether the deposit is current, and how often it has been verified, because an escrow holding a three-year-old build satisfies the paperwork and none of the purpose.