Legal Definitions - depository-transfer check

A depository-transfer check is a special type of check used by an organization to move its own funds between its various bank accounts. Unlike a regular check, it is typically non-negotiable, meaning it cannot be endorsed and transferred to a third party for payment. Instead, it serves as an internal instruction to a bank to transfer money from one of the organization's accounts to another, often from a local or branch account to a central corporate account.

Here are some examples to illustrate this concept:

• Example 1: Retail Chain Fund Consolidation

  A large national supermarket chain operates hundreds of stores, each with its own local bank account for daily cash deposits. At the end of each business day, the chain's corporate treasury department issues a depository-transfer check to move the accumulated funds from each individual store's bank account into the company's main corporate operating account at a central bank. This process efficiently consolidates the day's sales revenue without the need for a traditional check that could be cashed by an external party.

• Example 2: University Departmental Funds

  A major university has several academic departments, each managing small operational funds in separate bank accounts. To streamline financial management, the university's central finance office periodically uses a depository-transfer check to sweep funds from these departmental accounts into the university's primary endowment or general operating account. This ensures that all institutional funds are centrally managed and available for broader university initiatives, rather than remaining fragmented across many smaller accounts.

• Example 3: Manufacturing Company Payroll

  A manufacturing company with multiple factory locations maintains separate bank accounts at each site for local expenses and payroll processing. Before each payday, the corporate finance team might issue a depository-transfer check to move the necessary funds from the general corporate account into the specific payroll disbursement accounts at each factory's bank. This ensures that the local accounts are sufficiently funded to cover employee salaries and wages, while the main corporate account retains control over the larger pool of funds until needed.