The main difference between an indenture and a regular contract is the level of formality and legal complexity. Indentures are typically more formal, detailed, and legally binding than standard contracts. In a credit offering, a closed-end indenture clause may be used to detail any collateral involved that provides backing for the offering.
What are some examples of “indenture” in legal contracts?
It’s a formal written document that outlines the terms and conditions of a transaction or arrangement between two or what is the energy tax credit for 2020, 2021 how to claim and qualify more parties. An indenture is a type of legal contract or agreement that has been used for centuries. It’s a formal document that outlines the terms and conditions between two or more parties. Typically a credit indenture is used for the sake of bond issuers and bondholders.
They can provide more detailed guidance and advice based on your unique situation. Indentured servitude in the U.S. began in the early 1600s in Virginia, not long after the settlement of Jamestown. Many early American settlers sought cheap labor to help manage their large estates and farms, and commonly agreed to fund the passage of European immigrants to Virginia in exchange for their labor. Shaun Conrad is a Certified Public Accountant and CPA exam expert with a passion for teaching. After almost a axa insurance dac definition decade of experience in public accounting, he created MyAccountingCourse.com to help people learn accounting & finance, pass the CPA exam, and start their career. In the early history of the United States, many European immigrants served a period of indentured labour in order to pay the cost of their transportation.
If such conditions violate labor laws or other rights, this may be considered a form of human trafficking. Indentured servants did have limited rights including access to the courts and entitlement to own land. However, masters retained their right to prohibit their servants from marrying and had the authority to sell them to another master at any time.
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A copy of it must be filed with the Securities and Exchange Commission (SEC) for corporate bonds with aggregate principal issues of at least $5 million. Corporate issues for less than $5 million, municipal bonds, and bonds issued by the government are not required to file trust indentures with the SEC. Of course, these exempted entities may choose to create a trust indenture to reassure prospective bond buyers, if not to adhere to any federal law. In the U.S., there can be several types of indentures, all typically involved with debt agreements, real estate, or bankruptcy. Historically, indenture has also referred to a contract binding one person to work for another for a set period of time (indentured servant), particularly European immigrants.
Indentured servants enjoyed little personal freedom and some contracts allowed landowners to extend the work period for servants who were accused of behavior that was deemed improper. An independent contractor, often called a freelancer, is someone who provides services to a company without being an official employee, allowing for more flexibility and control over their work. If you need more information about indentures or have specific questions, it’s best to consult with a legal professional who specializes in the type of indenture you’re interested in.
A trust indenture also includes the characteristics of the bond, such as maturity date, face value, coupon rate, payment schedule, and purpose of the bond issue. One section of the trust indenture dictates the circumstances and processes surrounding a default. The indenture establishes a collective action mechanism under which creditors or bondholders can collect in a fair, orderly manner if default by the issuer takes place. A bondholder should be aware of and understand the proper sequence of events, allowing them to take the proper course of action should such a situation occur. Indentures are important because they provide a clear, legally binding agreement between the parties involved.
indenture – Meaning in Law and Legal Documents, Examples and FAQs
This practice was common during the 17th and 18th centuries, where over half of immigrants worked off an average of three years’ servitude. Yarilet Perez is an experienced multimedia journalist and fact-checker with a Master of Science in Journalism. She has worked in multiple cities covering breaking news, politics, education, and more. Indentured servants often served as field workers, gardeners, cooks, and laborers. Virginia and Maryland operated under the “headright system” where incentives, such as 50 acres of land, were provided for planters to import workers. This system was used by wealthy plantation aristocrats to increase their land holdings.
- Indentured servitude is a form of labor in which an individual is under contract to work without a salary for a certain timeframe to repay a loan.
- The term is used for any kind of deed executed by more than one party, in contrast to a deed poll which is made by one individual.
- Since these debts tended to grow over time, the sharecropping system effectively replaced chattel slavery with an informal system of debt bondage.
In the fixed-income market, an indenture is hardly ever referred to when times are normal. But the indenture becomes the go-to document when certain events take place, such as if the issuer is in danger of violating a bond covenant. The indenture is then scrutinized closely to make sure there is no ambiguity in calculating the financial ratios that determine whether the issuer is abiding by the covenants.
Should a conflict arise between the issuer and bondholder, the indenture is the reference document utilized for conflict resolution. When the offering memorandum is prepared in advance of marketing a bond, the indenture will typically be summarised in the “description of notes” section. A trust indenture is similar to a bond indenture, except it also details the trustee’s responsibilities in overseeing all of a bond issue’s terms.
Indenture: Definition and Types in Finance
It specifies the important features of a bond, such as its maturity date, the timing of interest payments, method of interest calculation, callability, and convertible features, if applicable. A bond indenture also contains all the terms and conditions applicable to the bond issue. Other critical information included in the indenture are the financial covenants that govern the issuer and the formulas for calculating whether the issuer is within the covenants (usually ratios based on corporate financials).
Closed-end indentures include collateral as well as provisions that ensure the collateral may only be assigned to one specific offering. In this case, what the Board of Pacific Ocean is asking for is the indenture of the bond issue. The contract in which both parties agree to certain conditions established for the bond. So, in order to continue with this transaction, the CEO of First Class should work with his legal team to write the indenture for the issue and then send it over to Pacific Ocean Trust, so they can review it and sign it.
The agreement entered into by the issuer, and the trustee is referred to as the trust indenture. A trust indenture is an agreement in a bond contract made between a bond issuer and a trustee that represents the bondholder’s interests by highlighting the rules and responsibilities that each party must adhere to. Indentures typically involve two or more parties, such as a borrower and a lender, a property owner and a tenant, or a company and its investors. The parties involved in an indenture are legally bound by the terms and conditions outlined in the document. The main purpose of an indenture is to clearly define the rights, responsibilities, and obligations of each party involved in a legal agreement. It helps to ensure that all parties understand and agree to the terms of the contract.