Incorporation by reference of Trust Indenture Act: Overview, definition, and example
What is incorporation by reference of the Trust Indenture Act?
Incorporation by reference of the Trust Indenture Act (TIA) means that a contract—typically an indenture or debt agreement—explicitly states that certain provisions of the TIA are included in the contract even if they’re not written out in full. The TIA is a U.S. federal law that governs how debt securities like bonds are issued and how investors are protected.
Why is incorporation by reference of the Trust Indenture Act important?
The TIA includes important rules that protect bondholders, such as requiring clear disclosure, trustee duties, and investor voting rights. By incorporating it by reference, the parties agree to follow those rules without rewriting the entire law into the document. This clause is especially common in indentures for publicly offered debt in the U.S., helping ensure the agreement complies with securities regulations and investor protection standards.
Understanding incorporation by reference of the Trust Indenture Act through an example
A company issues $100 million in bonds through a public offering and enters into an indenture agreement with a trustee. The agreement says that the indenture is subject to the Trust Indenture Act and incorporates its provisions by reference. This ensures that even if the indenture doesn’t spell out every detail—like the trustee’s standard of care or how amendments can be made—those parts of the TIA still apply automatically and carry legal weight.
Example of an incorporation by reference of the Trust Indenture Act clause
Here’s how an incorporation by reference of the Trust Indenture Act clause may look like in a contract:
This indenture is subject to, and shall be governed by, the Trust Indenture Act of 1939, as amended, and the provisions of such Act are hereby incorporated by reference and made a part of this agreement with the same effect as if set forth fully herein.
Conclusion
This clause ties the contract to federal investor protection standards without repeating the entire statute. For bond issuers, trustees, and investors, it signals that the deal is being conducted under the established legal framework of the Trust Indenture Act. If you're dealing with public debt instruments, this reference is not just boilerplate—it carries real legal force.
This article contains general legal information and does not contain legal advice. Cobrief is not a law firm or a substitute for an attorney or law firm. The law is complex and changes often. For legal advice, please ask a lawyer.