Indenture remains in full force and effect: Overview, definition, and example
What does "Indenture Remains in Full Force and Effect" mean?
The phrase "indenture remains in full force and effect" refers to a provision in a legal agreement or contract (usually in bond indentures or other financial agreements) that ensures the terms of the indenture remain valid and enforceable until the specified conditions are met or the agreement is formally terminated. Essentially, it means that the obligations, rights, and duties outlined in the indenture continue to apply unless the agreement is explicitly amended, fulfilled, or legally voided.
An indenture is a formal agreement, typically used for bond issuance, that outlines the terms of the bonds, including the rights of bondholders and the duties of the issuer. When the indenture remains in full force and effect, it guarantees that all parties are bound by the agreement and must comply with its terms.
Why is "indenture remains in full force and effect" important?
This phrase is important because it emphasizes that the terms of a legal agreement, such as a bond indenture, are still valid and binding until they are officially terminated or fulfilled. For investors, it ensures that the bond issuer cannot arbitrarily change the terms or ignore their obligations. For issuers, it means that they must comply with the terms set forth in the indenture, such as making timely payments, meeting covenants, and fulfilling other obligations.
For both parties, the phrase provides clarity about the continuation of the legal agreement, ensuring that the rights and responsibilities remain in effect until the indenture is legally altered or completed.
Understanding "indenture remains in full force and effect" through an example
Imagine a company issues bonds under a formal indenture agreement. The indenture outlines specific terms, such as the interest rate, payment schedule, and the company’s responsibilities. Even if the company faces financial challenges, the indenture remains in full force and effect, meaning that the company must continue to make interest payments and adhere to other obligations in the agreement unless the bondholders agree to modify the terms or the bonds are fully paid off.
In another example, a trust agreement between a borrower and a lender may include a statement that the indenture remains in full force and effect. This ensures that the borrower is legally required to fulfill their payment obligations according to the terms of the indenture agreement until the debt is satisfied or the agreement is otherwise terminated by mutual consent or through legal procedures.
Example of "indenture remains in full force and effect" clause
Here’s how a clause for "indenture remains in full force and effect" might look in a bond agreement:
“The terms of this Indenture shall remain in full force and effect until all obligations hereunder are satisfied, and the bonds issued pursuant to this Indenture have been redeemed in full, or until this Indenture is amended or terminated in accordance with the provisions herein.”
Conclusion
"Indenture remains in full force and effect" is a provision that ensures the terms of a legal agreement or contract continue to be valid and enforceable until specific conditions are met or the agreement is formally terminated. This phrase is commonly used in financial agreements such as bond indentures to provide assurance to all parties that the obligations outlined in the agreement must be followed unless legally modified or completed. It plays a key role in maintaining clarity and stability in contractual relationships.
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.