Information by holder: Overview, definition, and example
What is information by holder?
"Information by holder" refers to the requirement for an individual or entity that holds a financial instrument, asset, or contractual right to provide specific information to another party, such as a regulatory authority, issuer, or contractual counterparty. This obligation ensures transparency, compliance, and proper record-keeping in financial transactions, investment agreements, or business contracts. The information typically includes details about ownership, transfers, financial status, or compliance with contractual terms.
For example, in a securities agreement, a bondholder may be required to provide updated contact details or tax residency information to the issuer for regulatory compliance purposes.
Why is information by holder important?
Information by holder is important because it ensures accurate record-keeping, regulatory compliance, and efficient communication between parties. It helps issuers, regulators, and counterparties maintain up-to-date information regarding asset ownership, financial reporting, or contractual obligations. Failing to provide required information may result in penalties, loss of rights, or legal consequences.
For businesses, obtaining timely and accurate information from holders ensures compliance with tax laws, corporate governance rules, and financial reporting requirements. For investors or asset holders, complying with information requests helps secure their rights and benefits under the agreement.
Understanding information by holder through an example
Imagine an investor who holds shares in a publicly traded company. As a shareholder, they are required to provide updated tax identification and residency details to the company for dividend payments and tax withholding purposes. If the investor fails to provide this information, the company may be required to withhold a higher tax rate or delay dividend payments.
In another example, a bondholder is required to inform the bond issuer of any changes in ownership if they transfer their bonds to another party. This ensures that the issuer maintains an accurate record of bondholders and can issue payments or notices to the correct parties.
An example of an information by holder clause
Here’s how an information by holder clause might look in a contract:
“The Holder shall provide the Issuer with any requested information necessary for compliance with applicable laws, including but not limited to tax identification details, residency status, and changes in ownership. Failure to provide such information in a timely manner may result in withholding of payments, suspension of rights, or other legal consequences as permitted by law.”
Conclusion
The obligation for information by holder ensures that asset holders, investors, or contractual parties provide necessary details to issuers, regulators, or counterparties. This requirement helps maintain compliance with legal and financial regulations, ensuring smooth transactions and accurate record-keeping. Including a clear clause on information by holder in agreements helps prevent disputes, ensures timely compliance, and facilitates effective communication between the involved parties.
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.