No inclusion of other securities: Overview, definition, and example
What is no inclusion of other securities?
No inclusion of other securities refers to a clause in an agreement, typically in the context of financial or investment contracts, that explicitly prohibits the inclusion of additional securities, assets, or financial instruments in a transaction or arrangement. This clause ensures that the agreement or transaction remains limited to the specific securities, assets, or terms originally agreed upon, without introducing new or different securities during the course of the agreement. This provision helps maintain clarity, prevent unexpected risks, and ensures that both parties are aligned on the specific terms of the agreement.
For example, in a bond issuance agreement, a company may include a "no inclusion of other securities" clause to make it clear that the bondholders' rights are tied only to the specific bonds issued, not to any other securities the company may issue in the future.
Why is no inclusion of other securities important?
The "no inclusion of other securities" clause is important because it protects the parties involved by ensuring that the terms of the transaction are not altered by the introduction of new or unrelated securities. This helps prevent confusion, potential conflicts, or changes in risk exposure that could arise if additional securities were included. For investors, it provides assurance that their investment is limited to the specified terms, and for issuers or companies, it ensures that they are not obligated to include securities they did not intend to offer.
For both parties, this provision maintains the integrity of the agreed-upon terms and keeps the scope of the transaction clear and focused. It can also simplify the financial structuring and reduce legal and administrative complexity by preventing the introduction of additional securities or terms that were not part of the initial agreement.
Understanding no inclusion of other securities through an example
Imagine a company that is issuing bonds to raise capital. The bond agreement includes a "no inclusion of other securities" clause, which states that the company cannot include additional types of securities, such as warrants, stock options, or other financial instruments, as part of the bond issuance. This ensures that bondholders are not exposed to any other financial instruments, reducing their risk and maintaining the terms of the bond offering as originally agreed upon.
In another example, an investment fund may have a clause stating that no other securities can be included in the fund’s portfolio unless explicitly agreed upon. This protects the investors by making sure that the fund’s strategy and investment profile remain consistent with what was originally communicated to them.
An example of no inclusion of other securities clause
Here’s how a clause like this might appear in a financial agreement or securities offering:
“The Parties agree that the Securities issued under this Agreement shall not include, and no additional securities or financial instruments shall be offered or included, without the prior written consent of both Parties. The scope of the securities covered by this Agreement shall be limited to the specific Securities described herein.”
Conclusion
The "no inclusion of other securities" clause is a safeguard that ensures the terms of a transaction or investment arrangement remain focused and consistent with the original agreement. It prevents the introduction of additional securities or financial instruments that could alter the risk profile or terms of the deal. For both issuers and investors, this provision helps maintain transparency, clarity, and the integrity of the agreed-upon terms, ensuring that the deal remains as originally structured and protecting all parties from unexpected changes.
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.