Securities subject to this agreement: Overview, definition, and example
What are securities subject to this agreement?
Securities subject to this agreement refer to the specific financial instruments or assets that are governed by the terms and conditions outlined in a contract or legal agreement. These securities can include stocks, bonds, options, warrants, or other investment instruments that are mentioned or referenced within the context of the agreement. The agreement typically outlines the rights, duties, restrictions, and obligations associated with these securities, including their sale, transfer, or ownership under specific conditions. The phrase "securities subject to this agreement" ensures that all transactions and actions involving these securities will be conducted in accordance with the terms set out in the agreement.
Why are securities subject to this agreement important?
The concept of "securities subject to this agreement" is important because it defines which financial instruments are covered by the terms of a contract, reducing ambiguity and protecting the rights of the involved parties. By specifying the securities that are governed by the agreement, both parties have clarity on what is included and what is excluded from the scope of the agreement. This helps ensure that transactions, transfers, or other actions involving the securities are carried out in compliance with the contract. Additionally, it can provide legal protection in case of disputes or violations related to those securities.
Understanding securities subject to this agreement through an example
For example, a company enters into an agreement with an investor where the investor agrees to purchase a certain amount of stock in the company. The agreement states that the securities subject to this agreement are the company’s common shares. This means that the terms of the agreement apply only to those shares, and any transfer, voting rights, or dividend payments related to these shares are governed by the agreement. If the company issues other types of securities, such as convertible bonds, those securities are not subject to this agreement unless specifically stated.
In another example, a private equity firm enters into a partnership agreement with a venture capital fund. The agreement specifies that the securities subject to this agreement are the preferred shares of several portfolio companies in which the fund has invested. Any sale or transfer of these shares must be done in accordance with the terms of the partnership agreement.
An example of a "securities subject to this agreement" clause
Here’s how a "securities subject to this agreement" clause might appear in a contract:
“The securities subject to this Agreement shall include all shares of common stock, preferred stock, and warrants issued by the Company, as detailed in Schedule A. These securities shall be governed by the terms of this Agreement, including any restrictions on transfer, voting rights, and dividend payments.”
Conclusion
The phrase "securities subject to this agreement" defines which financial instruments are regulated by the terms of a contract, providing clarity and protecting the interests of all parties involved. It is an essential concept in investment agreements, corporate governance, and securities transactions, ensuring that the rights and obligations associated with specific securities are clear and enforceable. By specifying these securities, the agreement helps prevent disputes and ensures compliance with the agreed-upon terms.
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.