The American and British governments passed several laws that helped foster the decline of indentures. The UK Parliament’s Passenger Vessels Act 1803 regulated travel conditions aboard ships to make transportation more expensive, so as to hinder landlords’ tenants seeking a better life. An American law passed in 1833 abolished the imprisonment of debtors, which made prosecuting runaway servants more difficult, increasing the risk of indenture contract purchases. The Thirteenth Amendment to the United States Constitution, passed in the wake of the American Civil War, made involuntary indentured servitude illegal in the United States. A trust indenture is similar to a bond indenture, except it also details the trustee’s responsibilities in overseeing all of a bond issue’s terms. They provide clarity, transparency, and legal protection for both borrowers and lenders.
Other Common Credit Indenture Terms
This practice was common during the 17th and 18th centuries, where over half of immigrants worked off an average of three years’ servitude. This website is using a security service to protect itself from online attacks. There are several actions that could trigger this block including submitting a certain word or phrase, a SQL command or malformed data. A bankruptcy indenture refers to the proof of claim on a particular property in the event of bankruptcy.
- A credit indenture is an underlying contract which details all the clauses and provisions linked to a particular credit offering.
- All parties must consider the terms and conditions of an indenture before signing it, as it is a binding agreement that cannot be easily canceled or changed.
- In the United States, public debt offerings in excess of $10 million require the use of an indenture of trust under the Trust Indenture Act of 1939.
- Adam Hayes, Ph.D., CFA, is a financial writer with 15+ years Wall Street experience as a derivatives trader.
- However, bonds of reorganized companies and convertible bonds with increased interest rates continue to fall under the provisions of the Trust Indenture Act.
Indenture: Definition and Types in Finance
The first ship, Whitby, sailed from Calcutta for British Guiana on 13 January 1838, and arrived in Berbice on 5 May 1838. Transportation to the Caribbean stopped in 1848 due to problems in the sugar industry and resumed in Demerara and Trinidad in 1851 and Jamaica in 1860. The Indian indenture system was a system of indenture by which two million[42] Indians called coolies were transported to various colonies of European powers to provide labour for the (mainly sugar) plantations. This resulted in the development of a large Indian diaspora, which spread from the Indian Ocean (i.e. Réunion and Mauritius) to Pacific Ocean (i.e. Fiji), as well as the growth of Indo-Caribbean and Indo-African population. Most masters had to depend on middlemen or ships masters to recruit and transport the workers, so indentureships were commonly sold by such men to planters or others upon the ships arrival. Like slaves, their price went up or down, depending on supply and demand.
Commonly Misspelled Words
An indenture is a particular formal contract or deed made between two or more parties. Beginning in medieval England, an indenture can be defined as a specific agreement within a contract noted with a specific duration or significance. Indentures were initially used to companies using xero and its marketshare convey land and for service contracts of seven years. Currently, indentures are used for some apprenticeship contracts in the U.S. For example, bond indentures are indentured trusts that delineate various interests when companies issue bonds in financing agreements.
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The terms of an indenture were not always enforced by American courts, although runaways were usually sought out and returned to their employer. For the past 52 years, Harold Averkamp (CPA, MBA) hasworked as an accounting supervisor, manager, consultant, university instructor, and innovator in teaching accounting online. For the past 52 years, Harold Averkamp (CPA, MBA) has worked as an accounting supervisor, manager, consultant, university instructor, and innovator in teaching accounting online. We endeavor to ensure that the information on this site is current and accurate but you should confirm any information with the product or service provider and read the information they can provide.
An indenture is a legal contract between two parties, particularly for indentured labour or a term of apprenticeship but also for certain land transactions. When the agreement was made before a court of law a tripartite indenture was made, with the third piece kept https://www.bookkeeping-reviews.com/ at the court. The term is used for any kind of deed executed by more than one party, in contrast to a deed poll which is made by one individual. In the case of bonds, the indenture shows the pledge, promises, representations and covenants of the issuing party.
According to the SEC, raising the interest rate on outstanding convertible bonds to discourage conversions does not also require registering the securities again. However, bonds of reorganized companies and convertible bonds with increased interest rates continue to fall under the provisions of the Trust Indenture Act. The new form of indenture also required the master to allow each apprentice a reasonable holiday in every year. Yarilet Perez is an experienced multimedia journalist and fact-checker with a Master of Science in Journalism. She has worked in multiple cities covering breaking news, politics, education, and more.
The TIA of 1939 gave investors more substantive rights, including the right for an individual bondholder to independently pursue legal action to receive payment. The TIA requires that the hired trustee be free of conflicts of interest involving the issuer. The initial text reading “This Indenture” is highly decorated and includes a miniature printed portrait of King George II, the royal coat of arms of Great Britain, and a cupid/herald figure blowing a trumpet. The top edge of the vellum sheet, including the initial decoration, is cut in an irregular wavy manner. Follow-up notes and pieces of brief filing information are handwritten in ink on the reverse. The bottom of the deed has a red wax seal and a fragment of the fabric binding tape.
It serves as a crucial document that ensures transparency and clarity regarding the loan or debt concerned. The owner of this website may be compensated in exchange for featured placement of certain sponsored products and services, or your clicking on links posted on this website. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear), with exception for mortgage and home lending related products. SuperMoney strives to provide a wide array of offers for our users, but our offers do not represent all financial services companies or products. In the early history of the United States, many European immigrants served a period of indentured labour in order to pay the cost of their transportation.
As bond issues grew over time, the SEC updated the $10 million to $50 million. But the locals refused, and as a result, the British introduced the Indian indenture system, resulting in a permanent Indian South African presence. On 18 January 1826, the Government of the French Indian Ocean island of Réunion laid down terms for the introduction of Indian labourers to the colony. Each man was required to appear before a magistrate and declare that he was going voluntarily.
Adam received his master’s in economics from The New School for Social Research and his Ph.D. from the University of Wisconsin-Madison in sociology. He is a CFA charterholder as well as holding FINRA Series 7, 55 & 63 licenses. He currently researches and teaches economic sociology and the social studies of finance at the Hebrew University in Jerusalem. After the end of slavery, the West Indian sugar colonies tried the use of emancipated slaves, families from Ireland, Germany and Malta and Portuguese from Madeira. All these efforts failed to satisfy the labour needs of the colonies due to high mortality of the new arrivals and their reluctance to continue working at the end of their indenture. On 16 November 1844, the British Indian Government legalised emigration to Jamaica, Trinidad and Demerara (Guyana).
The trust indenture highlights the terms and conditions that the issuer, lender, and trustee must adhere to during the life of the bond. Any protective or restrictive covenants, such as call provisions, must be included in the indenture. When the offering memorandum is prepared in advance of marketing a bond, the indenture will typically be summarised in the “description of notes” section.
Securities that are not subject to regulation under the Securities Act of 1933 are exempt from the Trust Indenture Act of 1939. Securities registration requirements do not apply to bonds issued during a company reorganization or recapitalization. The Trust Indenture Act was introduced as an amendment to the Securities Act of 1933 to make indentured trustees more proactive in their roles. It puts some obligations directly on them, such as reporting requirements. Third-party loan provider information is not available to residents of Connecticut or where otherwise prohibited. Any opinions, analyses, reviews or recommendations expressed here are those of the author’s alone, and have not been reviewed, approved or otherwise endorsed by any financial institution.
The contract was for five years with pay of ₹8 (12¢ US)[citation needed] per month and rations provided labourers had been transported from Pondicherry and Karaikal. The first attempt at importing Indian labour into Mauritius, in 1829, ended in failure, but by 1834, with abolition of slavery throughout most of the British Empire, transportation of Indian labour to the island gained pace. An indenture is a legal agreement, deed, or contract between two or more parties. Historically, this type of contract was used to legally bind one person, such as an indentured servant, to work for another, as a judicial punishment, or for debt repayment.
It specifies the important features of a bond, such as its maturity date, the timing of interest payments, method of interest calculation, callability, and convertible features, if applicable. A bond indenture also contains all the terms and conditions applicable to the bond issue. Other critical information included in the indenture are the financial covenants that govern the issuer and the formulas for calculating whether the issuer is within the covenants (usually ratios based on corporate financials).
In the U.S., there can be several types of indentures, all typically involved with debt agreements, real estate, or bankruptcy. An indenture, formerly known as an “indenture of retainer,” is a legal contract between two parties. Sometimes the cut was made in a wavy instead of a toothed pattern such as the document in this collection. The Trust Indenture Act of 1939 was intended to supplement the Securities Act of 1933 with the overall goal of protecting investors; in this instance, bond investors. It enacted law that required bond offerings over $10 million to be fully disclosed, putting some of the responsibility on indentured trustees.
A trust indenture is an agreement between a bond issuer and a bondholder’s trustee. The indenture details the rights and responsibilities of each party in the bond agreement. Debt issuers are expected to disclose the terms under which a security is issued with a formal written agreement known as a trust indenture. A trust indenture is a contract entered into by a bond issuer and an independent trustee to protect the interests of bondholders.
The agreement mentions that XYZ Inc. would maintain a debt-equity ratio of 2.0x throughout the tenure of the loan, and any breach would trigger the event. Therefore, the borrower (XYZ Inc.) and the lender (ABC Bank) agreed upon this condition of maintaining the debt-equity ratio above 2.0x. XYZ Inc. is obliged to maintain the ratio throughout the loan tenure and is expected to infuse more equity capital if the ratio falls below the threshold figure of 2.0x. All the deeds above mentioned except an indenture, are signed only by the selling or granting party. These examples are programmatically compiled from various online sources to illustrate current usage of the word ‘indenture.’ Any opinions expressed in the examples do not represent those of Merriam-Webster or its editors.
