Article Title: Understanding the Agreement between Company and Deposit Trustee
When a company decides to issue debt securities such as bonds, it appoints a deposit trustee to act as an intermediary between the company and its bondholders. The role of the deposit trustee is to hold the securities and ensure that the terms of the agreement between the company and the bondholders are met. In this article, we will discuss the critical aspects of the agreement between a company and its deposit trustee.
Scope of the Agreement
The agreement between a company and its deposit trustee outlines the scope of the deposit trustee`s responsibilities. Some of the primary responsibilities include managing the bondholders` accounts, processing payments, and providing information to the company and bondholders regarding the bonds` status. The agreement also details the deposit trustee`s compensation and the terms of the agreement`s termination.
Custody of the Securities
One of the most crucial aspects of the agreement is the custody of the securities. The deposit trustee is responsible for holding the securities in a segregated account and ensuring that they are safe and secure. The agreement should detail the procedures for the deposit and withdrawal of securities and the circumstances in which the deposit trustee can be held liable for any loss or damage to the securities.
Communication with Bondholders
The deposit trustee acts as a liaison between the company and its bondholders. The agreement should outline the deposit trustee`s obligation to provide bondholders with periodic statements, notifications, and other relevant information. The deposit trustee is also responsible for communicating any changes to the terms of the bonds, such as interest rates or maturity dates, to the bondholders.
Enforcement of the Agreement
The deposit trustee`s role includes ensuring that the company complies with the terms of the agreement. The deposit trustee has the power to take legal action to enforce the agreement, such as initiating legal proceedings against the company for failing to make payments on the bonds.
Conclusion
The agreement between a company and its deposit trustee is a critical component of the bond issuance process. It is essential to ensure that the agreement is clear and concise and outlines the deposit trustee`s responsibilities in detail. By understanding the key aspects of the agreement, companies can ensure that their bond issuances run smoothly, and their bondholders` interests are protected.