indenture

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Indenture

An agreement declaring the benefits and obligations of two or more parties, often applicable in the context of Bankruptcy and bond trading.

The term indenture primarily describes secured contracts and has several applications in U.S. law. At its simplest, an indenture is an agreement that declares benefits and obligations between two or more parties. In bankruptcy law, for example, it is a mortgage or deed of trust that constitutes a claim against a debtor. The most common usage of indenture appears in the bond market. Before a bond is issued, the issuer executes a legally binding indenture governing all of the bond's terms. Finally, the concept of indenture has an ignominious place in the history of U.S. labor. Indentured servants of the seventeenth and eighteenth centuries were commonly European workers who contracted to provide labor for a number of years and in return received passage to the American colonies as well as room and board.

As an investment product that is used to raise capital, a bond is simply a written document by which a government, corporation, or individual promises to pay a definite sum of money on a certain date. The issuer of a bond, in cooperation with an underwriter (i.e., a financial organization that sells the bond to the public), prepares in advance an indenture outlining the terms of the bond. The issuer and the under-writer negotiate provisions such as the interest rate, the maturity date, and any restrictions on the issuer's actions. The last detail is especially important to corporate bonds because corporations Accrue liability upon becoming bond issuers and therefore seek to have the fewest possible restrictions placed on their business behavior by the terms of the indenture. As a consequence, potential buyers of corporate bonds should know what the indenture specifies before buying them.

Federal law governs these indentures. For 50 years, the Trust Indenture Act of 1939 (TIA) (15 U.S.C.A. § 77aaa) was the relevant law. Significant changes in financial markets prompted Congress to amend the TIA through the Securities Act Amendments of 1990 (Pub. L. No. 101-550, 1990; 104 Stat. 2713), which included the Trust Indenture Reform Act (Pub. L. No. 101-550, 104 Stat. 2713). The reforms simplified the writing of indentures, recognized the increasing internationalization of corporations by creating opportunities for foreign institutions to serve as trustees, and revised standards for conflicts of interest. The reforms also broadened the authority of the Securities and Exchange Commission.

In early American history, indenture was a form of labor contract. Beginning during the colonial period, employers in the largely agricultural economy faced a labor shortage. They addressed it in two ways: by buying slaves and by hiring indentured servants. The former were Africans who were brought to the colonies against their will to serve for life; the latter were generally Europeans from England and Germany who had entered multiyear employment contracts. From the late sixteenth century to the late eighteenth century, approximately half of the 350,000 European immigrants to the colonies were indentured servants. During the seventeenth century, these servants outnumbered slaves.

An indentured servant agreed to a four-to seven-year contract, and in return received passage from Europe and guarantees of work, food, and lodging. Colonial courts enforced the contracts of indentured servants, which were often harsh. Employers were seen as masters, and the servants had not only to work for them but also to obey their orders in all matters. For some, indentured servitude was not a Voluntary Act. Impoverished women and children were pressed into servitude, as were convicts. Nevertheless, this servitude was not equivalent to Slavery. Slaves remained slaves for life, whereas indentured servants were released at the end of their contracts. Moreover, as parties to a contract, indentured servants had rights that slaves never enjoyed. The practice of indentured servitude persisted into the early nineteenth century.

Further readings

Ballam, Deborah A. 1996. "Exploding the Original Myth Regarding Employment-At-Will: The True Origins of the Doctrine." Berkeley Journal of Employment and Labor Law 17.

——. 1995. "The Traditional View on the Origins of the Employment-At-Will Doctrine: Myth or Reality?" American Business Law Journal 33 (fall).

Riger, Martin. 1991."The Trust Indenture as Bargained Contract: The Persistence of Myth." Journal of Corporation Law 16 (winter).

West's Encyclopedia of American Law, edition 2. Copyright 2008 The Gale Group, Inc. All rights reserved.

indenture

n. a type of real property deed in which two parties agree to continuing mutual obligations. One party may agree to maintain the property, while the other agrees to make periodic payments. 2) a contract binding one person to work for another. 3) v. to bind a person to work for another.

Copyright © 1981-2005 by Gerald N. Hill and Kathleen T. Hill. All Right reserved.

indenture

see APPRENTICE.
Collins Dictionary of Law © W.J. Stewart, 2006

INDENTURE, conveyancing. An instrument of writing containing a conveyance or contract between two or more persons, usually indented or cut unevenly, or in and out, on the top or, side.
     2. Formerly it was common to make two instruments exactly alike, and it was then usual to write both on the same parchment, with some words or letters written between them, through which the parchment was cut, either in a straight or indented line, in such a manner as to leave one-half of the word on one part, and half on the other. The instrument usually commences with these words, "This indenture," which were not formerly sufficient, unless the parchment or paper was actually indented to make an indenture 5 Co. 20; but now, if the form of indenting the parchment be wanting, it may be supplied by being done in court, this being mere form. Besides, it would be exceedingly difficult with even the most perfect instruments, to out parchment or paper without indenting it. Vide Bac. Ab. Leases, &c. E 2; Com. Dig. Fait, C, and note d; Litt. sec. 370; Co. Litt. 143 b, 229 a; Cruise, Dig t. 32, c. 1, s. 24; 2 Bl. Com. 294; 1 Sess. Cas. 222.

A Law Dictionary, Adapted to the Constitution and Laws of the United States. By John Bouvier. Published 1856.
References in periodicals archive ?
The bonds are special obligations of the authority secured solely by the revenues and assets pledged under the amended and restated master indenture that primarily consist of mortgage backed securities (MBS) guaranteed by the Government National Mortgage Association (GNMA or Ginnie Mae), mortgage pass-through certificates guaranteed by the Federal National Mortgage Association (FNMA or Fannie Mae) and MBS guaranteed by the Federal Home Loan Mortgage Corporation (FHLMC or Freddie Mac) and cash reserves.
The issuers gave notice to Wells Fargo Bank National Association, as trustee for the notes that the requisite consents have been obtained and on 21 June 2018 (such time of execution, the effective time), the issuers, the guarantors party to the applicable Indenture and the trustee executed and delivered a supplemental indenture to the applicable Indenture to reflect the amendments (each, a "supplemental indenture").
For borrowers close to the restriction thresholds established in their indentures, a change made by FASB in 2015 could mean the difference between compliance with a debt covenant ratio and an apparent breach.
According to Millicom, it is seeking consents from the holders of the notes in order to introduce a customary restricted subsidiary and unrestricted subsidiary mechanic to allow for flexibility to operate subsidiaries outside the restricted group of subsidiaries and to make conforming amendments to certain defined terms and covenants in the indentures that reflect the potential designation of unrestricted subsidiaries.
Unfortunately, it was explained to me there were no copies of my indentures, there is only ever the one, the one held by Herbert's and returned to you, upon the successful completion of your apprenticeship.
As well as listing their trade or profession, apprenticeship records and 'indentures' - in effect a binding contract between the apprentice's family and the prospective employer - can also help you track down where your ancestor was living, for it was the practice for employers to provide board and lodgings in return for offering the apprenticeship.
The terms of the apprenticeship contract were written in documents called indentures.
While Zipf makes ample use of the few scattered court-ordered indentures for poor children that have survived, it is sometimes difficult to judge the degree to which the surviving documents are representative.
This book is also, however, a study of Asian immigration to the Caribbean, as well as a social history of the migrant settlers during and after their indentures. In many respects, this multifaceted focus marks Walton Look Lai's work as significantly different from previous studies, which have treated one or another of the above topics.
These include an analysis of existing loan agreements, indentures, stock option plans, employment agreements, and other material agreements.