Indenture Definition & Meaning

In modern-day finance, the word indenture most commonly appears in centerpoint fund accounting bond agreements, real estate deals, and some aspects of bankruptcies. The indentured servitude system permitted landowners to provide only food and shelter for indentured servants, as opposed to wages. Some landowners offered their servants basic medical care, but typically labor contracts did not provide for this.

How long do indentures last?

Some indentures may be in effect for a few years, while others may last for decades or even in perpetuity. Outside the United States, indentured servitude was prevalent in the British colonies, which relied on migrant labor to staff its sugar plantations after the abolition of slavery. Around 500,000 indentured laborers were transferred to the Caribbean between 1837 and 1917, when the practice was officially abolished.

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.

1. These types of indentures are used in real estate transactions, corporate finance, and rental agreements, respectively.
2. Outside the United States, indentured servitude was prevalent in the British colonies, which relied on migrant labor to staff its sugar plantations after the abolition of slavery.
3. However, masters retained their right to prohibit their servants from marrying and had the authority to sell them to another master at any time.
4. To issue a bond, the issuer hires a third-party trustee, usually a bank or trust company, to represent investors who buy the bond.
5. If such conditions violate labor laws or other rights, this may be considered a form of human trafficking.

The Marshall School Of Business At USC Definition

Indentured servitude was popular in the United States in the 1600s as many European immigrants worked in exchange for the price of passage to America. Today, indentured servitude is illegal in the U.S. and banned in nearly all countries. These instruments are essential to establish a legal framework that can be referred to in the case of a dispute or any complaints from any of the sides involved. In bankruptcy law, an indenture may be referenced as proof of a claim on property. Indentures in general provide details on collateralized property, constituting the claim a lender has against a debtor, usually secured with a lien on the debtor’s property. Although prohibited by U.S. law, unethical employers may take advantage of a person’s migrant status to compel work in repayment of a debt.

First Class Financial Services is an investment bank that trades in the New York Stock Exchange. The company needs to issue some bonds to fund their regular operations and approached Pacific Ocean Trust, a company that manages pension funds and retirement accounts, to offer them a part of the issue privately. The Board of Pacific Ocean Trust asked the CEO of First Class Financial Services to present a document that contains all the relevant information about the bond issue being offered. An index in finance is a statistical measure that tracks the performance of a group of securities, such as stocks or bonds, and serves as a benchmark for evaluating the performance of individual investments or portfolios. The duration of an indenture can vary widely, depending on the type of agreement and the specific terms outlined in the document.

The call premium, that is, the price that will be paid if the issuer repurchases the bond is also indicated on the trust indenture. Bonds are issued to lenders or investors to raise money for a corporation or governmental body. To issue a bond, the issuer hires a third-party trustee, usually a bank or trust company, to represent investors who buy the bond.

Special Provisions of a Trust Indenture

Great Britain used indentured servitude as a punishment for captured prisoners of war in rebellions and civil wars. Trust indentures may not be included in every bond contract, given thatsome government bonds disclose similar information (the duties andrights of the issuer and bondholders) in a document called the bond resolution. Almost all indentures include subordination clauses that limit the amount of additional debt that the issuer can incur, and that dictate that all subsequent debts are subordinated to prior debts. Without such restrictions, an issuer would theroretically be allowed to issue an unlimited amount of debt, increasing bondholders’ exposure to default risk.

They help to prevent misunderstandings and ensure that everyone’s rights and responsibilities are clearly defined. In the past, indentures were commonly used to convey land ownership or to establish service contracts, such as apprenticeships that lasted for a set number of years. Today, indentures are still used in certain legal situations, particularly when it comes to issuing bonds or other debt securities. Indentured servitude is a labor contract in which an individual works without compensation to repay an indenture or loan over some time, commonly several years. Indentured servitude was popular in American colonies as many worked in exchange for the price of passage to America. Following the Civil War, the 13th Amendment made indentured servitude illegal in the United States.

Indenture refers to a legal and binding agreement, contract, or document between two or more parties. People in debt bondage may endure slavery-like conditions, like being forced to stay on the employer’s premises, denied access to the authorities, or being subject to physical or psychological abuse. Estimates that around 21 million people are subject to some form of forced labor.

My Accounting Course  is a world-class educational resource developed by experts to simplify accounting, finance, & investment analysis topics, so students and professionals can learn and propel their careers. The new form of indenture also required the master to allow each apprentice a reasonable holiday in every year. All the deeds above mentioned except an indenture, are signed only by the selling or granting party. An independent trustee is an impartial third-party manager who oversees and administers a trust fund or estate on behalf of the beneficiaries, ensuring fair and unbiased management of assets. An indeterminate sentence, or flexible sentence, is a prison term with no definite release date, allowing authorities to keep an offender incarcerated until they deem them rehabilitated and no longer a threat to society.

Approximately 300,000 European workers immigrated to the American colonies in the 1600s as indentured servants, and indentured servitude continued throughout much of the 1700s. An indenture typically contains important information related to the debt, including the principal amount, interest rate, maturity date, payment schedule, and any other relevant terms. It serves as a crucial document that ensures transparency and clarity regarding the loan or debt concerned. If an indenture is breached, the non-breaching party may have the right to take legal action, such as filing a lawsuit or seeking other remedies outlined in the indenture. The consequences of a breach can vary depending on the specific terms of the agreement and the nature of the breach.

For example, a trust indenture may indicate whether an issued bond is callable. If the issuer can “call” the bond, the indenture will include call protection for the bondholder, which is the period during which the issuer cannot repurchase the bonds from tax considerations for college students 2020 the market. After the call protection period, the indenture may list the first call dates and any subsequent call dates that the issuer may exercise its right to call.

More Commonly Misspelled Words

In the case of bonds, the indenture shows the pledge, promises, representations and covenants of the issuing party. In finance, an indenture refers to a legal contract between a borrower and a lender that outlines the terms and conditions of a debt instrument, such as bonds. The indenture acts as a binding agreement, protecting the rights and interests of both parties involved. 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. These two are in a regular contractual, arm’s length, non-fiduciary, non-equity relationship. An indenture is a legal contract or agreement, often used in the context of real estate or finance.

Many of the current rules regarding trust indentures were established by the Trust Indenture Act (TIA), a piece of legislation passed in 1939 to protect bondholders and investors. If one or more parties to an indenture fail to uphold their end of the agreement, the other party or parties can take legal action to enforce the terms of the indenture. This may involve seeking damages, obtaining a court order, or taking other legal measures to ensure the indenture is upheld. In real estate, an indenture is a deed in which two parties agree to continuing obligations.