Corporate Mortgage Bonds and Majority Clauses
1948; The Yale Law Journal Company; Volume: 57; Issue: 4 Linguagem: Inglês
10.2307/793118
ISSN1939-8611
Autores Tópico(s)Corporate Governance and Law
ResumoIT has long been accepted that secured creditors of a corporation may not always enforce their security in conformity with terms previously accepted by the borrower. 1Since 1879 English and Canadian indentures have frequently contained provisions, commonly called majority clauses, enabling a specified percentage of the security holders to modify the rights of the class, including the principal and interest obligation of the corporate debtor. 2 Their use has become so common that a commentator on the English practice states that ". . . the draftsman who omits to insert some such provision runs the risk of being accused of neglecting the best interests of the debenture [holderl . . .With rare exceptions, majority clauses allowing modification of the principal and interest obligations of a corporate debtor were not accepted in the United States until recent insistence by the ICC that they be included in the new mortgages of railroads emerging from Section 77 reorganization.The Commission, in addition, has pressed for enactment of a statute which, in effect, would incorporate such a clause in most railroad obligations.There is at least inadequate understanding of the incidents and operation of such clauses in the United States.This article seeks to ameliorate the inadequacy. ENGLISH AND CANADIAN EXPERIENCEThe source of the English and Canadian majority clauses can probably be traced to clauses included in a trust deed prepared by Francis Beaufort Palmer in 1879 4 and, two years later, reproduced in a revision of his compilation of Company Precedents.Soon thereafter such clauses appeared in many English and Canadian trust deeds and indentures. 6t Member of the New York Bar.1.This is particularly true
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