Abstract:
Most corporate bonds are issued under a trust structure. Under a bond trust, the issuer appoints a trustee to act on behalf of the bondholders. This thesis aims to provide a comparative overview of the law of bond trusts in a number of major jurisdictions, and offer some valuable insights into various aspects of the tripartite relationship involving the issuer, the bond trustee, and the bondholders. In particular, this thesis looks at four specific issues. First, this thesis looks into the bond trust regime under New Zealand law and argues that the monitoring duties imposed on bond trustees are too onerous and therefore unlikely to achieve their purposes. Secondly, this thesis analyses the legal nature of the bond trust, and argues that it is fundamentally different from other types of express trust. Accordingly, the trustee’s duties and liabilities should be analysed under a contractual framework in accordance with the presumed intention of the parties. The third issue discussed is the no-action clause contained in standard bond trust deeds. The no-action clause provides that bondholders may not proceed against an issuer unless certain conditions are met. The thesis compares two approaches in interpreting this clause, the expansive approach and the restrictive approach, and argues that the former should be preferred. Finally, this thesis turns to exit consents. The exit consent technique refers to an offer by a bond issuer to all the bondholders to exchange the existing bonds for new bonds or other types of securities, on the condition that the tendering bondholders must consent to a resolution which will amend the terms of the existing bonds so as to make the bonds less attractive. It is submitted that the exit consent does not violate s 316(b) of the Trust Indenture Act of 1939 (US), nor the abuse principle under English law.