Q&As

What are collective action clauses and why are they used in sovereign bond documentation?

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Published by a LexisNexis Banking & Finance expert
Published on: 06 May 2015
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What are collective action clauses?

Collective action clauses (CACS) are provisions contained in the terms and conditions of Debt Securities which:

  1. •

    allow a specified majority of holders of the Securities to agree to a change in the terms of the securities proposed by the issuer, and

  2. •

    make any change so agreed binding upon all holders of the securities, including any who oppose the proposed change

The main purpose of a CAC is to facilitate a Rescheduling of the debt securities. If the issuer can agree rescheduled terms with the specified majority, the CAC will prevent minority holders from continuing to claim full repayment. A CAC makes it harder

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Jurisdiction(s):
United Kingdom
Key definition:
Debt Securities definition
What does Debt Securities mean?

Debt instruments constituted by a deed under which the borrower agrees with a creditor to repay a loan, usually with interest, within a given time frame.

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