One remedial statute enacted as a result of the Great Depression in the 20th century is the Trust Indenture Act of 1939 (TIA), designed to protect “investors in notes, bonds, debentures, evidences of indebtedness, and certificates of interest or participation therein, which are offered to the public….”1 These publicly offered debt securities are issued under trust indentures that protect the rights of security holders to enforce payment of the debt.
One abuse the TIA was enacted to prevent is forcing individual holders of debt to surrender their rights to payment under an indenture in restructuring the debts of a financially troubled company. For example, a company unable to pay its debts might reach an agreement with a majority of its bondholders to restructure its debts under which an objecting security holder would receive no payment.
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