Retirement of Securities: Key Insights and Legal Perspectives
Definition & Meaning
The retirement of securities refers to the process of removing a financial asset from the securities market. This typically occurs when a security, such as a bond, reaches its maturity date and is redeemed by the issuer. Additionally, it can involve a corporation repurchasing its own stock, which leads to the cancellation and destruction of the repurchased shares, along with any associated rights. In legal terms, the concept of retirement is broader than redemption, which is a more specific action.
Legal Use & context
The retirement of securities is relevant in various legal contexts, particularly in corporate law and securities regulation. It is often addressed in legal documents related to bond issuance and corporate stock buybacks. Users can manage some aspects of this process themselves by utilizing legal templates from US Legal Forms, which provide guidance on the necessary forms and procedures.
Real-world examples
Here are a couple of examples of abatement:
Example 1: A corporation issues bonds with a maturity date of ten years. Upon reaching this date, the corporation pays bondholders the principal amount, effectively retiring the bonds from the market.
Example 2: A company decides to buy back 1 million shares of its own stock. After repurchasing, the company cancels these shares, thereby retiring them and eliminating any associated shareholder rights. (hypothetical example)