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Understanding Undivided Account (Underwriting) in Legal Terms
Definition & Meaning
An undivided account, also known as an Eastern account, is a type of underwriting arrangement. In this system, each underwriter in a group is responsible not only for selling their assigned portion of a new issue but also for selling any remaining shares that the group as a whole has not sold. This means that if one underwriter sells more than their allotted amount, they can help sell the excess shares, ensuring that the entire issue is placed in the market effectively.
Table of content
Legal Use & context
Undivided accounts are primarily used in the field of finance and securities law. They are relevant in situations involving public offerings and bond issues, where multiple underwriters collaborate to sell securities. Users may encounter this term when dealing with investment banking, securities regulation, or corporate finance. Legal forms related to underwriting agreements may be available through platforms like US Legal Forms, allowing users to manage these processes effectively.
Key legal elements
Real-world examples
Here are a couple of examples of abatement:
Example 1: A group of underwriters is assigned to sell a new bond issue of $100 million. Each underwriter is allocated a specific portion, say $20 million. If one underwriter sells their entire allotment but another sells only $10 million, the first underwriter can assist in selling the remaining $10 million to ensure the entire issue is placed.
(Hypothetical example)
Comparison with related terms
Term
Definition
Key Differences
Undivided Account
A system where underwriters share responsibility for selling a new issue.
All underwriters are collectively responsible for unsold shares.
Divided Account
An underwriting arrangement where each underwriter is responsible only for their allocated shares.
Each underwriter is not responsible for unsold shares outside their allotment.
Common misunderstandings
What to do if this term applies to you
If you are involved in an underwriting process and this term applies to your situation, consider the following steps:
Review the underwriting agreement to understand your responsibilities.
Consult with a financial advisor or legal professional to ensure compliance with securities regulations.
Explore US Legal Forms for templates related to underwriting agreements that can help you manage the process.
Find the legal form that fits your case
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The main advantage is that it allows for a collective effort in selling securities, increasing the chances of a successful offering.
In an undivided account, underwriters share responsibility for unsold shares, whereas in a divided account, each underwriter is only responsible for their allocated shares.
Yes, using a template from US Legal Forms can help streamline the process and ensure compliance with legal requirements.