Provision

A A A

DEFINITION

A legal clause or condition contained within a contract that requires or prevents either one or both parties to perform a particular requirement by some specified time. Specified requirements can include, but are not limited to, sunset, soft call, anti-dilution, and anti-greenmail provisions.

INVESTOPEDIA EXPLAINS

Provisions were created to protect the interests of one or both parties named in a contract or legal document. For example, the anti-greenmail provision contained within some companies' charters protects shareholders from the board wanting to pass stock buybacks. Although stock buybacks can be a good thing for shareholders, some buybacks allow board members to sell their stock to the company at inflated premiums.


RELATED TERMS
  1. Anti-Dilution Provision

    A provision in an option or a convertible security. It protects an investor ...
  2. Anti-Greenmail Provision

    A special clause located within a firm's corporate charter that acts as a deterrence ...
  3. Assignable Contract

    A futures contract with a provision permitting the contract holder to convey ...
  4. Dead Hand Provision

    A stipulation on a defense mechanism (or poison pill) used by companies in order ...
  5. Make Whole Call (Provision)

    A type of call provision on a bond allowing the borrower to pay off remaining ...
  6. Buyback

    The repurchase of outstanding shares (repurchase) by a company in order to reduce ...
  7. Soft Call Provision

    A feature added to convertible fixed-income and debt securities. The provision ...
  8. Sunset Provision

    A clause in a statute, regulation or similar piece of legislation that provides ...
  9. Sprinkling Provision

    A provision within a life insurance agreement that allows the trustee of the ...
  10. Incontestability Clause

    A clause in most life insurance policies that prevents the provider from voiding ...
Related Articles
  1. Bond Call Features: Don't Get Caught ...
    Bonds & Fixed Income

    Bond Call Features: Don't Get Caught ...

  2. Mergers And Acquisitions: Understanding ...
    Fundamental Analysis

    Mergers And Acquisitions: Understanding ...

  3. A Breakdown Of Stock Buybacks
    Investing

    A Breakdown Of Stock Buybacks

  4. What happens when a company buys back ...
    Investing

    What happens when a company buys back ...

  5. What is an evergreen provision and how ...
    Options & Futures

    What is an evergreen provision and how ...

  6. The Basics Of Mergers And Acquisitions
    Options & Futures

    The Basics Of Mergers And Acquisitions

  7. How The Sarbanes-Oxley Era Affected ...
    Fundamental Analysis

    How The Sarbanes-Oxley Era Affected ...

  8. 4 Contract Essentials You Need to Know
    Budgeting

    4 Contract Essentials You Need to Know

  9. How To Profit From The Rise in Proxy ...
    Investing Basics

    How To Profit From The Rise in Proxy ...

  10. ISDA Master Agreement
    Investing Basics

    ISDA Master Agreement

comments powered by Disqus
Hot Definitions
  1. Quanto Swap

    A swap with varying combinations of interest rate, currency and equity swap features, where payments are based on the movement of two different countries' interest rates. This is also referred to as a differential or "diff" swap.
  2. Genuine Progress Indicator - GPI

    A metric used to measure the economic growth of a country. It is often considered as a replacement to the more well known gross domestic product (GDP) economic indicator. The GPI indicator takes everything the GDP uses into account, but also adds other figures that represent the cost of the negative effects related to economic activity (such as the cost of crime, cost of ozone depletion and cost of resource depletion, among others).
  3. Accelerated Share Repurchase - ASR

    A specific method by which corporations can repurchase outstanding shares of their stock. The accelerated share repurchase (ASR) is usually accomplished by the corporation purchasing shares of its stock from an investment bank. The investment bank borrows the shares from clients or share lenders and sells them to the company.
  4. Microeconomic Pricing Model

    A model of the way prices are set within a market for a given good. According to this model, prices are set based on the balance of supply and demand in the market. In general, profit incentives are said to resemble an "invisible hand" that guides competing participants to an equilibrium price. The demand curve in this model is determined by consumers attempting to maximize their utility, given their budget.
  5. Centralized Market

    A financial market structure that consists of having all orders routed to one central exchange with no other competing market. The quoted prices of the various securities listed on the exchange represent the only price that is available to investors seeking to buy or sell the specific asset.
  6. Balanced Investment Strategy

    A portfolio allocation and management method aimed at balancing risk and return. Such portfolios are generally divided equally between equities and fixed-income securities.
Trading Center