Provision

AAA

DEFINITION of 'Provision'

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 'Provision'

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 ...
  2. Anti-Greenmail Provision

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

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

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

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

    The repurchase of outstanding shares (repurchase) by a company ...
Related Articles
  1. Mergers And Acquisitions: Understanding ...
    Fundamental Analysis

    Mergers And Acquisitions: Understanding ...

  2. Bond Call Features: Don't Get Caught ...
    Bonds & Fixed Income

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

  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 ...

Hot Definitions
  1. Debit Spread

    Two options with different market prices that an investor trades on the same underlying security. The higher priced option ...
  2. Leading Indicator

    A measurable economic factor that changes before the economy starts to follow a particular pattern or trend. Leading indicators ...
  3. Wage-Price Spiral

    A macroeconomic theory to explain the cause-and-effect relationship between rising wages and rising prices, or inflation. ...
  4. Accelerated Depreciation

    Any method of depreciation used for accounting or income tax purposes that allows greater deductions in the earlier years ...
  5. Call Risk

    The risk, faced by a holder of a callable bond, that a bond issuer will take advantage of the callable bond feature and redeem ...
  6. Parity Price

    When the price of an asset is directly linked to another price. Examples of parity price are: 1. Convertibles - the price ...
Trading Center