Restrictive covenants


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Restrictive covenants

Provisions that place constraints on the operations of borrowers, such as restrictions on working capital, fixed assets, future borrowing, and payment of dividends.

Restrictive Covenant

A bond covenant that forbids the issuer from taking certain actions. For example, a restrictive covenant may prevent an issuer from issuing more debt until the bond matures. More commonly, a restrictive covenant limits the dividends an issuer may pay to shareholders so as to reduce the risk to the bond. It contrasts with a positive covenant, which requires the issuer to take certain enumerated actions. It is also called a negative covenant.
References in periodicals archive ?
Unfortunately, there is not sufficient space to go through restrictive covenants in any detail as there is a huge amount of law relating to this subject.
If a homeowner's future use of a property will cause a breach of the restrictive covenants imposed upon the land, such as the construction of an extension, it is safest to assume that the restrictive covenants are still enforceable.
In George Wimpey, Bristol and Gloucestershire Housing Association, both the national housebuilder and the housing association applied to the Land Tribunal to have a restrictive covenant discharged which prevented buildings being built on their land.
Alternatively, if you act in a way that a third party says breaches a restrictive covenant, you may be able to say that the covenant is anti-competitive and therefore void.
4) Restrictive covenants are typically favored to the extent they tend to be binding on property regardless of changes in the law, do not require change in ownership, provide for enforcement by third parties, allow for productive uses that would not be allowed in conservation areas, and tend to appear during typical title searches.
Buyers must be aware of what restrictive covenants are in place before they complete their purchase to ensure they will not be prevented from using the land for the purpose for which they purchased it.
The written employment contract for certain key workers, therefore, may contain a restrictive covenant, also referred to as a non-competition agreement, in which the employee has agreed not to work in the same industry within a specified territory for a period of time after leaving.
The likelihood of the latter is small, but sometimes, these fights over restrictive covenants are both prolonged and expensive.
In a February 10 letter, TEI expressed concerns about proposed amendments to the Canadian Income Tax Act to revise the tax treatment of restrictive covenants.
Editor's Note: This case should serve as a lesson to all hospital officials who might seek to impose restrictive covenants on their employees, whether physicians or others, to ensure that the restrictive covenants are reasonable as to time limits as well as the radius of the restricted area, in which an employee is not to engage in the practice or otherwise compete with the employer.
There are ways round restrictive covenants depending on the nature of the restrictive covenant and the proposed used of the land.
One of the keys to securing such competitive advantages is properly drafted restrictive covenants.