ACCA Applied Skills · Corporate and Business Law (Global) · Loan capital
Orion plc plans to issue debentures to many public investors. A trust deed will appoint a trustee for the holders. Which is the main purpose of the trustee in this arrangement?
The trustee acts for the debenture holders collectively. It holds any security on trust and enforces the terms of the trust deed on their behalf, so dispersed holders need not act individually. The trustee neither manages the company nor guarantees repayment from its own funds.
- ATo manage the company's daily business and appoint its directors
- BTo guarantee personally that the company will repay the debentures
- CTo act for the debenture holders as a group, holding any security and enforcing the terms of the deed on their behalfCorrect
Explanation
A trustee acts for the holders collectively, often holding the security on trust and enforcing the covenants when needed. This avoids many individual holders acting separately. The trustee does not run the company and does not guarantee repayment.
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