Bonds and Trustees Essay Example | Topics and Well Written Essays - 1000 words

Bonds and Trustees - Essay Example This paper illustrates that the legal structure of a trust agreement to provide that the rights of the bondholders are vested in the trustee through the trust agreement which confers upon the trustee rights to â€Å"represent the holder in dealing with the issuer and to enforce action on their collective behalf†. By virtue of the trust agreement, subject to the provisions of the deed, the trustee shall represent the bondholder and the bondholder shall not be allowed to represent him/herself unless there is a breach of the agreement, which will render it unenforceable. Thus, the provision in the conditions of trust, which states, â€Å"no bondholder may take enforcement action against the issuer following a default unless the trustee, having become obliged to act thereon, has failed to do so† is valid. As held in case of Highberry Ltd v Colt Telecom Group Plc (No.2) a no-action clause is valid. Under Chapter 29 Part 1 of the Trustee Act 2000, the trustee has the duty to â€Å"exercise such care and skill as is reasonable in the circumstances, having regard in particular- (a) to any special knowledge or experience that he has or holds himself out as having, and (b) if he acts as trustee in the course of a business or profession, to any special knowledge or experience that it is reasonable to expect of a person acting in the course of that kind of business or profession.† The degree of care in transacting business for and on behalf of the bondholders binds the trustee to deliver what is in the best interest of the bondholder. The same rules apply as in the case of negligence. Therefore, where the trustee is faced with a situation where it becomes obliged to act, the failure thereof to act accordingly would constitute a statutory breach as well as of the agreement.