Restrictions on the activities of a debtor written into bank loan agreements or bond indenture agreements. Also called indenture' covenants' or protective covenants. Contractual terms of the loan or indenture agreement that prohibit the debtor from taking actions that might hurt the interests of the lenders or bondholders. Designed to protect the interests of creditors — often (but not limited to) unsecured creditors. Four common examples of covenants are prohibitions against: issuing new debt, paying dividends if certain minimum financial standards are not maintained, merging with another company, and selling corporate assets.
Barry Goldsmith
| APA | Barry Goldsmith. (2010). covenants. Retrieved September 20, 2026, from http://smartdefine.org/covenants/definitions/1151002 |
| Chicago | Barry Goldsmith. 2010. "covenants" http://smartdefine.org/covenants/definitions/1151002 (accessed September 20, 2026). |
| Harvard | Barry Goldsmith 2010, covenants, Smart Define, viewed 20 September, 2026, <http://smartdefine.org/covenants/definitions/1151002>. |
| MLA | Barry Goldsmith. "covenants" 21 October 2010. Web. 20 September 2026. <http://smartdefine.org/covenants/definitions/1151002> |