Protective rights include:
A) a lender's right to restrict a borrower from undertaking activities that could significantly change the credit risk of the borrower to the detriment of the lender.
B) the right of a party holding a non-controlling interest in an investee to approve capital expenditure greater than that required in the ordinary course of business, or to approve the issue of equity or debt instruments.
C) the right of a lender to seize the assets of a borrower if the borrower fails to meet specified loan repayment conditions.
D) all of the options are correct.

Question

Quizplus · Accepted Answer

All of the options are correct. Protective rights are various contractual provisions included in loan agreements, shareholder agreements or other documents that aim to protect the interests of the lender or investor. These rights can be used to mitigate the risk of the borrower or investee defaulting on their obligations or to guarantee a certain level of control or profit. Examples of protective rights include covenants restricting the use of assets, prohibitions on certain transactions, change of control clauses, veto rights on key decisions, and collateral pledges.

Protective Rights Include