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Simple English definitions for legal terms
antidestruction clause
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A quick definition of antidestruction clause:
An antidestruction clause is a rule that protects a shareholder's ability to convert their securities into new ones if the company they invested in merges with another company. This means that the shareholder can still keep their investment even if the company changes. Securities are things that show a person's ownership or creditor relationship with a company, like stocks or bonds. They don't have value on their own, but represent something else. The value of a security depends on how well the company is doing or how much people are willing to pay for it.A more thorough explanation:
An antidestruction clause is a provision in a security that protects a shareholder's conversion rights in the event of a merger. It grants the shareholder the right to convert their securities into the securities that will replace the company's stock when the merger is complete.
For example, let's say Company A merges with Company B. If a shareholder of Company A has an antidestruction clause in their security, they have the right to convert their securities into the securities of the new merged company, instead of losing their investment.
Antidestruction clauses are important for shareholders because they provide a safeguard against losing their investment in the event of a merger or acquisition. It ensures that they have the option to convert their securities into the new company's securities, which may have a different value or structure than the original securities.