Jurisdiction(s):
United Kingdom

Key definition

Bonds definition

What does Bonds mean? Bonds are tradable debt securities that record an issuer’s promise to repay principal at maturity and pay interest (a fixed or floating coupon) to investors. They are used in legal practice to raise medium to long‑term finance for governments (UK gilts; Irish government bonds), corporates, banks and public bodies, typically documented by a trust deed or agency agreement and an offering document or prospectus. Key legal features include face value, coupon, maturity, transferability (usually in registered or global form through clearing systems), ranking (senior or subordinated), and whether the bond is secured or unsecured; covenants and events of default...

On demand guarantees/bonds: key risks, counter-indemnity and drafting checks for issuing banks

Published by a LexisNexis Banking & Finance expert

Practice notes

The terminology surrounding on demand guarantees and Bonds can be confusing.

On demand guarantees and on demand bonds broadly fulfil the same role and exhibit similar features. They are also known as 'first demand guarantees' or 'first demand bonds'. For simplicity, this Practice Note groups them together as 'on demand guarantees/bonds'. These instruments operate as a type of quasi-security, most commonly supporting contractual duties. In general, security (eg mortgages and charges) and quasi-security (eg guarantees) are granted in favour of a lender, usually a bank, as Collateral for a loan.

By contrast, an on demand guarantee or bond is issued by a bank in connection with a contract its customer has entered into with a third party, and it serves as collateral for that customer's obligations to that third party. Banks issue on demand guarantees/bonds for their clients as part of the wider suite of facilities they make available, and a fee is payable for issuing them. The bank's undertaking therefore stands as collateral for its customer's contractual obligations to that third party under the relevant contract terms...

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Web page updated on 21/05/2026

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