Law Commons^™

The Roles Of Acceleration, David Hahn

David Hahn

Acceleration clauses are found in most debt instruments. Upon the occurrence of predetermined triggering event, acceleration makes a creditor's future claim due and payable. While debt covenants have been analyzed extensively in the academic literature, the role of acceleration has been overlooked. This paper examines the role of acceleration clauses and maintains that they play a critical role in debt financing. The paper argues that the prime role of acceleration is to perfect a complex set of governance mechanisms within the corporate setting. This governance role is comprised of three parts. First, acceleration is a complementary measure that supports debt …