Investment Bonds

Investment bonds are long term tax effective investment options.  They are also known as insurance bonds.  They are issued by life insurance companies and enable investors to invest in a variety of funds.  The main benefits of investment bonds are:

  • Funds are managed by professional investment managers;
  • Long term capital growth as well as income generation;
  • Life insurance.

Bonds are regarded as property and not as the mere evidences of debts[i].  In some jurisdictions, statutes prescribe a limitation period for actions on bonds.  While in other jurisdictions, the appropriate statute of limitations is that relating to actions on instruments in writing or to actions on sealed instruments.  In actions brought by bondholders to compel payment and retirement of public bonds, the applicable limitation statute is the one that governs the right to sue for trust funds[ii].

Generally, a bond holder can by mandamus proceedings compel the proper officials of the governmental agency to levy and collect the tax or assessment and other things required by the statute.  However, a holder of bonds will not obtain any remedy in the federal courts unless he/she is entitled to recover a judgment[iii].  Bondholders must not be permitted to stand idly by after their bonds mature.

The limitation period for bringing an action against a county upon a bond of another county from which it was formed begins at or after the date of imposition of the obligation on the new county.  However, if such public bonds contain a fixed maturity date, then the statute of limitations begins to run from the maturity date[iv].

The holder of unpaid coupons is entitled to recover interest since the time of their maturity.  The coupons are generally considered a mode agreed between parties for the convenience of the holder in collecting the interest due.  Detached coupons are governed by the same statute of limitations which governs the bond from which they are detached.

[i] De Ganay v. Lederer, 250 U.S. 376 (U.S. 1919)

[ii] Cruzen v. Boise City, 58 Idaho 406 (Idaho 1937)

[iii] Irvine v. Bossen, 25 Cal. 2d 652 (Cal. 1944)

[iv] Central Trust Co. v. Board of Comm’rs, 111 Kan. 104 (Kan. 1922)

Inside Investment Bonds