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What is the Role of Bond Counsel?

What is the Role of Bond Counsel?


Bond counsel is a law firm retained by the issuer to prepare financing documents and provide legal opinions on a bond’s tax status and validity.

The bond counsel will work on behalf of the issuer to ensure that the bond issue meets all legal and procedural requirements. In the case of tax-exempt bonds, the bond counsel will also play a role in protecting the investor from any potential issues that might convert the tax-exempt bonds into taxable bonds in the future due to non-compliance with tax regulations. 

The main responsibilities of the bond counsel include, but are not limited to:

  • Determine authorization for the bond offering
  • Interpret existing legislation, state constitutions, and local laws
  • Draft enabling legislation if required
  • Opine on any litigation that may jeopardize the validity of the offering
  • Interpret arbitrage regulations and tax law
  • Draft the Resolution of Indenture and Tax Certificate

Tax-exempt bonds must meet various criteria set by the federal government in order to have tax-exempt status. Tax exemption is important because investors are willing to receive a lower yield than they would on taxable bonds, since taxable bonds may actually yield less when the taxes the investor must pay on interest payments are taken into account.

The bond counsel is dependent on the analysis of tax counsel to ensure the bonds meet all the federal requirements to be issued as tax-exempt securities. If no special tax counsel is hired by the issuer, the bond counsel can also do the tax analysis.


What’s important here?

The bond counsel's main responsibilities in a bond deal are to ensure the validity of the bonds by ensuring that the bond issue meets all legal and procedural requirements, and opine on the tax status of the bonds, including any future issues that may impact the tax-exempt status of certain offerings.