“Actively” (Including “Actively Traded”)

The word actively can join the long list of useless—or at least mostly useless—words used on contracts.

In particular, it often seems that actively is in effect used just to mean the opposite of passively. That’s redundant, given that actively is always used with a verb that connotes action. Consider the following examples from EDGAR:

Liens for taxes not yet delinquent or which are being actively contested in good faith …

… and the Participant dies while actively employed with the Company and its affiliates …

The Company has taken all necessary actions to ensure that it is in compliance with all provisions of the Sarbanes-Oxley Act that are in effect and with which the Company is required to comply, and it is actively taking steps to ensure that it will be in compliance with other provisions of the Sarbanes-Oxley Act not currently in effect or which the Company is not required to comply with, that are reasonably expected to be applicable to the Company after the effectiveness of the Registration Statement; …

But it’s worth considering separately the phrase actively traded  when used with respect to securities. I defer to securities lawyers, but sometimes it seems as if in this context, too, actively might be redundant, as it’s not clear that the drafter has in mind a particular level of trading:

… the Designated Spread over the yield to maturity implied by (i) the yields reported, as of 10:00 a.m. (New York City time) on the Business Day next preceding the Settlement Date with respect to such Called Principal, on the display designated as “Page PX1” on the Bloomberg Financial Services Screen (or such other display as may replace Page PX1 on the Bloomberg Financial Services Screen), for actively traded U.S. Treasury securities having a maturity equal to the Remaining Average Life of such Called Principal as of such Settlement Date …

If Tenant is a corporation, partnership or limited liability company, the shares or other ownership interests thereof which are not actively traded upon a stock exchange or in the over-the-counter market …

If you want actively traded securities to convey the meaning given that term (with the addition of a redundant hyphen between actively and traded) in Rule 101 of Regulation M (part of U.S. securities laws), then you should make that clear, as in the following example:

… within three business days prior to the expiration of the Lock-up Period, the Company delivers to the Representative a certificate, signed by the Chief Financial Officer or Chief Executive Officer of the Company, certifying on behalf of the Company that the Common Stock is an “actively traded security” (as defined in Regulation M) …

About the author

Ken Adams is the leading authority on how to say clearly whatever you want to say in a contract. He’s author of A Manual of Style for Contract Drafting, and he offers online and in-person training around the world. He’s also chief content officer of LegalSifter, Inc., a company that combines artificial intelligence and expertise to assist with review of contracts.

2 thoughts on ““Actively” (Including “Actively Traded”)”

  1. I suggest that “actively” should often be replaced with “continuously and diligently,” at least in the context of a tax lien contest or other carve out for litigation. The general intention, I think, is to avoid a situation where one party can avoid a default by “contesting” or “disputing” an event that would otherwise be a default by merely sending an objection letter and then sleeping on their rights, strategically or simply apathetically dragging the dispute out without bringing it to a resolution, to the detriment of the counterparty that wanted the default.

    • I’m not sure that “continuously” is a good choice, given that litigation is inherently stop-and-start. As regards “diligently,” I’d use “in good faith” instead, as it’s the broader, more general concept.


Leave a Comment

This site uses Akismet to reduce spam. Learn how your comment data is processed.