“Warrant,” “Warrant Agreement,” and “Warrant Certificate”

Today’s topic is warrants. By warrant, I mean an instrument granting the holder a long-term option to buy shares at a fixed price. (I discuss elsewhere the unrelated verb to warrant and noun warranty.)

A warrant is an intangible right, but it’s evidenced by a document. Many drafters don’t bother distinguishing between the two, in that they refer to exercise of this Warrant (that is, the intangible right) and surrender of this Warrant (in other words, the document evidencing that right). In the interest of not confusing your readers, I recommend that you draw the distinction.

But what do you call the piece of paper? If it’s signed by the issuer and the holder, call it a warrant agreement; if it’s signed by the issuer only, call it a warrant certificate. Often you’ll have a warrant agreement that provides for issuance of warrant certificates.

In the piece of paper, you’ll want to refer to this agreement or this certificate, as the case may be. I suggest that when referring to the underlying warrant, you use the defined term the Warrant rather than referring to this warrant.

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.