what is a negative covenant 
a negative covenant is an agreement that restricts a company from engaging in certain actions think of a negative covenant as a promise not to do something negative covenants are also referred to as restrictive covenants for example a covenant entered into with a public company might limit the amount of dividends the firm can pay its shareholders it could also place a cap on executives salaries a negative covenant may be found in employment agreements and mergers acquisitions m a contracts however these covenants are almost always found in loan or bond documents understanding negative covenants