Which one of the following is an example of a negative covenant?

Question

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A negative covenant refers to a restriction or a limitation on the actions or decisions that a company can take. Option C, a limit on capital expenditures, is an example of a negative covenant because it restricts the company from spending beyond a specified limit. Options A, B, and D are examples of positive covenants as they involve commitments to specific actions or obligations. Compliance with laws, maintenance of insurance, and rights of inspection all require the company to take specific actions or follow certain rules.

Which One of the Following Is an Example of a Negative