The Financial Collateral Arrangements (No.2) Regulations 2003

Close-out netting provisions to take effect in accordance with their terms U.K.

12.—(1) A close-out netting provision shall, subject to paragraph (2), take effect in accordance with its terms notwithstanding that the collateral-provider or collateral-taker under the arrangement is subject to winding-up proceedings or reorganisation measures.

(2) Paragraph (1) shall not apply if at the time that a party to a financial collateral arrangement entered into such an arrangement or that the relevant financial obligations came into existence—

(a) that party was aware or should have been aware that winding up proceedings or re-organisation measures had commenced in relation to the other party;

(b) that party had notice that a meeting of creditors of the other party had been summoned under section 98 of the Insolvency Act 1986, or Article 84 of the Companies (Northern Ireland) Order 1989 or that a petition for the winding-up of [F1 or, in Scotland, a petition for winding-up proceedings in relation to] the other party was pending;

(c) that party had notice that an application for an administration order was pending or that any person had given notice of an intention to appoint an administrator; or

(d) that party had notice that an application for an administration order was pending or that any person had given notice of an intention to appoint an administrator and liquidation of the other party to the financial collateral arrangement was immediately preceded by an administration of that party.

(3) For the purposes of paragraph (2)—

(a) winding-up proceedings commence on the making of a winding-up order [F2 or, in the case of a Scottish partnership, the award of sequestration] by the court; and

(b) reorganisation measures commence on the appointment of an administrator, whether by a court or otherwise [F3 or, in the case of a Scottish partnership, when a protected trust deed is entered into].

(4) Rules 2.85 (4)(a) and (c) and 4.90 (3)(b) of the Insolvency Rules 1986 (mutual credit and set-off)[F4 , or in Scotland, any rule of law with the same or similar effect to the effect of these Rules] shall not apply to a close-out netting provision unless sub-paragraph (2)(a) applies.

Textual Amendments

F1 Words in reg. 12(2)(b) inserted (6.4.2011) by The Financial Markets and Insolvency (Settlement Finality and Financial Collateral Arrangements) (Amendment) Regulations 2010 (S.I. 2010/2993), regs. 1, 4(10)(a) (with reg. 3)

F2 Words in reg. 12(3)(a) inserted (6.4.2011) by The Financial Markets and Insolvency (Settlement Finality and Financial Collateral Arrangements) (Amendment) Regulations 2010 (S.I. 2010/2993), regs. 1, 4(10)(b)(i) (with reg. 3)

F3 Words in reg. 12(3)(b) inserted (6.4.2011) by The Financial Markets and Insolvency (Settlement Finality and Financial Collateral Arrangements) (Amendment) Regulations 2010 (S.I. 2010/2993), regs. 1, 4(10)(b)(ii) (with reg. 3)

F4 Words in reg. 12(4) inserted (6.4.2011) by The Financial Markets and Insolvency (Settlement Finality and Financial Collateral Arrangements) (Amendment) Regulations 2010 (S.I. 2010/2993), regs. 1, 4(10)(c) (with reg. 3)