PART 3Modification of insolvency law
Close-out netting provisions to take effect in accordance with their terms12
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;
F5aa
ab
in England and Wales, that party had notice that a statement as to the affairs of the other party had been sent to the other party’s creditors under section 99(1) of that Act(c);
ac
that party had notice that a meeting of creditors of the other party had been summoned under Article 84 of the Insolvency (Northern Ireland) Order 1989;
b
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 F2or, 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 F3or, in the case of a Scottish partnership, when a protected trust deed is entered into.
F74
The following provisions of the Insolvency (England and Wales) Rules 2016, or, in Scotland, any rule of law with the same or similar effect to the effect of these Rules, do not apply to a close-out netting provision unless paragraph (2)(a) applies—
a
in rule 14.24 (administration: mutual dealings and set-off), in paragraph (6), in the definition of “mutual dealings”, paragraphs (a) and (d); and
b
in rule 14.25 (winding up: mutual dealings and set-off), in paragraph (6), in the definition of “mutual dealings”, paragraph (c).
4A
Rules 2.086(2)(a) and (d) and 4.096(2)(c) of the Insolvency Rules (Northern Ireland) 1991 (mutual credits and set off) do not apply to a close-out netting provision unless paragraph (2)(a) applies.