Section 721 CAMA 2020

Section 721 Companies and Allied Matters Act is about Enforceability of netting agreements. It is under Chapter 28 (Netting) of the Act.

(1) The provisions of a netting agreement is enforceable in accordance with their terms, including against an insolvent party, and, where applicable, against a guarantor or other person providing security for a party and shall not be stayed, avoided or otherwise limited by—

(a) any action of the liquidator ;

(b) any other provision of law relating to bankruptcy, reorganisation,composition with creditors, receivership or any other insolvency proceeding an insolvent party may be subject to ; or

(c) any other provision of law that may be applicable to an insolvent party, subject to the conditions contained in the applicable netting agreement.

(2) After commencement of insolvency proceedings in relation to a party, the only obligation, if any, of either party to make payment or delivery under a netting agreement shall be equal to its net obligation to the other party as determined in accordance with the terms of the applicable netting agreement.

(3) After commencement of insolvency proceedings in relation to a party,the only right, if any, of either party to receive payment or delivery under a netting agreement shall be equal to its net entitlement with respect to the other party as determined in accordance with the terms of the applicable netting agreement.

(4) Any power of the liquidator to assume or repudiate individual contracts or transactions will not prevent the termination, liquidation or acceleration of all payment or delivery obligations or entitlements under one or more qualified financial contracts entered into under or in connection with a netting agreement,and applies, if at all, only to the net amount due in respect of all of such qualified financial contracts in accordance with the terms of such netting agreement.

(5) The provisions of a netting agreement which provide for the determination of a net balance of the close-out values, market values, liquidation values or replacement values calculated in respect of accelerated or terminated payment or delivery obligations or entitlements under one or more qualified financial contracts entered into is not affected by any applicable insolvency law limiting the rights to set off, offset or net out obligations, payment amounts or termination values owed between an insolvent party and another party.

(6) The liquidator of an insolvent party may not avoid—

(a) any transfer, substitution or exchange of cash, collateral or any other interests under or in connection with a netting agreement from the insolvent party to the non-insolvent party ; or

(b) any payment or delivery obligation incurred by the insolvent party and owing to the non-insolvent party under or in connection with a netting agreement on the grounds of it constituting a preference by the insolvent party to the non-insolvent party,unless there is clear and convincing evidence that the non-insolvent party—

(i) made such transfer,

(ii) incurred such obligation with actual intent to hinder, delay, or defraud any entity to which the insolvent party was indebted or became indebted,on or after the date that such transfer was made or such obligation was incurred.

(7) Reasonable notice to interested parties, individuals, persons or entities shall be required for the realisation, appropriation or liquidation of collateral under a collateral arrangement unless otherwise agreed by the parties :

Provided that this subsection is without prejudice to any applicable provision of law requiring that realisation, appropriation or liquidation of collateral is conducted in a commercially reasonable manner.

(8) For the purposes of this section—

(a) a netting agreement is deemed to be a netting agreement notwithstanding the fact that the netting agreement may contain provisions relating to agreements, contracts or transactions that are not qualified financial contracts defined in section 718, provided, however, that, for the purposes of this section, such netting agreement shall be deemed to be a netting agreement only with respect to those agreements , contracts or transactions that fall within the definition of “qualified financial contract” in this Chapter ;

(b) a collateral arrangement is deemed to be a collateral arrangement notwithstanding the fact that such collateral arrangement may contain provisions relating to agreements, contracts or transactions that are not a netting agreement or qualified financial contracts as defined in section 718 of this Act, provided, however, that, for the purposes of this section, such collateral arrangement shall be deemed to be a collateral arrangement only with respect to those agreements, contracts or transactions that fall within the definition of “netting agreement” or “qualified financial contract” as defined in section 718 of this Act ; and

(c) a netting agreement and all qualified financial contracts entered into shall constitute a single agreement.