Australian law governs a close-out netting contract; and

the contract is entered into in circumstances that are within Commonwealth constitutional reach;

the following provisions apply:

obligations may be terminated, termination values may be calculated and a net amount become payable in accordance with the contract;

security given over financial property, in respect of obligations of a party to the contract, may be enforced in accordance with the terms of the security, provided the terms of the security are evidenced in writing (but see section 14A);

paragraphs (c) and (ca) apply despite:

any disposal of rights that may be netted under the contract; or

the creation of any encumbrance, or any other interest, in relation to those rights or financial property mentioned in paragraph (ca); or

the operation of any encumbrance, or any other interest, in relation to those rights or that financial property that is created after the commencement of this section;

in contravention of a prohibition in the contract, or in the security mentioned in paragraph (ca);

for the purposes of any law, the assets of a party to the contract are taken:

to include any net obligation owed to the party under the contract; and

not to include obligations terminated under the contract.

a person who is, or has been, a party to a close-out netting contract goes into external administration; and

Australian law governs either:

the external administration; or

the contract;

the following provisions apply:

obligations may be terminated, termination values may be calculated and a net amount become payable in accordance with the contract;

obligations that are, or have been, terminated under the contract are to be disregarded in the external administration (but see subsection (5));

any net obligation owed by the party under the contract that has not been discharged is provable in the external administration;

any net obligation owed to the party under the contract that has not been discharged may be recovered by the external administrator for the benefit of creditors;

security given over financial property, in respect of obligations of a party to the contract, may be enforced in accordance with the terms of the security, provided the terms of the security are evidenced in writing (but see section 14A);

if:

(i) under Personal Property Securities Act 2009 or section 588FL of the Corporations Act 2001, a security interest would, but for this paragraph, vest in the grantor before the external administration begins; andsection 267 or 267A of the

where the security interest did not vest under one of those sections before the external administration begins, the security would be enforceable under paragraph (fa);

the security interest does not vest under that section before the external administration begins;

none of the following is to be void or voidable in the external administration:

the netting or termination of obligations under the contract;

a payment by the party to discharge a net obligation under the contract;

the enforcement of security under paragraph (fa);

paragraphs (c) to (g) apply despite:

any disposal of rights that may be netted under the contract; or

the creation of any encumbrance, or any other interest, in relation to those rights or financial property mentioned in paragraph (fa); or

the operation of any encumbrance, or any other interest, in relation to those rights or that financial property;

in contravention of a prohibition in the contract, or in the security mentioned in paragraph (fa).

subject to a specified stay provision that applies to the contract; and

despite any other law (including the specified provisions).

the person acquired the right or obligation from another person with notice that that other person, or the other party to the contract, was at that time unable to pay their debts as and when they became due and payable; and

the person acquired the right or obligation otherwise than as a result of the operation of section 22, 35 or 36R of the Business Transfer Act.

the party goes into external administration; and

the party acquired the obligation otherwise than as a result of the operation of section 22, 35 or 36R of the Business Transfer Act; and

subsection (6) is satisfied.

the other person did not act in good faith in entering into the transaction that created the terminated obligation;

when that transaction was entered into, the other person had reasonable grounds for suspecting that the party was insolvent at that time or would become insolvent because of, or because of matters including:

entering into the transaction; or

doing an act, or making an omission, for the purposes of giving effect to the transaction;

the other person neither provided valuable consideration under, nor changed their position in reliance on, that transaction.

making a payment, or transferring property, to another person to meet an obligation under the contract;

creating rights or obligations in another person under the contract;

giving any security to another person in relation to the contract;

entering into one or more close-out netting contracts with another person;

doing anything mentioned in paragraph (a), (b) or (c) under a close-out netting contract mentioned in paragraph (d).

the transaction did not result from the operation of section 22, 35 or 36R of the Business Transfer Act; and

either of the following is satisfied:

the other person did not act in good faith in entering into the transaction;

(ii) the other person neither provided valuable consideration under, nor changed their position in reliance on, the transaction.

subsection (3) applies in relation to the security in the same way as it applies in relation to the contract; and

subsection (4) applies in relation to rights and obligations under the security in the same way as it applies in relation to rights and obligations under the contract; and

subsection (5) applies in relation to an obligation owed by a party to the security in the same way as it applies in relation to an obligation owed by a party to the contract; and

subsection (7) applies to things done by a party to the security in relation to the security, or a right or obligation under the security, in the same way as it applies in relation to things done by a party to the contract in relation to the contract, or a right or obligation under the contract.

the obligations secured by the financial property, and discharged through the enforcement, are:

eligible obligations in relation to the contract; or

obligations under the contract of a party to the contract to pay interest on an eligible obligation; or

obligations of a party to the contract to pay costs and expenses incurred in connection with enforcing security given in respect of an eligible obligation; and

before the enforcement, the financial property is transferred or otherwise dealt with so as to be in the possession or under the control of:

the secured person; or

another person (who is not the grantor) on behalf of the secured person, under the terms of an arrangement evidenced in writing; and

(c) the enforcement is carried out in a manner that complies with Corporations Act 2001 (if it applies) and any applicable general law duties that are not inconsistent with the terms of the security.section 420A of the

in a case where there is an issuer of the financial property—the person is registered by, or on behalf of, the issuer as the registered owner of the financial property; or

in a case where the financial property is intermediated financial property—the person is the person in whose name the intermediary maintains the account.

the financial property is intermediated financial property; and

the intermediary is not the grantor (but may be the secured person or any other person); and

there is an agreement in force between the intermediary and one or more other persons, one of which is the secured person or the grantor; and

the agreement has one or more of the following effects:

the person in whose name the intermediary maintains the account is not able to transfer or otherwise deal with the financial property;

the intermediary must not comply with instructions given by the grantor in relation to the financial property without seeking the consent of the secured person (or a person who has agreed to act on the instructions of the secured person);

the intermediary must comply, or must comply in one or more specified circumstances, with instructions (including instructions to debit the account) given by the secured person in relation to the intermediated financial property without seeking the consent of the grantor (or any person who has agreed to act on the instructions of the grantor).

right to receive and withdraw income in relation to the financial property;

right to receive notices in relation to the financial property;

right to vote in relation to the financial property;

right to substitute other financial property that the parties agree is of equivalent value for the financial property;

right to withdraw excess financial property;

right to determine value of financial property.

an obligation under the contract of a party to the contract that relates to a derivative or foreign exchange contract or is of another prescribed kind;

an obligation that results from the netting of 2 or more obligations that are created under the contract that:

must include at least one obligation covered by paragraph (a); and

may include one or more incidental obligations that, taken together, do not form a material part of the net obligation;

an obligation declared by the regulations to be an eligible obligation in relation to a close-out netting contract.

(a) may only relate to a contract entered into after the day the declaration is registered on the Federal Register of Legislation under the Legislation Act 2003; and

ceases to have effect at the end of 6 months after the day it is registered.

a party to the contract is:

a regulated body; or

a related body corporate of a regulated body; and

an obligation under the contract of a party to the contract is an eligible obligation in relation to the contract or is of another prescribed kind; and

a specified stay provision (other than a direction stay provision) applies to a trigger event that happens in relation to the contract.

a party to the contract is:

a regulated body; or

a related body corporate of a regulated body; and

the obligation is an eligible obligation in relation to the contract, or an obligation of a prescribed kind; and

a specified stay provision (other than a direction stay provision) applies to a trigger event that happens in relation to the contract.

at the time when a declaration under section 15B in relation to the contract or security takes effect; or

at the end of the resolution period for the trigger event, if no declaration under section 15C in relation to the contract or security is made during that period.

at midnight (by legal time in the Australian Capital Territory) at the end of the first business day after the day on which the trigger event happens, unless the specified stay provision is subsection 36AA(2) of the Business Transfer Act; or

for subsection 36AA(2) of the Business Transfer Act:

if APRA makes a declaration under subsection (5)—at the time the declaration is made; or

if a certificate of transfer under that Act comes into force—just after the certificate of transfer comes into force.

a trigger event happens to which subsection 36AA(2) of the Business Transfer Act applies; and

the trigger event is the fact that an act is done for the purposes of Division 2 or 3 of Part 4 of that Act; and

APRA is satisfied that APRA will not issue a certificate of transfer under that Act;

APRA may declare, in writing, that the resolution period for that trigger event ends.

a trigger event to which a specified stay provision (other than a direction stay provision) applies happens in relation to a close-out netting contract; and

a party to the contract is:

a regulated body; or

a related body corporate of a regulated body; and

APRA is satisfied that APRA will not make a declaration under section 15C in relation to the party before the end of the resolution period for the trigger event.

all close-out netting contracts of the party; and

all securities given over financial property, in respect of obligations of the party under all close-out netting contracts of the party.

if the declaration specifies a time before the end of the resolution period when the specified stay provision is to cease to apply—at the specified time; or

in any other case—at the time when the declaration is made.

prescribe requirements relating to how declarations under subsection (2) are to be made (including requirements relating to the content or form of declarations);

prescribe requirements relating to the notification or publication of declarations under subsection (2);

include provisions that apply to determining, either generally or for a particular purpose, the time when declarations under subsection (2) are taken to be made.

a trigger event to which a specified stay provision (other than a direction stay provision) applies:

is an event that involves a regulated body; and

(ii) happens in relation to a close-out netting contract (the trigger contract) to which the regulated body is a party; and

APRA is satisfied that all the matters in subsection (3) will be satisfied in relation to the party in respect of which the declaration under subsection (2) will be made:

unless subparagraph (ii) applies—at the time the declaration will be made; or

if a certificate of transfer will come into force under the Business Transfer Act for a transfer of business from the regulated body to a receiving body—just after that coming into force; and

(c) the party in respect of which the declaration under subsection (2) will be made is not in external administration (disregarding paragraphs (d), (daa), (da), (db), (e) and (f) of the definition of external administration in section 5); and

APRA has not already made a declaration under section 15B in relation to the trigger event happening in relation to the trigger contract.

unless paragraph (b) or (c) applies:

all close-out netting contracts to which the regulated body is a party; and

all securities given over financial property, in respect of obligations under those close-out netting contracts; or

in the case of a total transfer under the Business Transfer Act:

all close-out netting contracts to which the regulated body is a party (and to which the receiving body will become a party immediately after the transfer); and

all securities given over financial property, in respect of obligations under those close-out netting contracts; or

in the case of a partial transfer under the Business Transfer Act—either or both of the following:

all close-out netting contracts to which the regulated body is a party (and to which the regulated body will remain a party immediately after the transfer), and all securities given over financial property in respect of obligations under those contracts;

all close-out netting contracts to which the regulated body is a party (and to which the receiving body will become a party immediately after the transfer), and all securities given over financial property in respect of obligations under those contracts.

that the party is able to meet all its liabilities under:

close-out netting contracts to which it is a party; and

securities given over financial property in respect of obligations of the party under those contracts;

as and when they become due and payable;

(b) that the party is solvent (within the meaning of the Corporations Act 2001);

if the party is an ADI, a general insurer or a life company—that the party has each material authorisation (however described) necessary for its regulated business;

(d) if minimum capital requirements under the Banking Act 1959, the Insurance Act 1973 or the Life Insurance Act 1995 apply to the party—that either subsection (4) or subsection (5) is satisfied in respect of the party.

(a) the Banking Act 1959, the Insurance Act 1973 or the Life Insurance Act 1995 (as the case requires); and

(b) the applicable prudential standards made under that Act.

arrangements are in place to ensure that the party performs all its obligations under:

close-out netting contracts to which it is a party; and

securities given over financial property in respect of obligations of the party under those contracts;

as and when they are due to be performed; and

those arrangements will remain in place until at least the earliest day on which one or more of the following occurs:

subsection (4) is satisfied;

(ii) if a Banking Act statutory manager is in control of the party’s business—APRA makes an ultimate termination of control under subsection 13C(3) of the Banking Act 1959;

(iii) if an Insurance Act statutory manager is in control of the party’s business—APRA makes an ultimate termination of control under subsection 62ZOC(3) of the Insurance Act 1973;

(iv) if a Life Insurance Act statutory manager is in control of the party’s business—APRA makes an ultimate termination of control under subsection 179AC(3) of the Life Insurance Act 1995;

(v) if the party is under judicial management under the Insurance Act 1973—an order under section 62ZF of that Act cancelling the judicial management comes into force;

(vi) if the party is under judicial management under the Life Insurance Act 1995—an order under section 172 of that Act cancelling the judicial management comes into force.

prescribe requirements relating to how declarations under subsection (2) are to be made (including requirements relating to the content or form of declarations);

prescribe requirements relating to the notification or publication of declarations under subsection (2);

include provisions that apply to determining, either generally or for a particular purpose, the time when declarations under subsection (2) are taken to be made.

a trigger event to which a specified stay provision (other than a direction stay provision) applies:

(i) is an event that involves a regulated body (the trigger body); and

(ii) happens in relation to one or more close-out netting contracts (each of which is a trigger contract) to which a related body corporate of the trigger body (the contracting body) is a party; and

APRA is satisfied that all the matters in subsection (5) will be satisfied in relation to each entity covered under subsection (2):

unless subparagraph (ii) applies—at the time the declaration will be made; or

if a certificate of transfer will come into force under the Business Transfer Act for a transfer of business from the trigger body to a receiving body—just after that coming into force; and

(c) each entity covered under subsection (2) is not in external administration (disregarding paragraphs (d), (daa), (da), (db), (e) and (f) of the definition of external administration in section 5); and

APRA has not already made a declaration under section 15B in relation to the trigger event happening in relation to the trigger contract.

if section 15E does not apply—the trigger body; or

if section 15E applies because of a transfer of business under the Business Transfer Act from the trigger body to a receiving body:

in the case of a total transfer of business—the receiving body; or

in the case of a partial transfer of business—an entity specified in a determination under subsection 15E(3).

each trigger contract specified in the declaration; and

all securities given over financial property, in respect of obligations under each trigger contract specified in the declaration.

one or more trigger contracts;

one or more classes of trigger contracts.

that the entity covered under subsection (2) is able to meet all its liabilities under:

close-out netting contracts to which it is a party; and

securities given over financial property in respect of obligations of the entity under those contracts;

as and when they become due and payable;

(b) that the entity covered under subsection (2) is solvent (within the meaning of the Corporations Act 2001);

if the entity covered under subsection (2) is an ADI, a general insurer or a life company—that the entity has each material authorisation (however described) necessary for its regulated business;

(d) if minimum capital requirements under the Banking Act 1959, the Insurance Act 1973 or the Life Insurance Act 1995 apply to the entity covered under subsection (2)—that either subsection (6) or subsection (7) is satisfied in respect of the entity covered under subsection (2).

(a) the Banking Act 1959, the Insurance Act 1973 or the Life Insurance Act 1995 (as the case requires); and

(b) the applicable prudential standards made under that Act.

arrangements are in place to ensure that the entity performs all its obligations under:

close-out netting contracts to which it is a party; and

securities given over financial property in respect of obligations of the entity under those contracts;

as and when they are due to be performed; and

those arrangements will remain in place until at least the earliest day on which one or more of the following occurs:

subsection (6) is satisfied;

(ii) if a Banking Act statutory manager is in control of the entity’s business—APRA makes an ultimate termination of control under subsection 13C(3) of the Banking Act 1959;

(iii) if an Insurance Act statutory manager is in control of the entity’s business—APRA makes an ultimate termination of control under subsection 62ZOC(3) of the Insurance Act 1973;

(iv) if a Life Insurance Act statutory manager is in control of the entity’s business—APRA makes an ultimate termination of control under subsection 179AC(3) of the Life Insurance Act 1995;

(v) if the entity is under judicial management under the Insurance Act 1973—an order under section 62ZF of that Act cancelling the judicial management comes into force;

(vi) if the entity is under judicial management under the Life Insurance Act 1995—an order under section 172 of that Act cancelling the judicial management comes into force.

prescribe requirements relating to how declarations under subsection (3) are to be made (including requirements relating to the content or form of declarations);

prescribe requirements relating to the notification or publication of declarations under subsection (3);

include provisions that apply to determining, either generally or for a particular purpose, the time when declarations under subsection (3) are taken to be made.

the requirement in paragraph 15D(1)(a) is satisfied in relation to a trigger event; and

a certificate of transfer will come into force under the Business Transfer Act for:

a total transfer of business from the trigger body to a receiving body; or

a partial transfer of business from the trigger body to a receiving body.

the trigger body;

the receiving body.

prescribe requirements relating to how determinations under subsection (3) are to be made (including requirements relating to the content or form of declarations);

prescribe requirements relating to the notification or publication of determinations under subsection (3);

include provisions that apply to determining, either generally or for a particular purpose, the time when determinations under subsection (3) are taken to be made.