Specified Entity - ISDA Provision

2002 ISDA Master Agreement A Jolly Contrarian owner’s manual™ Go premium Overview — Summary — Premium — See also — Wikitext Crosscheck: →’87 equivalent →’92 equivalent →’02 equivalent Specified Entity in a Nutshell™ The JC’s Nutshell™ summary of this term has moved uptown to the subscription-only ninja tier. For the cost of ½ a weekly 🍺 you can get it here. Sign up at Substack. You can even ask questions! Ask about it here. Original text “Specified Entity” has the meaning specified in the Schedule. See ISDA Comparison for a comparison between the 1992 ISDA and the 2002 ISDA. The Varieties of ISDA Experience Subject 2002 (wikitext) 1992 (wikitext) 1987 (wikitext) Preamble Pre Pre Pre Interpretation 1 1 1 Obligns/Payment 2 2 2 Representations 3 3 3 Agreements 4 4 4 EODs & Term Events 5 Events of Default: FTPD • Breach • CSD • Misrep • DUST • Cross Default • Bankruptcy • MWA Termination Events: Illegality • FM • Tax Event • TEUM • CEUM • ATE 5 Events of Default: FTPD • Breach • CSD • Misrep • DUST • Cross Default • Bankruptcy • MWA Termination Events: Illegality • Tax Event • TEUM • CEUM • ATE 5 Events of Default: FTPD • Breach • CSD • Misrep • DUSS • Cross Default • Bankruptcy • MWA Termination Events: Illegality • Tax Event • TEUM • CEUM Early Termination 6 Early Termination: ET right on EOD • ET right on TE • Effect of Designation • Calculations; Payment Date • Payments on ET • Set-off 6 Early Termination: ET right on EOD • ET right on TE • Effect of Designation • Calculations • Payments on ET • Set-off 6 Early Termination: ET right on EOD • ET right on TE • Effect of Designation • Calculations • Payments on ET Transfer 7 7 7 Contractual Currency 8 8 8 Miscellaneous 9 9 9 Offices; Multibranch Parties 10 10 10 Expenses 11 11 11 Notices 12 12 12 Governing Law 13 13 13 Definitions 14 14 14 Schedule Schedule Schedule Schedule Termination Provisions Part 1 Part 1 Part 1 Tax Representations Part 2 Part 2 Part 2 Documents for Delivery Part 3 Part 3 Part 3 Miscellaneous Part 4 Part 4 Part 4 Other Provisions Part 5 Part 5 Part 5 Resources and Navigation Index: Click ᐅ to expand: ISDA

Comparisons

They got their over-engineering right in the first go round, and the “Specified Entity” concept is largely the same in the 2002 ISDA as it was in the 1992 ISDA. The Absence of Litigation clause got a makever on 2002 to include Specified Entities, too — in 1992 it only mentioned Affiliates. Good, huh?

Fun fact: in the 1992ma, it says “Specified Entity has the meanings” — plural — “specified in the Schedule.” By 2002, ISDA’s crack drafting squad™ had come back to its senses. JC mentions this only to demonstrate his own unfathomable attention to detail, and to point up a want of fastidiousness on the part of the fastidiousest cabal known to law.

Basics

A Specified Entity is any affiliate of a counterparty to an ISDA Master Agreement which is designated in the relevant Schedule.

It is relevant to the definition of Cross Default and Default under Specified Transaction in that it widens the effect of those provisions to include defaults by the parties specified.

It is so (~ cough ~) important that it is, literally, the first thing you see when you regard an ISDA Schedule.

The same concept in both versions of the ISDA Master Agreement only with different clause numberings. Specified Entity is relevant to:

• DUST
• Cross Default
• Bankruptcy
• Credit Event Upon Merger

And of course the Absence of Litigation representation. Let’s not forget that.

Each party designates its Specified Entities for each of these events in Part 1(a) of the Schedule, which gives the Schedule its familiar layout:

(a) “Specified Entity” means in relation to Party A for the purpose of:― Section 5(a)(v), [SPECIFY]. Section 5(a)(vi), [SPECIFY]. Section 5(a)(vii), [SPECIFY]. Section 5(b)(v), [SPECIFY]. and in relation to Party B for the purpose of:― Section 5(a)(v), [SPECIFY]. Section 5(a)(vi), [SPECIFY]. Section 5(a)(vii), [SPECIFY]. Section 5(b)(v), [SPECIFY].

Now, why would anyone want different Affiliates to trigger this a Event of Default depending precisely upon how they cork-screwed into the side of a hill? Well, there is one reason where it might make a big difference when it comes to Bankruptcy, and we will pick that up in the premium section. But generally — and even in that case, really — in our time of variation margin it really ought not to be the thing that is bringing down your ISDA Master Agreement.

Note it also pops up as relevant in the “Absence of Litigation” representation in Section 3(c) of the 2002 ISDA.

Premium content Here the free bit runs out. Subscribers click 👉 here. New readers sign up 👉 here and, for ½ a weekly 🍺 go full ninja about all these juicy topics👇 JC’s “nutshell” summary of the clause Background reading and long-form essays The upside of Specified Entities for DUST. The downside of Specified Entities when you are in an Automatic Early Termination jurisdiction.

See also

• Specified Transaction
• Default under Specified Transaction
• Cross Default
• Bankruptcy
• Absence of Litigation