Manufactured payments in respect of Loaned Securities - GMSLA Provision
GMSLA Anatomy™
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In other words the Borrower pays what the Lender would have received net, by reference to the Lender's own situation. This means that the Lender doesn't need to worry about different rates of tax or withholding applying to the Borrower. The Borrower, being the person who wanted to borrow the securities, takes the risk of untoward taxes related to its own position (as opposed to the Lender’s position) — if the tax is one the Lender would have suffered anyway, the Borrower doesn't have to account for this.
Makes sense, really.
Court-ordered compensation
Easy enough for standard dividends, where this is all run-of-the-mill stuff and the Income Record Date is within a month or so of the Income payment date. But what about extraordinary distributions of the kind ordered by courts to compensate minority shareholders after years of litigation over some kind of botched merger or acquisition? This can and does happen.
- Is court ordered compensation income in the sense meant by the 2010 GMSLA? Based on the definition of Income, yes:
- Income means any interest, dividends or other distributions of any kind whatsoever with respect to any Securities or Collateral;
- Clause 6.2 (Manufactured payments in respect of Loaned Securities) puts you right in the zone here, providing as it does (in a nutshell): Nutshell GMSLA 6.2}}.
What about limitation periods? Unlikely to help: if the amount only becomes due ten years after the original incident that gave rise to it — modern commercial litigation does tend to rumble on a bit — but, in the elegant words of the Limitation Act 1980, “an action founded on simple contract shall not be brought after the expiration of six years from the date on which the cause of action accrued”. No cause of action existed until the court award was made.