Affiliate - 1987 ISDA Provision

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1987 ISDA Interest Rate and Currency Exchange Agreement

A Jolly Contrarian owner’s manual™

Affiliate in a Nutshell

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Original text

Affiliate” means, subject to Part 4 of the Schedule, in relation to any person, any entity controlled, directly or indirectly, by the person, any entity that controls, directly or indirectly, the person or any entity under common control with the person. For this purpose, “control” of any entity or person means ownership of a majority of the voting power of the entity or person.

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: FTPDBreachCSDMisrepDUSTCross DefaultBankruptcyMWA Termination Events: IllegalityFMTax EventTEUMCEUMATE 5 Events of Default: FTPDBreachCSDMisrepDUSTCross DefaultBankruptcyMWA Termination Events: IllegalityTax EventTEUMCEUMATE 5 Events of Default: FTPDBreachCSDMisrepDUSSCross DefaultBankruptcyMWA Termination Events: IllegalityTax EventTEUMCEUM
Early Termination 6 Early Termination: ET right on EODET right on TEEffect of DesignationCalculations; Payment DatePayments on ETSet-off 6 Early Termination: ET right on EODET right on TEEffect of DesignationCalculationsPayments on ETSet-off 6 Early Termination: ET right on EODET right on TEEffect of DesignationCalculationsPayments 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 to expand:

Comparisons

Affiliate was introduced in the 1987 ISDA. By 1992, ISDA’s crack drafting squad™ had thought better of saying if should be defined in Part 4 of the Schedule (what if someone carelessly defined it in Part 5?) and helpfully added the qualifier “directly or indirectly” to the description of “under common control”. “Helpfully” to vendors of printer’s ink and paper, that is; but at peripheral cost to the patience of that vanishingly small community of prose stylists among ISDA negotiators.

The “Affiliate” definitions are then identical between the 1992 ISDA and the 2002 ISDA.

Basics

Affiliate is potentially wide: it could capture, for example, special purpose vehicles whose shareholding is owned by the same corporate service provider, or separate stand-alone hedge funds managed by the same administrator or investment manager.

An “affiliate” is really not a complicated idea in the abstract, yet in the world of commercial contracts, our learned friends rejoice in overdetermining it all the same. For these men and women, a “affiliate” of an undertaking could be:

  • Parent: its parent or holding company, which holds all or a majority of its ordinary share capital — often abbreviated as a “holdco”
  • Child: its subsidiary — a company the ordinary share capital of which it holds all or a majority
  • Sibling: a company in common ownership with the corporate being; that is to say, a company that shares the same parent or holding company.

And that is about it. Pedants will be anxious to point out that, shares being the divisible ownership units that they are, and different degrees of control and voting rights attaching to different classes of share, there are degrees of ownership, and affiliation, and some imply more connectedness than others. Any confusion is usually resolved by pointing at the definition of “subsidiary” and “holding company” in the Companies Act, or similar legislation in a jurisdiction near you. The ISDA Master Agreement does a reasonably neat job of capturing the above by reference to the majority of voting control.

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See also

References