Affiliate - ISDA Provision
2002 ISDA Master Agreement
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A potentially wide definition which could include, 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.
- The JC’s famous Nutshell™ summary of this clause
- Affiliate under the Equity Derivatives Definitions — which um points back to this definition in the ISDA Master Agreement. As it should.
- Affiliate in the abstract