Insolvency Filing - Equity Derivatives Provision
2002 ISDA Equity Derivatives Definitions
Paragraph 12.9(a)(iv) in a Nutshell™
Use at your own risk, campers!
Full text of Paragraph 12.9(a)(iv)
Content and comparisons
Section 12.9(a): The actual Additional Disruption Events
One tends to disapply this and instead rely on the famous Triple Cocktail so somewhat academic, but if you are minded to include it, note that an Insolvency Filing is wider than “Insolvency” Section 12.6(a)(ii). Also it differs from Bankruptcy in the ISDA Master Agreement, in that it has no grace period and cannot be triggered by creditor petitions etc.
As with Change in Law, an Insolvency Filing allows either party to terminate the Transaction upon at least two Scheduled Trading Days’ notice, whereupon the Transaction will terminate and the Determining Party will determine the Cancellation Amount.
You may be forgiven for wondering what the difference is between “Insolvency”, being the normal Extraordinary Event from Section 12.6, and the Additional Disruption Event called “Insolvency Filing”.
It’s a good question that, we dare say, even ISDA’s crack drafting squad™ would struggle to capably answer, but the reality is that this people tend to disapply Insolvency Filing, as it is covered by other Additional Disruption Events so Insolvency is the important one.
- Insolvency under Section 12.6(a) of the 2002 ISDA Equity Derivatives Definitions, being part of the wider concept of Nationalization, Insolvency and Delisting
- Bankruptcy under Section 5(a)(vii) of the ISDA Master Agreement.