2002 ISDA Equity Derivatives Definitions
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12.9(a)(iv) in a Nutshell™
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12.9(a)(iv) in all its glory
- 12.9(a)(iv) “Insolvency Filing” means that the Issuer institutes or has instituted against it by a regulator, supervisor or any similar official with primary insolvency, rehabilitative or regulatory jurisdiction over it in the jurisdiction of its incorporation or organization or the jurisdiction of its head or home office, or it consents to a proceeding seeking a judgment of insolvency or bankruptcy or any other relief under any bankruptcy or insolvency law or other similar law affecting creditors’ rights, or a petition is presented for its winding-up or liquidation by it or such regulator, supervisor or similar official or it consents to such a petition, provided that proceedings instituted or petitions presented by creditors and not consented to by the Issuer shall not be deemed an Insolvency Filing;
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Section 12.9(a): The actual Additional Disruption Events
- 12.9(a)(i) Additional Disruption Event
- 12.9(a)(ii) Change in Law
- 12.9(a)(iii) Failure to Deliver
- 12.9(a)(iv) Insolvency Filing
- 12.9(a)(v) Hedging Disruption
- 12.9(a)(vi) Increased Cost of Hedging
- 12.9(a)(vii) Loss of Stock Borrow
- 12.9(a)(viii) Increased Cost of Stock Borrow
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.
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