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Merger Without Assumption - ISDA Provision: Difference between revisions
Merger Without Assumption - ISDA Provision (view source)
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{{isdaanat|5(a)(viii)}} | {{isdaanat|5(a)(viii)}} | ||
When a firm merges into, or is taken over by, another, some magical — or unexpected — things can happen. Not for nothing does the {{isdama}} labour over the very description: that this might be a “[[consolidation]], [[amalgamation]], [[merger]], [[transfer]], [[reorganisation]], [[reincorporation]] or [[reconstitution]]” — prolix even by ISDA’s lofty standards — should tell you something. Generations of lawyers have forged whole careers out of the manifold ways one can put companies together and take them apart again. Your correspondent is not one of them, and has little more to say about it, except that what happens to live contracts at the time of such chicanery will depend | When a firm merges into, or is taken over by, another, some magical — or unexpected — things can happen. Not for nothing does the {{isdama}} labour over the very description: that this might be a “[[consolidation]], [[amalgamation]], [[merger]], [[transfer]], [[reorganisation]], [[reincorporation]] or [[reconstitution]]” — prolix even by ISDA’s lofty standards — should tell you something. Generations of lawyers have forged whole careers out of the manifold ways one can put companies together and take them apart again. Your correspondent is not one of them, and has little more to say about it, except that what happens to live contracts at the time of such chicanery will depend a lot on just how the companies or their assets are being joined or torn assunder. | ||
If the {{isdama}} and its extant {{isdaprov|Transactions}} carry across — which in a plain [[merger]], they ought to — all well and good <ref>Though watch out for traps: what if ''both'' merging companies have {{isda}}s with the same counterparty, but on markedly different terms? Which prevails? Do they both? Which one do you use for new {{isdaprov|Transaction}}s? This you will have to hammer out across the negotiating table.</ref> | |||
But in some cases the Transactions might not carry across. Perhaps the resulting entity has no [[Ultra vires|power]] to transact swaps. Perhaps it is in a jurisdiction in which that cannot be enforced. Perhaps it just refuses to honour them. {{isdaprov|Merger Without Assumption}} addresses that contingency. | But in some cases the Transactions might not carry across. Perhaps the resulting entity has no [[Ultra vires|power]] to transact swaps. Perhaps it is in a jurisdiction in which that cannot be enforced. Perhaps it just refuses to honour them. {{isdaprov|Merger Without Assumption}} addresses that contingency. | ||
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There's not a lot of [[case law]] on it. Some say 90%. Some say 75%. Some people — your correspondent included — say “shoot me”. | There's not a lot of [[case law]] on it. Some say 90%. Some say 75%. Some people — your correspondent included — say “shoot me”. | ||
{{sa}} | {{sa}} | ||
*{{isdaprov|Credit Event Upon Merger}} | |||
{{ref}} | {{ref}} | ||