Document ID: chunk:federal_register_of_legislation:C2024C00373:section:14:p1
Version: federal_register_of_legislation:C2024C00373
Segment Type: section
Provision Reference: s 14 (pt 1/4)
Character Range: 33771–36558

14  Effectiveness of close‑out netting contracts
 (1) If:
 (a) Australian law governs a close‑out netting contract; and
 (b) the contract is entered into in circumstances that are within Commonwealth constitutional reach;
the following provisions apply:
 (c) obligations may be terminated, termination values may be calculated and a net amount become payable in accordance with the contract;
 (ca) security given over financial property, in respect of obligations of a party to the contract, may be enforced in accordance with the terms of the security, provided the terms of the security are evidenced in writing (but see section 14A);
 (d) paragraphs (c) and (ca) apply despite:
 (i) any disposal of rights that may be netted under the contract; or
 (ii) the creation of any encumbrance, or any other interest, in relation to those rights or financial property mentioned in paragraph (ca); or
 (iii) the operation of any encumbrance, or any other interest, in relation to those rights or that financial property that is created after the commencement of this section;
  in contravention of a prohibition in the contract, or in the security mentioned in paragraph (ca);
 (e) for the purposes of any law, the assets of a party to the contract are taken:
 (i) to include any net obligation owed to the party under the contract; and
 (ii) not to include obligations terminated under the contract.
 (2) If:
 (a) a person who is, or has been, a party to a close‑out netting contract goes into external administration; and
 (b) Australian law governs either:
 (i) the external administration; or
 (ii) the contract;
the following provisions apply:
 (c) obligations may be terminated, termination values may be calculated and a net amount become payable in accordance with the contract;
 (d) obligations that are, or have been, terminated under the contract are to be disregarded in the external administration (but see subsection (5));
 (e) any net obligation owed by the party under the contract that has not been discharged is provable in the external administration;
 (f) any net obligation owed to the party under the contract that has not been discharged may be recovered by the external administrator for the benefit of creditors;
 (fa) security given over financial property, in respect of obligations of a party to the contract, may be enforced in accordance with the terms of the security, provided the terms of the security are evidenced in writing (but see section 14A);
 (fb) if:
 (i) under section 267 or 267A of the Personal Property Securities Act 2009 or section 588FL of the Corporations Act 2001, a security interest would, but for this paragraph, vest in the grantor before the external administration begins; and
 (ii) where the security interest did not vest under one of