Anguilla Enacts Netting Legislation

The Netting Act, 2006 came into force on October 19, 2006 and now provides certainty for those seeking to net against Anguillan counterparties. The interaction of company and bankruptcy law had previously meant that the basis for netting in Anguilla was uncertain and this was proving increasingly problematic for, amongst others prime brokers dealing with Anguillan hedge funds. The Netting Act is based on the International Swaps and Derivatives Association’s Model and was introduced after consultation with ISDA.

Netting concerns the ability of parties to set off reciprocal claims or obligations in an insolvency. A creditor is therefore able to improve his position by setting off any sums owed to him by the insolvent debtor. The creditor effectively receives these sums before preferential creditors and need only claim with the other unsecured creditors for a lesser amount.