Netting
The Insolvency Act, 2003 of the British Virgin Islands (the
"IA") provides that netting provisions
in financial contracts are exempted from the insolvency provisions
of the IA. Significantly this includes voidable transactions. Even
where an insolvent entity that is party to a financial contract
goes into liquidation, this exemption will preserve the sanctity of
the netting provisions contained in the relevant agreement(s).
A point of note is that this exemption is confined to financial
contracts between two parties and does not include multi-party
arrangements. As such, it is critical that netting arrangements are
structured as bilateral contracts as opposed to multilateral
contracts. Financial contracts are contracts pursuant to which
payment or delivery obligations that have a market or an exchange
price are due to be performed at or within a certain period of
time.
