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310: Mutual credit and set-off
or “How debts are balanced when a company is being liquidated”
You could also call this:

“Explaining key terms for settling debts between companies”

This part of the law explains some important words used in the Companies Act 1993. These words help understand how debts are settled between companies.

The Reserve Bank of New Zealand is simply called the “Bank” in this law.

A “bilateral netting agreement” is a deal between two people or companies. It explains how they will settle their debts to each other. This might happen when a certain event occurs, or it could be part of their regular business. The agreement describes how they calculate who owes what to whom.

A “clearing house” is a place that helps settle financial deals between more than two parties who have a “multilateral netting agreement”.

A “multilateral netting agreement” is like a bilateral agreement, but it involves more than two parties. It explains how all the parties will settle their debts with each other, often using a clearing house to help.

The “netted balance” is the final amount one party owes another after they’ve settled all their debts under their netting agreement.

A “netting agreement” can be either a bilateral or a multilateral agreement that’s recognised by law.

A “recognised clearing house” is one that has been officially approved under section 310K of this law.

A “recognised multilateral netting agreement” is one that follows the rules of a recognised clearing house.

These definitions help make sure everyone understands how debts are settled in complex financial situations.

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Next up: 310B: Application of set-off under netting agreement

or “How set-off works in netting agreements for creditors' claims”
Next

Part 16 Liquidations
Creditors' claims

310ADefinitions relating to set-off under netting agreement

  1. In this Act, unless the context otherwise requires,—

    Bank means the Reserve Bank of New Zealand

      bilateral netting agreement means an agreement that provides, in respect of transactions between 2 persons to which the agreement applies,—but does not include any bilateral netting agreement that is part of a multilateral netting agreement

      1. that on the occurrence of an event specified in the agreement, all or any of those transactions must (or may, at the option of a party) be terminated and—
        1. an account taken of all money due between the parties in respect of the terminated transactions; and
          1. all obligations in respect of that money satisfied by payment of the net amount due from or on behalf of the party having a net debit to or on behalf of the party having a net credit; or
          2. that each transaction is to be debited or credited to an account with the effect that the rights and obligations of each party that existed in respect of the relevant account prior to the transaction are extinguished and replaced by rights and obligations in respect of the net debit due on the relevant account after taking into account that transaction; or
            1. that amounts payable by each party to the other party are to be paid or satisfied by payment of the net amount of those obligations by the party having a net debit to the party having a net credit;—

              clearing house means a person that provides clearing or settlement services in respect of financial transactions between parties to a multilateral netting agreement

                multilateral netting agreement means an agreement that provides for the settlement, between more than 2 persons, of payment obligations arising under transactions that are subject to the agreement, and that provides, in respect of transactions to which it relates, that debits and credits arising between the parties are to be brought into account so that amounts payable by or to each party are satisfied by—

                1. payment by or on behalf of each party having a net debit to or on behalf of a clearing house (whether as agent or as principal) or a party having a net credit; and
                  1. receipt by or on behalf of each party having a net credit from or on behalf of a clearing house (whether as agent or as principal) or a party having a net debit

                    netted balance means any amount calculated under a netting agreement as the net debit payable by or on behalf of a party to the agreement to or on behalf of another party to the agreement in respect of all or any transactions to which the netting agreement applies

                      netting agreement means a bilateral netting agreement or a recognised multilateral netting agreement

                        recognised clearing house means a clearing house declared under section 310K to be a recognised clearing house

                          recognised multilateral netting agreement means a multilateral netting agreement that is contained in, or is subject to, the rules of a recognised clearing house.

                          Notes
                          • Section 310A: inserted, on , by section 15 of the Companies Amendment Act 1999 (1999 No 19).