Key Features of Bilateral Netting\nof Qualified Financial Contracts Bill, 2020<\/h2>\n\n\n\n
The key features of Bilateral Netting of Qualified Financial Contracts Bill, 2020 are as follows-<\/strong><\/em><\/p>\n\n\n\n The appropriate\nauthority may, by notification, designate an entity to be governed by it as a\nqualified participant to deal with QFCs. It would include Non-Banking Finance\nCompanies (NBFCs), insurance companies, and pension funds. The derivatives\nmarkets can facilitate excessive and risks that are not clear, leading to a lot\nof systemic risks. <\/p>\n\n\n\n The terms of the bill will apply to QFCs\nbetween two qualified participants, whereby at least one party, an entity, will\nbe regulated by the specified authorities like RBI, SEBI, IRDAI, PFRDA, or the\nIFSCA. <\/p>\n\n\n\n The Bill provides that netting of QFCs is enforceable if the contract has a netting agreement.<\/em><\/strong><\/p>\n\n\n\n Qualified financial contracts (QFC) states any bilateral contract to be notified as by the relevant authority. The authority can be the RBI,\u00a0 SEBI, IRDAI, PFRDA, or IFSCA. The Central Government<\/strong><\/em>[1]<\/strong><\/em><\/a><\/sup> by notification, executes contracts between certain parties or containing specific terms from being designated as QFCs. <\/p>\n\n\n\n Netting\nagreement is an agreement that caters for the netting of amounts and involves\ntwo or more QFCs. It may also include a collateral arrangement. A collateral\narrangement is a sort of protection granted as one or more QFCs in a netting\nagreement. It may include a pledge of assets or an arrangement to transfer the\ntitle to collateral or a third-party guarantor. The inclusion of non-qualified\nfinancial contracts in a netting agreement will not invalidate the\nenforceability of netting QFCs under the agreement. <\/p>\n\n\n\n It refers to the termination of all obligations arising out of relevant QFCs event of a default. It requires the parties to a QFC to ensure that obligations are replaced by a single net amount enforced during close-out netting. A party may initiate the process to the QFC in the case of: <\/p>\n\n\n\n Administration\nrefers to the moratorium’s imposition, proceedings of winding up, insolvency,\nor bankruptcy, among others. The administration practitioner is an entity that\nadministers the affairs of the party. The parties to a QFC are required to\nassure that all duties owed by the one party that is imposed on the other party\nare required to be returned by a single net amount. The netting will affect\nconverting present and future responsibilities arising from QFCs to which the\nnetting agreement is applicable. <\/p>\n\n\n\n The net amount payable\/receivable under the close-out netting would be fixed under the following conditions:-\u00a0 <\/em><\/strong><\/p>\n\n\n\n The insolvent party of a close-out netting agreement is placed under an Administration Practitioner (AP). The Bilateral Netting of Qualified Financial Contracts Bill, 2020 restricts the AP from rendering ineffective cash or collateral transfer despite the imposition of moratorium by any court under any law. If you need to know more about this bill, you can contact our experts at Corpbiz<\/strong><\/a>.<\/p>\n\n\n\n Read our article<\/b>:Provisions for CGST ITC Rule 36 (4) for February, 2020 to August, 2020 is clarified by CBIC<\/a><\/mark><\/p>\n\n\nBilateral-Netting-of-Qualified-Financial-Contracts-Act-2020 The Finance minister Nirmala Sitharaman introduced the Bilateral Netting of Qualified Financial Contracts Bill, 2020, in Lok Sabha on September 14, 2020. She said that the Bilateral Netting of Qualified Financial Contracts Bill would have a significant bearing on the financial sector’s stability and would release large amounts of locked-up capital in the banking system […]<\/p>\n","protected":false},"author":18,"featured_media":18393,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":[],"categories":[153],"tags":[1143],"acf":{"service_id":"220"},"authorName":"Sakshi Srivastava","authorImageUrl":"https:\/\/corpbiz.io\/learning\/wp-content\/uploads\/2020\/03\/IMG-20180130-WA0007.jpg","authorDescription":"Sakshi has pursued B.B.A.LL.B.(IPR Hons.). She is an avid reader and is keen to gather and share her knowledge on the subjects relating to IPR, Company Law and GST. Priorly she has worked as a legal researcher and vide her articles she aims at improving the core knowledge of the subjects to the masses.","postViews":3543,"readingTime":3,"_links":{"self":[{"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/posts\/18389"}],"collection":[{"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/users\/18"}],"replies":[{"embeddable":true,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/comments?post=18389"}],"version-history":[{"count":12,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/posts\/18389\/revisions"}],"predecessor-version":[{"id":18404,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/posts\/18389\/revisions\/18404"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/media\/18393"}],"wp:attachment":[{"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/media?parent=18389"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/categories?post=18389"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/tags?post=18389"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}Qualified financial market\nparticipant under Bilateral Netting of Qualified Financial Contracts Bill, 2020<\/h3>\n\n\n\n
Applicability of the Bilateral\nNetting of Qualified Financial Contracts Bill, 2020,<\/h3>\n\n\n\n
Enforcement of Netting under\nBilateral Netting of Qualified Financial Contracts Bill, 2020<\/h3>\n\n\n\n
Close-out Netting arrangement<\/h3>\n\n\n\n
![\"Close-out](\"https:\/\/corpbiz.io\/learning\/wp-content\/uploads\/2020\/10\/image-89.png\")
<\/figure><\/div>\n\n\n\nConclusion<\/h2>\n\n\n\n