Commonwealth Consolidated Acts

PAYMENT SYSTEMS AND NETTING ACT 1998 - SECT 5

                   In this Act, unless the contrary intention appears:

"approved netting arrangement" means a netting arrangement approved under section 12.

"approved RTGS system" means a payment or settlement system approved under section 9.

"close-out netting contract" means:

                     (a)  a contract under which, if a particular event happens:

                              (i)  particular obligations of the parties terminate or may be terminated; and

                             (ii)  the termination values of the obligations are calculated or may be calculated; and

                            (iii)  the termination values are netted, or may be netted, so that only a net cash amount (whether in Australian currency or some other currency) is payable; or

                     (b)  a contract declared by the regulations to be a close‑out netting contract for the purposes of this Act;

but does not include:

                     (c)  a contract that constitutes, or is part of, an approved netting arrangement; or

                     (d)  a contract in relation to which a declaration under section 15 is in force; or

                     (e)  a contract declared by the regulations to not be a close‑out netting contract for the purposes of this Act.

"Commonwealth constitutional reach" : a contract or arrangement is entered into in circumstances that are within Commonwealth constitutional reach if:

                     (a)  a constitutional corporation is a party to the contract or arrangement; or

                     (b)  the contract or agreement has a significant effect on the business affairs, or an activity, of a constitutional corporation; or

                     (c)  the contract or arrangement is entered into in the course of, for the purposes of or in relation to one or more of the following:

                              (i)  dealings in currency, bills of exchange or promissory notes;

                             (ii)  money borrowed on the public credit of the Commonwealth;

                            (iii)  trade and commerce between Australia and places outside Australia or between places outside Australia;

                            (iv)  trade or commerce among the States;

                             (v)  trade or commerce within a Territory, between a State and a Territory or between 2 Territories;

                            (vi)  banking (other than State banking);

                           (vii)  insurance (other than State insurance); or

                     (d)  the contract or arrangement is entered into by means of or in relation to, postal, telegraphic, telephonic or other like services.

"constitutional corporation" means:

                     (a)  a foreign corporation; or

                     (b)  a trading or financial corporation formed within the limits of the Commonwealth.

"external administration" : a person goes into external administration if:

                     (a)  they become a body corporate that is an externally administered body corporate within the meaning of the Corporations Act 2001 ; or

                     (b)  they become an individual who is an insolvent under administration within the meaning of the Corporations Act 2001 ; or

                     (c)  someone takes control of the person's property for the benefit of the person's creditors because the person is, or is likely to become, insolvent.

"external administrator" for a person who goes into external administration is the person who takes control of the person's property under the administration.

"general participant" in a payment or settlement system means a participant who cannot, under the operating rules for the system, settle transactions on their own account through the system.

"market netting contract" means:

                     (a)  a contract:

                              (i)  entered into in accordance with the rules that govern the operation of a netting market; and

                             (ii)  under which obligations between parties to the contract are netted; or

                     (b)  a contract declared by the regulations to be a market netting contract for the purposes of this Act;

but does not include:

                     (c)  a contract that constitutes, or is part of, an approved netting arrangement; or

                     (d)  a contract declared by the regulations not to be a market netting contract for the purposes of this Act.

"multilateral netting arrangement" means an arrangement that has more than 2 parties and under which the obligations owed by the parties to each other are netted.

"netting market" means:

                     (a)  an arrangement that is:

                              (i)  a licensed market or a licensed CS facility as defined in section 761A of the Corporations Act 2001 ; and

                             (ii)  approved by the Minister for the purposes of this definition; or

                     (b)  an arrangement declared by the regulations to be a netting market for the purposes of this Act.

"operating rules for a " payment or settlement system means the rules governing the operation of the system.

"participant" in an approved RTGS system means a person who is a participant in the system in accordance with the rules governing the operations of the system.

"party" to an approved netting arrangement is a person who is a party to the arrangement in accordance with the rules governing the arrangement.

"provable" : an obligation is provable in an external administration if:

                     (a)  for an external administration that is a winding up under the Corporations Act 2001 --the obligation is a debt or claim that is admissible to proof against the body being wound up; or

                     (b)  for an external administration that is a bankruptcy under the Bankruptcy Act 1966 --the obligation is a debt or liability provable in the bankruptcy; or

                     (c)  in any other case--the person to whom the obligation is owed is entitled to share in any distribution of property to creditors under the administration on the basis of the obligation if the obligation is properly established.

"Reserve Bank" means the Reserve Bank of Australia.

"settling participant" in a payment or settlement system means a participant who, under the operating rules for the system, can settle transactions through the system on their own behalf and for other participants.

"specified provisions" means:

                     (a)  section 11F and subsection 13A(3) of the Banking Act 1959 ; and

                     (b)  section 187 of the Life Insurance Act 1995 ; and

                     (c)  section 86 of the Reserve Bank Act 1959 ; and

                     (d)  sections 437D and 468 and Division 2 of Part 5.7B of the Corporations Act 2001 ; and

                     (e)  sections 120, 121, 122, 128B and 128C of the Bankruptcy Act 1966 ; and

                      (f)  section 142 of the Superannuation Industry (Supervision) Act 1993 ; and

                     (g)  a law prescribed by the regulations for the purposes of this definition.

"voidable" : a payment is voidable in an external administration if it is:

                     (a)  for an external administration that is a winding up under the Corporations Act 2001 --voidable under Division 2 of Part 5.7B of the Corporations Act 2001 ; or

                     (b)  for an external administration that is a bankruptcy under the Bankruptcy Act 1966 --void as against the trustee in bankruptcy; or

                     (c)  in any other case--void as against the external administrator or voidable under the law governing the external administration.