Clearing and settlement of debt securities

This overview is a guide to the Banking & Finance content within the Clearing and settlement of debt securities subtopic, with links to appropriate materials.

Introduction to clearing and settlement of debt securities

The market for debt securities depends on an extensive infrastructure of systems and services, including:

  1. infrastructure which eliminates the risk that a party who has entered into a contract for the sale and purchase of debt securities will fail to complete the transaction (clearing infrastructure), and

  2. infrastructure which enables debt securities to be delivered from one party to another in performance of a previously agreed purchase and sale or under a transaction such as a securities lending transaction (settlement infrastructure and, together with clearing infrastructure, post-trading infrastructure).

For more information on post-trading infrastructure, see Practice Note: Debt securities market infrastructure. For more information on securities lending transactions and repos, see Practice Notes: An introduction to securities lending transactions and the Global Master Securities Lending Agreement (GMSLA) and An introduction to repo and the Global Master Repurchase Agreement (GMRA).

Clearing debt securities

Clearing

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High Court clarifies position of sole directors under Model Articles and the interaction between UK sanctions regulations and in-court appointment of administrators (Re KRF Services (UK) Ltd and others)

Restructuring & Insolvency analysis: This High Court case (which addresses two important issues in UK company law and sanctions regulations) will be of interest to insolvency practitioners, corporate and restructuring lawyers, sanctions lawyers, and businesses and individuals which are affected by sanctions. Firstly, it clarifies the position of sole directors under the Model Articles for private limited companies. The court ruled that a sole director can validly pass board resolutions and bind the company, regardless of whether they have always been the sole director or were previously part of a multi-member board. This interpretation resolves conflicts between Article 7(2) and Article 11(2) of the Model Articles, with the court favouring Article 7(2)'s provisions. Secondly, the case examines the interaction between UK sanctions regulations and the in-court appointment of administrators. The court determined that making an administration application and order does not breach asset-freezing sanctions, even when the company is designated or controlled by a sanctioned person. While an Office of Financial Sanctions Implementation (OFSI) license is typically required for administrators to act, the court retains discretion to make immediate appointments in urgent situations. Written by Joshua Ray and Duncan Henderson, partners at CANDEY, which acted for the First and Second Applicants on this matter.

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