Payment Systems Act 2003 Chapter 3 — Finality of Payment and Netting Arrangement

s 16

For the purposes of this Chapter— "bilateral netting" means a netting arrangement between two parties; "multilateral netting" means a netting arrangement that has more than two parties; "payments netting" means a netting arrangement where on any day on which amounts are due between the parties in respect of one or more transactions, the party with the higher gross payment obe gatios paymeint ted toations othehe her pasty the net amount of "close out netting" means a netting arrangement under which, following the occurrence of certain events specified by the parties to the arrangement, all or any of the transactions referred to in the netting arrangement may be terminated, and where so terminated the termination value becomes due and payable; "netting by novation" means a netting arrangement between the parties to a series of transactions where an account of amounts due is kept and the rights and obligations of the parties in respect of the account are continuously extinguished and replaced by a new single amount payable by one party to the other; "netting arrangement" means an arrangement in writing to convert several claims or obligations into one net claim or one net obligation and includes bilateral netting, multilateral netting, netting by novation, close out netting, payments netting or a combination thereof; "insolvency administrator" includes a receiver, manager, receiver and manager, liquidator, provisional liquidator, judicial manager, curator, special administrator or any other person, by whatever name called, authorized under any law in or outside Malaysia to take control of a person's property for the benefit of that person's creditors in the event that the person is, or is likely to become, insolvent; "designated payment system" includes a payment system operated by the Bank under the Central Bank of Malaysia Act 1958. Application

s 17

(1) The provisions of this Chapter shall apply to- (a) any payment or settlement instruction sent through a designated payment system; and (b) any netting arrangement, in respect of claims or obligations arising from a payment or settlement instruction that is final under subsection 19(1), entered into between an operator and a participant or between participants only in respect of a designated payment system. (2) Any written law relating to bankruptcy and insolvency shall continue to apply, but where there is any conflict or inconsistency between the provisions of this Chapter and the written law relating to bankruptcy and insolvency, the provisions of this Chapter shall prevail.

Payment or settlement instruction made after appointment of insolvency administrator

s 18

This Chapter shall not apply in relation to any payment or settiement instruction which is sent through a designated payment system after the expiry of the day on which an insolvency administrator is appointed in respect of an operator or participant of a designated payment system. Finality of payment and netting arrangement

s 19

(1) A payment instruction or settlement shall be valid and enforceable by and against an operator or participant of a designated payment system and shall be final and shall not be revoked, reversed or set aside by any person from the time the payment instruction or settlement is determined to be final under the rules of the designated payment system required to be established under paragraph 14(b) and no order shall be made by any court for the rectification or stay of such payment instruction or settlement. (2) A netting arrangement shall be valid and enforceable and an operator or participant of a designated payment system shall do whatever is permitted or required under the netting arrangement in order to give effect to the netting arrangement. (3) Any payment or settlement obligations owed to an operator or participant of a designated payment system under the netting arrangement that has not been discharged— (a) is provable in insolvency proceedings; and (b) may be recovered for the benefit of the creditors. (4) Without limiting the generality of subsection 17(2), any payment instruction or settlement that is final and irrevocable under subsection (1) and any netting arrangement that is valid and enforceable under subsections (2) and (3) shall be given effect notwithstanding anything to the contrary contained in— (a) sections 223 and 224 of the Companies Act 1965 in relation to avoidance of dispositions of property; (b) section 296 of the Companies Act 1965, section 59 of the Bankruptcy Act 1967 [Act 360] or subsection 40(1) of the Pengurusan Danaharta Nasional Berhad Act 1998 [Act 587] in relation to the disclaiming of onerous property; (c) section 219 of the Companies Act 1965 and section 47 of the Bankruptcy Act 1967 in relation to the time of commencement of insolvency; (d) section 293 of the Companies Act 1965 and section 53 of the Bankruptcy Act 1967 in relation to undue preference; and (e) section 222 of the Companies Act 1965 and section 10 of the Bankruptcy Act 1967 in relation to the power to stay or restrain proceedings. Preservation of rights

s 20

For the avoidance of doubt, it is declared that the provisions of this Chapter shall not restrict or preclude any person from enforcing his rights under the law in so far as it does not affect the finality of payment instruction or settlement or the validity and enforceability of a netting arrangement under this Chapter. Non-recognition of insolvency order by foreign court

s 21

Notwithstanding any other written law or rule of law, a court shall not recognize or give effect to an order of a court exercising jurisdiction under the law of insolvency outside Malaysia in so far as the making of that order would be inconsistent with or contrary to the provisions of this Chapter. Requirement to notify in the event of insolvency, etc.

s 22

(1) Where an operator of a designated payment system— (a) is insolvent or is likely to become insolvent; (b) has become or is likely to become unable to meet any or all of his obligations; or (c) has suspended payments or compounded with his creditors, such operator shall immediately notify the participants of the designated payment system. (2) Where a participant of a designated payment system— (a) is insolvent or is likely to become insolvent; (b) has become or is likely to become unable to meet any or all of his obligations; or (c) has suspended payments or compounded with his creditors, such participant shall immediately notify the operator who shall notify the other participants of the designated payment system.