An Appraisal of Netting Provisions Under the Companies and Allied Matters ACT 2020

Netting Provisions

The new Companies and Allied Maters Act, 2020 (the Act or CAMA 2020), made significant amendments and introductions to the Nigerian companies’ laws, one of which is the provision for statutory enforcement of netting arrangements.

In simple terms, netting can be described as the process of reconciling and setting off two or more obligations to achieve a reduced net obligation between two parties. It is used in financial contracts (such as derivative contracts), to mitigate credit, settlement and other risks, by aggregating two or more obligations to achieve a reduced net obligation.

Thus, with the introduction of the netting provisions under Chapter 28 of the Act, Nigeria became one of the countries which have statutorily provided for the enforcement of netting provisions in financial derivative contracts.

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