Close-Out Netting
/ˈkloʊsˌaʊt ˈnetɪŋ/
Definitions
- (n.) A legal mechanism that allows parties to terminate multiple financial obligations by consolidating them into a single net amount payable by one party to another, typically upon default or insolvency.
The parties invoked close-out netting to determine the final amount owed after the counterparty's bankruptcy.
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Commentary
Close-out netting is crucial in reducing credit risk in financial contracts and requires precise drafting to ensure enforceability under insolvency law.
This glossary is for general informational and educational purposes only. Definitions are jurisdiction-agnostic but reflect terminology and concepts primarily drawn from English and American legal traditions. Nothing herein constitutes legal advice or creates a lawyer-client relationship. Users should consult qualified counsel for advice on specific matters or jurisdictions.