The International Insolvency Review – 3rd Edition

This chapter featured in The International Insolvency Review 2015 – 3rd edition.

 

INSOLVENCY LAW, POLICY AND PROCEDURE

i. Statutory framework and substantive law

Jersey has two principal forms of insolvency procedure – désastre under the Bankruptcy (Désastre) (Jersey) Law 1990 and creditors’ windings up under the Companies (Jersey) Law 1991 (the Companies Law), the latter being for Jersey-registered companies. Jersey’s legislation is designed to provide the same outcome whichever procedure is followed. In recent years, there has also been a growing trend for the use of court windings up, also under the Companies Law, principally where the court is satis ed that it is just and equitable to do so (a di erent test of public interest is also available). A further trend has been the increased use of dégrèvement (an ancient statutory procedure used to disencumber Jersey immoveable property). Other forms of insolvency exist, but these procedures are invoked comparatively rarely.

ii. Policy

Jersey does not have any form of formal ‘business rescue’ legislation that would enable a company to continue as a going concern. However, the Royal Court (the Court) has always operated to seek to ensure that all stakeholders’ interests are taken into account.

By way of example, there is no statutory mechanism by which a pre-packaged sale of a business’ assets can take place in Jersey. However, in Re Collections Group [2013] JRC 096, the Court approved a just and equitable procedure that gave e ect to a pre-packaged sale of the business and assets of the companies that formed Collections Group, which was involved in the sale of clothing and other items. e companies were in a dire nancial position and would have had to shut immediately had the Court not placed them into liquidation and authorised the liquidators immediately to enter into an agreement whereby they would sell the business and assets to a new company in return for a future share in the new company’s profits.

The Court recognised that a creditors’ winding up or désastre would lead to a significant number of people losing their jobs and damage retail con dence in the island. Given the statutory notice periods involved in creditors’ windings up and désastres, these would not lend themselves to expedited pre-packaged arrangements, the procedures being designed to protect creditors’ interests.

A pre-packaged arrangement, which is commonly put in place by administrators in England, also took place in Re Huelin-Renouf Shipping Ltd [2013] JRC 164.

iii. Insolvency procedures

Désastres can be initiated on the simple grounds that the company is insolvent based on the cash ow test; namely, the company is unable to pay its debts as they fall due. Rather confusingly, a creditor is not entitled to initiate a creditors’ winding up; rather it is for the directors of a company to do so on the basis of insolvency. An application for a désastre may be made to the court by a creditor of the company having a liquidated claim exceeding £3,000. is limit does not apply to creditors’ windings up. A company can declare itself, through its directors, en désastre.

Given that all creditors must be given 14 days’ written notice of a creditors’ meeting which usually takes place immediately after a shareholders’ meeting to pass a special resolution to place it into liquidation, the time frame to place a company into a creditors’ winding up can be as little as two weeks.

In relation to just and equitable windings up, the Court has adopted a exible approach. Recent cases have included, but are not limited to, the following grounds: where the substratum of the company has gone; where an investigation is required; where there might be competing interests between creditors and clients (particularly where nancial services businesses are concerned); or where speed and choice of liquidator are important. A just and equitable winding up can be initiated by the company, a director, a shareholder or the local nancial services regulator. e time frame involved with just and equitable windings up is usually longer than for creditors’ windings up due to the complexity of the matters in issue and the availability of court time.

Please use the link below to read the Jersey Chapter of the International Insolvency Review in full.


View Full Briefing PDF >

Our website uses cookies. By continuing to use this website you have consented to having cookies placed on your computer.

To find out more please read our cookie policy.