Guernsey: Corporate Insolvency Procedures in the Channel Islands

Last Updated: 14 March 2012
Article by Wendy Benjamin

Originally appeared in Finance, Offshore – Winter 2012

The main corporate insolvency procedures available in Guernsey and Jersey are summarised below.

Creditors Winding Up

Both a Guernsey "voluntary winding up" and a Jersey "creditors' winding up" are initiated by a shareholders' resolution. In Jersey this is immediately followed by a creditors meeting, and unless the creditors nominate a liquidator, the company appoints a liquidator who is then responsible for realising the company's assets and discharging its liabilities. In Guernsey, the liquidator is appointed by ordinary resolution of the Company. Costs incurred by the liquidator in a creditors' winding up are payable out of the company's assets in priority to all other claims. Detailed rules govern the rights of secured and unsecured creditors, the proving of debts and their order of payment, the setting off of debts and interest payable.

Once the winding up is concluded, the liquidator presents his report to the members and creditors and, subsequently, the company is struck off the register. The court will have nothing to do with a voluntary or creditors' winding up at all unless something happens to cause it to be involved, such as a dispute about the validity of a debt or the liquidator seeking to set aside prior transactions.

Compulsory Winding Up

Compulsory winding up, on the other hand, is very much a court-driven process in Guernsey. (There is no equivalent process in Jersey.) Companies can be compulsorily wound up by the court for a number of reasons including if, amongst other matters, they are unable to pay their debts of over £750 as they fall due. The first step in such an action would be for the creditor to serve a written demand for its debt. If the debt is not paid within 21 days the company will be deemed to be unable to pay its debts without further proof.

The creditor applying for the winding up may nominate his choice of liquidator and may need to agree funding in advance if there are insufficient assets in the company to meet the liquidator's fees. The nominated liquidator is sworn directly into office by the court in Guernsey and must then proceed to conduct the winding up. At the conclusion of the process, the liquidator's accounts are examined by a court-appointed Commissioner, the assets are distributed according to the priority of respective claims, and the company is dissolved.

Misconduct

Misconduct in managing the company's affairs in the period leading up to the liquidation can lead to proceedings for a directors' disqualification order. Also persons who allow a company to continue trading when they know it is insolvent may be made personally liable for wrongful or fraudulent trading.

Liquidators may also apply to the court to set aside transactions which they suspect amount to unlawful preferences. A payment or other arrangement which amounts to a preference is liable to be set aside if it was made in Guernsey within the last 6 months and in Jersey within the last 12 months prior to the commencement of the winding up. In Guernsey, in the case of payments to or arrangements made with persons connected to the company, this period is extended to 2 years.

Liquidators may apply to the court to set aside transactions at an undervalue which were made within the preceding 5 years. (Certain other transactions, such as extortionate credit transactions are also liable to be set aside). Customary law doctrines can sometimes be deployed to unwind fraudulent transactions which may have occurred outside these periods.

Désastre

In Jersey the main insolvency procedure utilised by creditors is an application to the Court that the company be declared "en désastre". An application for a desastre may be made by a creditor with a claim of not less than £3,000 or by the company itself. The application must state that the company is insolvent and that it has or is believed to have realisable assets. On the making of the declaration, all the company's property vests in an official of the court known as the Viscount.

The Viscount has wide powers in the winding up of the company's affairs including carrying on the company's business as far as is expedient for the beneficial disposal of the business and making any compromise or arrangement with the company's creditors or debtor's which he considers expedient.

Once again costs incurred by the Viscount in a désastre are payable out of the company's assets in priority to all other claims and detailed rules govern the rights of secured and unsecured creditors, the proving of debts and their order of payment, setting off of debts and interest payable. The Viscount is also able to apply to set aside certain transactions in the same way that a liquidator may do so.

When the Viscount has realised all the company's property, the Viscount must supply all creditors and a court official with a report and accounts relating to the désastre and pay the creditors whatever final dividend is due. The Viscount must notify the Registrar of Companies of the date on which the final dividend is paid and subsequently the company will be dissolved. A very similar désastre procedure is also available in Guernsey.

Administration

An administration order is an alternative to winding up in Guernsey. It is not available in Jersey although Jersey companies may sometimes be placed into English administration. The procedure can be used whenever there is a possibility the company could survive as a going concern or, if this is not possible, where nevertheless the administration process is likely to lead to a more advantageous realisation of assets than an immediate liquidation. In most cases it will be the company itself or a creditor who applies for the administration order.

The person making the application for an administration order is entitled to nominate their preferred administrator. Once sworn in by the court, the administrator is responsible for managing the business and will either nurse it back to health (in which case the administration will come to an end) or, if this is not possible, the administrator will realise the assets as best they can and then cause the company to be wound up.

Receivership

It is not generally possible to place a Guernsey or Jersey company into receivership or to appoint a receiver over assets. The only exception to this is in respect of Guernsey protected cell companies, where there is a specific procedure for receivership of individual cells. In appropriate cases, however, the Guernsey and Jersey courts are prepared to recognise receivers appointed overseas and, where necessary, to grant orders to assist them in discharging their functions.

Order of the Court

A company may also be wound up or dissolved by order of the court on a variety of grounds, for example, that it is just and equitable or in the public interests to do so or on grounds of unfair prejudice or as part of a scheme of arrangement.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Wendy Benjamin
Similar Articles
Relevancy Powered by MondaqAI
 
In association with
Related Topics
 
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
 
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions