The Royal Court of Guernsey has issued a Practice Direction
pertaining to the information required when applying for the
appointment of an administrator or liquidator in Guernsey.
The Companies (Guernsey) Law 2008 (as amended) (the 2008
Law) governs corporate insolvency proceedings in Guernsey.
It provides that the remuneration of insolvency office holders be
"fixed by the Court". Historically, the established
practice in applications of this type was for fees to be fixed by
reference to a schedule of hourly rates provided by the office
holder with a detailed fee statement being examined at the
conclusion of the process. In many cases, detailed statements were
prepared in accordance with the English Statement of Insolvency
Practice number 9 (SIP9).
Going forward, the Royal Court has decided that further clarity
in respect of the likely fees of office holders is required at the
outset of the insolvency process. Accordingly, Practice Direction
No. 3 of 2015, issued on 19 August 2015 requires:
an estimate of the total fees to be charged by the
administrator or liquidator together with an indication of the
nature of any other expenses likely to be incurred, for example,
a statement that a creditor or group of creditors has agreed to
underwrite the fees and expenses without charge to any other
in exceptional circumstances, an explanation as to why it is
impossible to estimate all or some of the fees and expenses at the
time of the application.
In addition to the above fee-related requirements, all
applications are required to include a description of the nature of
the work to be undertaken, both inside and outside of the Bailiwick
The Practice Direction does acknowledge that, in complex
insolvencies, the provision of such estimates may be onerous or
impractical. The Practice Direction allows the appointed
administrator or liquidator to apply to the Royal Court for a
variation of the estimate if necessary or, if additional
information comes to light which will make a significant difference
to the work involved or the total costs. Such an application must
be supported by a statement explaining why an uplift is
The Practice Direction may be seen as an additional burden in
the process for the appointment of insolvency office holders.
However, it arrives against a background of increased scrutiny of
the proposed fees of office holders by the Court, usually at the
first hearing of any application. In some cases a fee cap had been
imposed by the Court at those hearings without any prior warning
leading to confusion for appointees, following appointment, if caps
In that regard, the Practice Direction brings welcome clarity to
the process, although it will undoubtedly increase the burden
placed upon potential appointees in advance of their appointment.
It is hoped that in cases of significant complexity, the Court will
adopt a pragmatic view in relation to the workability of a fixed or
capped fee. The Practice Direction's intention is
certainly to assist creditors by ensuring complete transparency on
the fees and expenses charged in insolvency proceedings.
It is also encouraging that the Practice Direction envisages
that applications for an increase in the fee cap/estimate will be
kept as simple as possible. In particular, it is hoped that
hearings will not be necessary in most cases and that the Court
will be able to determine these on the papers in light of a report
provided by the office holder. Carey Olsen is currently engaged in
assisting a liquidator with what may be the first application of
this kind and it is envisaged that with the requisite planning, the
office holder will be able to make that application (as an officer
of the Court) without the need to formally engage an advocate
leading to significant cost saving to the insolvent estate.
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.
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The claim followed the conclusion of two years of litigation (ORD 12/0035 & ORD 12/0034) between the parties in respect of the Bank's contractual claim for amounts owed by TSEL to the Bank pursuant to certain business loans.
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