This client briefing provides a general overview of schemes of
arrangement for Jersey companies under the Companies (Jersey) Law
1991 (the "Companies Law"). A scheme of
arrangement can involve almost any kind of corporate
reorganisation, merger, acquisition or restructuring so long as the
appropriate approvals and court sanction are obtained. In the
context of restructurings, there is limited precedent in Jersey,
although Jersey schemes of arrangement have been used as part of
the Drax and Telewest restructurings.
What is a Scheme?
Under Article 125 of the Companies Law, the Royal Court of
Jersey may sanction a compromise or arrangement (a
"Scheme") between a company and its
creditors or shareholders (or a class of either of them). The court
may, on application of the company (or its creditor, shareholder,
or liquidator if it is being wound up), call a meeting at which the
Scheme will need to be agreed to by a majority in number of the
creditors or shareholders (or a class of either of them)
75% in value of the creditors (or class of creditors); or
75% of the voting rights of the shareholders (or class of
If the Scheme is so agreed and sanctioned by the court, it is
binding on all the creditors (or class of creditors) or on all the
shareholders (or class of shareholders), as well as on the company
itself and, where the company is in the course of being wound up,
on the liquidator and all contributories. A Scheme is concluded
when the court order sanctioning the Scheme is filed with the
Jersey Companies Registry.
Article 167 of the Companies Law provides that an arrangement
between a company and its creditors entered into immediately
preceding the commencement of, or in the course of, a
creditors' winding up is binding:
on the company, if sanctioned by special resolution of the
on the creditors, if acceded to by 75% in number and value of
However, a creditor or contributory may appeal to the court
against the arrangement within 3 weeks from its completion, and the
court may then amend, vary or confirm the arrangement as it thinks
Although we do not advise on English law, we understand that the
above statutory provisions on Schemes are similar to Sections 425
to 427 of the UK Companies Act 1985, which have now been superseded
by Part 26 (Sections 895 to 901) of the UK Companies Act 2006.
Therefore as confirmed in the Jersey case of Re TSB Bank
Channel Islands Limited  JLR 160, English cases will be
highly persuasive in this area and the Jersey courts will have the
fullest regard to the interpretation given by the English courts to
the corresponding sections of the English legislation.
As established in a line of Jersey cases including
Representation of CPA  JRC 021, when considering
applications for shareholders' Schemes under Article 125 of the
Companies Law, the Royal Court must consider the following
whether the provisions of the Companies Law have been complied
whether the class of shareholders to be affected by the
proposed Scheme was fairly represented by those who attended the
meeting and whether the statutory majority are acting bona fide and
not coercing the minority in order to promote interests adverse to
those of the class whom they purport to represent; and
whether the arrangement is such that an intelligent and honest
man, a member of the class concerned and acting in respect of his
interest might reasonably approve.
Schemes and Restructurings
There is no direct equivalent in Jersey of the English
administration procedure, meaning a Scheme cannot be used in
conjunction with administration to obtain a moratorium protecting
the company from its creditors enforcing their security or other
rights (unless an English administration is sought for this
purpose, on which please see our separate client briefing entitled
Jersey Companies and English Administration). There is no
automatic stay on proceedings in connection with a Scheme.
The advantages of Schemes are that if the appropriate approvals
and court sanction are obtained, they are binding on all the
creditors (or class of creditors), including secured and
preferential creditors, or on all the shareholders (or class of
shareholders). In the current economic climate, we expect to see
increasing use of Schemes as alternatives to consensual
restructurings, as well as for a wide range of corporate
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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