Jersey: Cross Border Insolvency Remedies In Jersey

Last Updated: 25 February 2013
Article by Damian James and Louise Trotter

Jersey's position as an international finance centre has created a legal and commercial climate in which foreign laws and interests are commonly considered by the Royal Court of Jersey. Given the continued difficult economic climate, remedies in relation to cross border insolvency are becoming increasingly relevant.

Jersey Insolvency Remedies

There a number of insolvency remedies available under Jersey law. The most commonly used remedies are:

  • creditors winding up;
  • désastre proceedings;
  • just and equitable winding up.

Despite its title, a creditors winding up may only be instigated by the insolvent company. It is more akin to a voluntary winding up and does not involve the Court.

The désastre procedure is usually relied on when placing a company into bankruptcy and this process involves a court officer, the Viscount, administering the estate of the insolvent company (or individual). The Viscount's powers are comparable to those of a receiver under English law and include: carrying on the debtor's business insofar as is necessary; expending money for the repair, maintenance or up keep of a property; bringing or defending legal proceedings in relation to the property of the debtor and so forth.

The Royal Court also has the power to wind up a Jersey company where is considers it just and equitable to do so or if it is expedient in the public interest (Article 155 of the Companies (Jersey) Law 1991). An application of this nature may be made by the company itself, a director, a member or the Jersey Financial Services Commission (only if in the public interest).

The processes and procedures of receivership, administrative receivership, and administration are not available under Jersey law. However, in certain circumstances, the application of a foreign insolvency remedy may in fact be more appropriate than those available in Jersey. For example, a company may be Jersey registered, but hold its assets and business interests in England and so it may be more appropriate for the company to be placed into an English administration - arguably a more flexible remedy than the désastre or other procedures available in Jersey.

Applications to place a Jersey Company into English administration

In order to place a Jersey Company into English administration, an application seeking a Letter of Request from the Royal Court must be made. Applications of this nature have been received by the Royal Court on a number of occasions in recent years (see for example Anglo Irish Asset Finance [2010] JRC 087; The Governor and Company of the Bank of Ireland [2009] JRC 126; and; OT Companies Limited 2002/29 (31 January 2002)).

Procedurally, the application is made by way of Representation (a type of originating process) supported by affidavit evidence explaining why an English administration is more appropriate than the insolvency remedies available under Jersey law. Affidavit evidence will commonly be provided by the directors of the relevant Jersey Company, the proposed administrators, or the company seeking to enforce security.

In addition, it will be necessary to provide the Royal Court with a valuation evidencing the Jersey Company's insolvency and appropriateness to be the subject of an English administration order.

An Opinion from English Counsel (preferably a QC) should also be exhibited explaining the nature of the administration process in England and Wales and the jurisdiction of the English Court to assist when it receives a Letter of Request from a foreign court such as Jersey.

Advanced notice of the application should be provided to the Viscount who should be provided with a draft copy of the application before it is filed. Confirmation should be provided by the Viscount that he has no comments or objections to the application proposed.

Persuasive evidence on this matter will include: evidencing the Jersey Company is cash-flow insolvent; that the management and economic activities of the Jersey Company are primarily undertaken in England; that the powers available to English administrators are much wider than those available in Jersey thereby allowing them to do anything necessary or expedient for the management of the Jersey Company's affairs.

It should be noted that an application of this nature is not simply a "rubber stamping exercise" and may be contested by the insolvent Jersey Company (commonly as a delaying tactic for negotiating an out of court settlement). It has also become increasingly evident that the Royal Court will not transfer the jurisdiction of insolvency matters without first being persuaded that an English administration order would be in the best interests of the Jersey Company and that a Jersey insolvency remedy cannot be utilised to the same effect.

Letters of request from a foreign jurisdiction

The Royal Court may also be required to consider a Letter of Request issued by another jurisdiction, often seeking the recognition of a foreign insolvency officer pursuing the assets of a foreign national which are held in Jersey.

Pursuant to Article 49 of the Bankruptcy (Désastre) (Jersey) Law 1990, the Royal Court may give statutory assistance to the courts of certain specified jurisdictions namely, the UK, the Isle of Man, Guernsey, Australia, and Finland. The countries specified above offer reciprocal treatment to Jersey. Outside of this statutory scheme, the Royal Court retains an inherent jurisdiction to assist non-prescribed countries in cross border insolvency matters under the doctrine of comity.

The terms of a Letter of Request issued by a foreign jurisdiction to the Royal Court should:

  • Be made in accordance with the laws and procedure of that country and not go beyond the scope of its authority;
  • Evidence comity and reciprocity, namely, that the foreign jurisdiction will provide assistance to Jersey in similar circumstances;
  • Confirm that the request is not abhorrent or inconsistent to Jersey domestic law and policy; and
  • Include an undertaking given to the Royal Court ensuring that Jersey creditors would be adequately protected before entrusting the handing over of Jersey based assets to a foreign office holder.

It is worth noting that the Royal Court has no jurisdiction where the only creditor is a foreign revenue authority (Re Tucker 1987-88 JLR 473) however where even just a single unsecured creditor applies along with the foreign revenue authority, this exclusion will not apply.

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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