Reforms to Guernsey's insolvency legislation to give greater powers to administrators and liquidators and streamline distribution processes are likely to be enacted in the very near future after a new law was passed by the States of Guernsey yesterday.
Partner Sarah Brehaut from Walkers' Guernsey Insolvency & Dispute Resolution team said that the changes to the law would update and modernise the jurisdiction's insolvency legislation, following a discussion and consultation process that has lasted almost seven years.
The new law – formally entitled the Companies (Guernsey) Law, 2008 (Insolvency) (Amendment) Ordinance, 2020 – contains many new provisions which will bring Guernsey's insolvency regime more in line with that of other offshore jurisdictions and, indeed, the UK.
In summary the changes to the law provide that:
- If it likely to assist the achievement of any purpose for which the administration order was made an administrator will be able to make distributions to secured creditors and those with a preferred debt under the 1983 Preferred Debts (Guernsey) Law;
- A company may be dissolved on a specified date, following the discharge of an administration order, where it appears to the Court that a company has no assets that might permit a distribution to creditors.
- There will be an initial meeting of creditors within one month of the date of an administration order (or such other time as the Court sees fit)
- Where it is proposed to wind up a company voluntarily, the board of directors may make a declaration of solvency, stating the company satisfies the solvency test - if they do not make such a declaration, the company may not appoint a liquidator that is not independent.
- Liquidators will have a positive duty to report delinquent directors to the Companies Registry and the Guernsey Financial Services Commission.
- Liquidators and Administrators may require a statement of affairs from officers of the company (or others named in s387(3) of the Companies Law)
- Liquidators will have enhanced powers to apply to Court for the production of documents from company officers and to apply to the Court for public examination of those who have been officers of the Company.
- With the permission of the Court liquidators may now, by giving notice, disclaim onerous property; and
- New provisions also appear in relation to transactions at an undervalue and extortionate credit transactions,
Sarah, who is also the Island's Bâtonnier, said that the reforms were a clear modernising step that would be welcomed by insolvency practitioners as well as legal counsel.
She said: "Guernsey's company and partnership insolvency regime is part of the foundation of the Island's attraction and success as an international financial services centre.
"These reforms, which have been produced in consultation and co-operation with the industry, are the first meaningful amendments to Guernsey Insolvency law for several years, and will offer even more certainty and clarity in respect of processes, independence and powers.
"We anticipate that the ordinance will be enacted swiftly, so anyone dealing with an active insolvency matter – or who is likely to be – should be seeking advice on the implications of the new law."
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