It was announced in July that the Government of Jersey is seeking to amend the Companies (Jersey) Law 1991 (the Companies Law), to introduce a process whereby a creditor can apply to the court for an insolvent company to be placed into a creditors' winding up and for a liquidator to be appointed to conduct the winding up.
This process will be an additional option for creditors alongside existing procedures. Currently, options available to a creditor seeking to enforce against a Jersey corporate debtor are limited to:
- making an application for a declaration that a person's property is declared en désastre under the Bankruptcy (Désastre) (Jersey) Law 1990 (the Bankruptcy Law). This is available to a creditor with a liquidated claim of more than £3,000; or
- enforcement of security, subject to the terms of that security; or
- a dégrèvement (being the process for enforcement of secured lending or execution of judgment debts, by removing all encumbrances from immovable property at the request of a petitioning or enforcing creditor) or réalisation (being the process which runs parallel to dégrèvement and applies to the debtor's movable property) can be initiated.
The creditors' winding up procedure under the current Companies Law is, similar to that of a creditors' voluntary liquidation under English law, a shareholder initiated process. It is proposed that the Companies Law is amended, by way of Regulations and an Order, to permit a creditor (and not just a shareholder) to bring a winding up application, and for the appointment of a liquidator or provisional liquidator (as the circumstances may require) to be made from a register of private sector insolvency practitioners to be kept and maintained by the Viscount (the Jersey insolvency official).
The proposed procedure utilises the familiar English law concept of a statutory demand. It is hoped that this process will lead to more certainty by showing that where a debt is not disputed and where a company is not able to pay its debts as they fall due, it is thus deemed to be insolvent.
The new procedure is intended to draw upon the existing processes within the Bankruptcy Law, as well as looking to the procedures in place in other jurisdictions. As noted in the consultation paper, by following established concepts and processes, the procedure will be familiar to practitioners, investors and intermediaries and will be grounded on tried and tested and widely understood procedures across jurisdictions, reflecting the reality of complex cross jurisdictional commerce today and enhancing certainty in relation to exit and contingency planning.
Responses to the consultation are welcome before close of business on 6 September 2021. At a time when structuring and restructuring are at the forefront of the minds of many investors, boards, creditors and other stakeholders, another option available to creditors in respect of Jersey companies is likely to be a welcome addition to the armoury of Jersey insolvency procedures.
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.