Jersey: Update: Expansion of Jersey Insolvency Toolkit
To print this article, all you need to do is be registered or log in to Mondaq.com.
The Adoption of the Companies (Amendment No 8) (Jersey) Regulations 2022 (Regulations) [last week] brings welcome changes to the Jersey Insolvency Toolkit.
As we reported in the summer of last year, the regulations amend the Companies (Jersey) Act 1991 (Corporate law) to initiate proceedings allowing a creditor to apply to the court to place an insolvent company in compulsory liquidation. To date, the options available to creditors in Jersey have been limited to requesting that a debtor’s assets be placed in disaster under the Bankruptcy (Disaster) (Jersey) Act 1990 or, in respect of secured creditors, to the enforcement of their security subject to the terms of that security.
The Regulations and subsequent amendments to the Companies Act will enter into force on  March 2022. Creditors will then have the opportunity to use well-recognized concepts such as legal demand and the appointment of provisional liquidators. Although the legal demand is not a mandatory prerequisite for creditor-led liquidation proceedings, particularly in circumstances where there is other indisputable evidence of insolvency, it is hoped that it will provide more certainty as to the solvency or not of a debtor. The amount of the legal claim will also reflect the level of the disaster liquidated claim, at the £3,000 level.
The Regulations also allow the court to appoint a provisional liquidator who may take steps to preserve the assets where there is a risk that the assets will be dissipated or that the affairs of the company will not be properly conducted between the application to the court and the issuance of a winding-up order.
Changes to Jersey’s insolvency regime will not affect the rights of secured creditors, who will continue to be able to enforce their security if a company is placed in a “new” creditor liquidation.
Indeed, the rights of third parties have been fully taken into consideration, since the other creditors, shareholders and directors of the company subject to a creditors’ liquidation will have the right to be notified of the impending demand and to oppose on the liquidation of a company, for example if a claim is disputed by the company. It is also possible for any creditor or contributor to ask the court to decide a question raised by the liquidation, or for the court to exercise any of its powers in relation to the liquidation in accordance with article 186A of the Code of Companies. Law.
Insolvency and restructuring professionals in Jersey and beyond welcome this addition to Jersey’s insolvency regime. The rights of creditors and their options in the event of a borrower’s insolvency are of vital importance to the financial sector and the changes introduced by the Regulation further demonstrate the jurisdiction’s profile as a center international finance.
We expect that over time this reform will have a fundamental impact on market practice in the Jersey restructuring and insolvency market in Jersey.
The content of this article is intended to provide a general guide on the subject. Specialist advice should be sought regarding your particular situation.
POPULAR ARTICLES ON: Insolvency/Bankruptcy/Restructuring from Jersey