Introduction

How the situation will be addressed remains to be seen, although hopefully the issue will feature in the ongoing discussions between the UK and the EU as to their future relationship.  Greater adoption of the UNCITRAL model law would be one potential solution, although to date is has not been adopted either by the UK or by many EU member states.  In the immediate future, and in the absence of a blanket solution, recognition is likely to be dealt with on a piecemeal and case-by-case basis, applying the familiar principles of comity and reciprocity.

The Crown Dependencies of Jersey, Guernsey and the Isle of Man are not part of the UK and already sit outside of the EU, meaning that the courts in each of these jurisdictions are well versed in recognition of foreign insolvency proceedings. A reminder of the process in each of the jurisdiction appears below.

Jersey

Under Article 49 of the Bankruptcy (Désastre) (Jersey) Law 1990 (the Désastre Law), the Royal Court of Jersey (Royal Court) may assist the courts of designated territories (presently the United Kingdom, the Isle of Man, Guernsey, Finland and Australia) in all matters relating to the insolvency of any person or entity.  The Royal Court has power, on receiving a request from such a country for assistance, to exercise any jurisdiction that either it or the requesting court could exercise if the matters in respect of which assistance is requested fall within its jurisdiction.  For other jurisdictions, the Royal Court may agree to assist under its inherent jurisdiction and under principles of comity, on a case-by-case basis.  The principal factor which the Royal Court will take into account in deciding whether or not to assist on the grounds of comity will be the question of whether a request from Jersey to the jurisdiction in question would be accorded reciprocal treatment.  It is therefore important that specific evidence on this issue be obtained.

For example, an English law-governed administration can be recognised by the Royal Court to the extent the latter court thinks fit to offer assistance.  Foreign insolvency officials need to have authority to act in Jersey.  The appointment of administrators or liquidators in the UK is governed by the laws of England and Wales and will require recognition by the Royal Court before the appointed officeholders have any standing to be able to deal with or realise Jersey situs assets of the insolvent company.

Procuring recognition in practice would involve engaging with the Viscount (the Royal Court insolvency official) to explain the strategy of the administration or liquidation, how Jersey employees, creditors and other stakeholders are to be dealt with and why the administration or liquidation is likely to deliver the best result for these interested parties.  The Viscount (and the Royal Court) will be particularly concerned to protect where possible the interests of those creditors who would be afforded priority in a Jersey domestic insolvency, even where they would not be regarded as priority creditors in the insolvency process of the foreign jurisdictions.  In Jersey, these creditors will include local authorities in respect of income tax, social security, local property taxes and – to a limited extent – a landlord in respect of unpaid rent.  Once the Viscount is satisfied with the proposed strategy, the English insolvency practitioners should then approach the English court for a Letter of Request (LoR), to be issued to the Royal Court seeking recognition of their appointment in Jersey.  This application will need to be made by English solicitors acting for the insolvency practitioners, but the Appleby team has extensive experience in advising on the wording of the LoR and in liaising with the Viscount.  Once the LoR has been issued, an application will need to be made to the Royal Court for an order giving effect to the terms of the LoR.  This process needs to be followed even if the appointed insolvency practitioners need to simply assign a lease to a buyer of the assets of an insolvent business, which is often the case in a retail insolvency where proprietary rights to the store itself ultimately allow continuance of trade.  The officeholders would have no standing to procure such assignment, however, unless and until their appointment is recognised in the jurisdiction of the asset.

Jersey is an international finance centre and the Royal Court is well versed in matters of cross border restructurings and insolvencies.  There are numerous authorities that can be pointed to demonstrating the willingness of the Royal Court to support general principles of comity and extend co-operation to other courts and Appleby is well placed to assist with this.

Guernsey

Foreign officeholders may seek recognition and assistance in Guernsey either via section 426 of the English Insolvency Act 1986 (Insolvency Act) or the common law.

For officeholders from England and Wales, Scotland, Northern Ireland, Jersey, or the Isle of Man, section 426 of the Insolvency Act has been extended to Guernsey by the Insolvency Act 1986 (Guernsey) Order, 1989.  The procedure under section 426 of the Insolvency Act is similar (but not identical) to that in Jersey and involves the foreign officeholder applying to the court in their home jurisdiction for an order that the home court send a letter of request to the Royal Court of Guernsey (Royal Court) seeking assistance.  In such circumstances, the Royal Court considers that it has a duty to assist the foreign court unless there are compelling reasons for it not to do so.  The Royal Court routinely recognises the appointment of UK liquidators, administrators and bankruptcy trustees.  Upon granting such recognition, the Royal Court may apply, in relation to any matters specified in the request, the insolvency law which is applicable by either court in relation to comparable matters falling within its jurisdiction.

In Guernsey, foreign officeholders outside a designated jurisdiction must rely on the grant of recognition and assistance at common law.  When a request comes from an overseas officeholder appointed outside a designated jurisdiction, the court may exercise its inherent power to provide recognition and assistance, provided there is a sufficient connection between the foreign officeholder and relevant jurisdiction.  Following private international law principles, officeholders appointed by a national court in which a company is incorporated will be recognised by both the Guernsey and Jersey courts.  In light of the decision by the Privy Council in Singularis Holdings Ltd v PricewaterhouseCoopers (Bermuda) [2014] UKPC 36, the concept of modified universalism has been rolled back such that the full extent of the assistance the Royal Court may grant to foreign officeholders is still being worked out.  In light of recent local case law, it would appear such assistance is limited to powers available to officeholders in a domestic insolvency.

Guernsey has a well-developed rescue culture, including the process of company administration, which is modelled on the English equivalent.  Administration, like the equivalent procedure in other jurisdictions, provides insolvent companies with breathing space in order to maximise realisations and asset values without increasing liabilities.  An administration application may be made in respect of a company by the company itself, its directors or its members, or a creditor.  Currently, Guernsey does not permit out-of-court appointments by directors.  The two purposes for which an administration order is made are either or both of the survival of the business of the company and a more advantageous realisation of assets than would be effected on a winding up.  Once an application for an administration order is made, a moratorium prevents any “proceedings” being commenced or continued against the company by unsecured creditors and any existing application for the company’s winding up will be dismissed. In January 2020, the States of Guernsey approved amendments to the Island’s corporate insolvency regime, including the establishment of a committee to publish a set of insolvency rules in a similar manner to those in force in England & Wales. The forthcoming amendments include the ability for the Royal Court to wind up non-Guernsey companies, being overseas companies or companies otherwise not registered in Guernsey, where they have ceased carrying on business, are unable to pay their debts within the current statutory parameters or on the just and equitable basis. Our commentary the incoming amended regime, focusing on the winding up of non-Guernsey companies can be found here.

A commencement date for the Ordinance introducing the amendments is still awaited, though it is anticipated that the commencement will coincide with the publication of the associated insolvency rules.

Isle of Man

Corporate insolvency law in the Isle of Man is broadly similar to that which existed in England and Wales around 1985.  The Isle of Man views itself as a secured creditor-friendly jurisdiction and as such has not developed the rescue culture adopted in England and Wales with the introduction of the Insolvency Act 1986 and the subsequent Enterprise Act 2002.  Accordingly, Manx law does not provide for company voluntary arrangements or administrations.

Whilst not affecting the rights of secured creditors, the Isle of Man Court has been willing to be creative in using the tools available to facilitate attempts to rescue Manx companies.  For example, the Isle of Man Court, in the case of Capita v Gulldale (CHP 2013/145), agreed to issue a letter of request to the High Court in London seeking the appointment by the High Court of administrators over an Isle of Man company, the centre of main interests of which was deemed to be nonetheless in the Isle of Man.  The Isle of Man Court was satisfied that the issuing of a letter of request in the circumstances of that case would facilitate the most efficient and effective administration of the debtor company’s assets in the best interests of all concerned.

By way of a further example, in the unreported matter of 2e2 (IOM) Limited (CHP 13/0014) the Isle of Man Court was persuaded to follow lines of authority from the Cayman Islands and Hong Kong to use the appointment of provisional liquidators to provide a “breathing space” for an Isle of Man company that was the subsidiary of a UK company that was in administration to enter negotiations with its own direct creditors and, in due course, emerge from provisional liquidation without winding up.  It is possible for a liquidator to be provisionally appointed at any time after the presentation of a winding up petition (section 178 of the Companies Act 1931).  The appointment of a provisional liquidator should only be made if there is a prima facie case for making a winding up order and it is accepted that the appointment must be shown to serve some purpose which will justify the expense of a provisional liquidator being appointed.

The Isle of Man Court has a history of proactively assisting foreign courts in respect of insolvency proceedings and has been prepared to extend the scope of Manx common law to assist foreign liquidators when there has been no statutory power to provide such assistance.  The Court has shown that it is willing to provide appropriate common law recognition and assistance to foreign insolvency officeholders, despite there being no statutory recognition provisions.  Such recognition and assistance is subject to the restrictions set out in Rubin v Eurofinance SA [2012] UKSC 46, [2013] 1 AC 236 and Singularis Holdings Ltd v PricewaterhouseCoopers (Bermuda) [2014] UKPC 36.  In that context, the Isle of Man Court cannot provide assistance that would not be available to the insolvency officeholder in his or her own jurisdiction.  A foreign insolvency officeholder can apply directly or by letter of request from the UK court.

Recent Experience

Appleby’s Crown Dependency Restructuring and Insolvency teams have considerable experience in seeking recognition for foreign office holders, including two recent examples in 2020 acting for the administrators of large-scale retail undertakings, namely Monsoon/Accessorize and entities within the Arcadia Group. In both circumstances, Appleby represented the joint administrators appointed in England & Wales, successfully obtaining recognition in Jersey, Guernsey and the Isle of Man.

Appleby is the only firm which offers restructuring and insolvency capability across all three Crown Dependencies and has extensive restructuring and insolvency expertise across nine global offshore jurisdictions.

Please do reach out to any of our specialists Jared Dann, Anthony Williams, Caren Pegg, Gemma Whale, Andrew Murphy or your usual Appleby contact if you would like to discuss how we may be able to assist.

Key Contacts

Jared Dann

Group Partner: Jersey

T +44 (0)1534 818 313
E Email Jared

Anthony Williams

Partner: Guernsey

T +44 (0)1481 755 622
E Email Anthony

Caren Pegg

Partner: Isle of Man

T +44 (0)1624 647 636
E Email Caren

Gemma Whale

Senior Associate: Jersey

T +44 (0) 1534 818 166
E Email Gemma

Emily Ashe

Associate: Isle of Man

T +44 (0) 1624 647 649
E Email Emily

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