As we reported in the summer of last year, the Regulations amend the Companies (Jersey) Law 1991 (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. To date, options available to Jersey creditors have been limited to applying for a debtor’s property to be placed en désastre under the Bankruptcy (Désastre) (Jersey) Law 1990 or, in respect of secured creditors, enforcement of their security subject to the terms of that security.
The Regulations and the consequential changes to the Companies Law will be brought into effect on, or shortly after, 1 March 2022. Creditors will then have the ability to utilise well recognised concepts such as the statutory demand and appointment of provisional liquidators. Whilst the statutory demand will not be a mandatory precursor to creditor led winding up proceedings, particularly in circumstances where there is other indisputable evidence of insolvency, it is hoped it will offer more certainty as to the solvency or otherwise of a debtor. The quantum of the statutory demand will also mirror the level of liquidated claim in désastre, at the level of £3,000.
The Regulations also permit the Court to appoint a provisional liquidator who will be able to take steps to preserve assets where there is a concern that the assets will be dissipated or the affairs of the company will not be properly conducted between the application to court and the making of a winding up order.
The changes made to the Jersey insolvency regime will not prejudice the rights of secured creditors, who will continue to be able to enforce their security if a company is placed into a “new” creditors’ winding up.
In fact, the rights of third parties have been fully considered, as other creditors, shareholders and directors of the company which is the subject of a creditors’ winding up will have the right to be notified of the impending application and to file an objection to the winding up of a company, for example if a debt is disputed by the company. It is also possible for any creditor or a contributor to apply to the court for the determination of a question arising in the winding up, or for the court to exercise any of its powers in relation to the winding up pursuant to Article 186A of the Companies Law.
Insolvency and restructuring professionals in Jersey and further afield welcome this addition to the Jersey insolvency regime. The rights of creditors and options available to them on any insolvency of a borrower are vitally important to the finance industry and the changes introduced by the Regulations further demonstrate the jurisdiction’s profile as an international finance centre.
We would expect that given time this reform will have a fundamental impact on market practice in the Jersey restructuring and insolvency market in Jersey.
Please do get in touch with your usual Appleby contact should you require further information or wish to discuss further.