The practice statement issued this week seeks to clarify the circumstances in which a wrongful trading claim may be brought against directors under Jersey law and emphasises certain matters by way of reassurance to directors, such as:

  • a wrongful trading claim can only be brought against a director if the company enters a formal insolvency process; and
  • for a claim to be successful, a director must know (or be reckless on the facts known to him or her) that the company no longer has a reasonable prospect of survival and there may be a wide spectrum of legitimate views as to what constitutes a “reasonable prospect”.  It may be that the Viscount or liquidator may only wish to pursue a clear claim, as there will be a significant evidential burden for them to overcome.

Directors are reminded that an order cannot be made against a director if they took reasonable steps to minimise losses to creditors and guidance is offered in the statement as to how directors may be able to demonstrate having taken such reasonable steps. Prudent financial and cash flow management are key during this time.  The practice note emphasises that it is not necessary to prove that losses to creditors were in fact minimised, rather that reasonable steps to this end were taken.

The practice statement offers practical guidance as to possible steps that could be taken that may go some way to defeat a wrongful trading claim should this be advanced at a later stage. What will be deemed to be reasonable in the circumstances will be very fact specific and the statement acknowledges that with the truly unprecedented circumstances that COVID-19 presents, there may simply be too many different views and approaches to say with any certainty that the directors did not take reasonable steps. This will offer some comfort to concerned directors at this time.

Type

Insight

Locations

Jersey

Share
Twitter LinkedIn Email Save as PDF
More Publications
8 Mar 2021 |

Appleby Celebrates International Women’s Day

International Women’s Day is celebrated annually in support of gender equality and equal participa...

2 Mar 2021 |

KBR and the Serious Fraud Office – should offshore companies and corporate providers still worry about a knock at the door from the SFO?

At first sight, the recent decision of the UK Supreme Court in R (on the application of KBR Inc) v D...

2 Mar 2021 |

Listing Private Equity Acquisition Debt on The International Stock Exchange

The purpose of this article is to provide a high level understanding of Appleby listing agent servic...

Contributors: Chris Smedley
24 Feb 2021 |

Fintech: advancing economies in Africa

In this article we explore the rapidly evolving African FinTech industry.

Contributors: Lebogang Maimane
23 Feb 2021 |

Fit and Proper in the Channel Islands – A Regulatory Enforcement Update

It is sometimes easy to forget with all that has happened over the last 12 months that there was a w...

4 Feb 2021 |

GBP 2million fine for contempt of Court: The Jersey Royal Court issues stark warning to litigants

The Jersey Court has shown that it continues to expect, and if necessary will demand, compliance wit...

Contributors: Amy Benest
9 Dec 2020 |

Jersey Propco structures: still a strong foundation

First Published in Jersey First for Finance, December 2020

Contributors: David Dorgan, Daniel Healy
3 Dec 2020 |

Objectively speaking – Jersey confirms its stance on contractual formation

A recent decision of the Royal Court has held that, when determining whether or not parties have con...