The executor of the estate of the deceased who had been the principal mover behind the Belgravia Group, was faced with two novel circumstances. First, the estate appeared totally insolvent but yet the executor had no set of rules to deal with creditors (the Bankruptcy (Désastre) (Jersey) Law 1990) does not apply to the property of a deceased). The Royal Court considered the matter and ordered a process which mirrored the rules applying to a désastre.

The current position

In one of a number of cases in which Bedell Cristin has acted for English trustees in bankruptcy who have sought recognition in Jersey for the purposes of seeking documents from Jersey trustees in order to trace assets of the bankrupt, the court was asked to recognise the trustee, even though the petitioning creditor in the bankruptcy was a foreign revenue (HMRC), whose claim comprised 99.8% of all claims against the bankrupt. There is a long established rule in England, Jersey and elsewhere which prevents enforcement of foreign revenue claims.

The liquidity crisis has increased the need for creative procedures to avoid sudden death bankruptcy in order to salvage existing value.

A Jersey company or a company incorporated elsewhere but administered in Jersey may become involved in insolvency procedures under Jersey law or the law of a jurisdiction outside Jersey.

Introduction

The Statutory Position:

The provisions governing the recognition of a foreign (including a UK) insolvency office holder under Jersey law are found in Article 49 of the Bankruptcy (Désastre) (Jersey) Law 1990 (the 'Law') and Article 6 of the Bankruptcy (Désastre) (Jersey) Order 2006 (the 'Order').

In the matter of the Representation of Gregory Branch and Lee Manning, Joint Liquidators of AAA Holdings Limited (in liquidation) [2009]JRC110

This judgment is of interest as being the first occasion on which the Royal Court in Jersey was asked to sanction the compromise of a claim under Article 170 of the Companies (Jersey) Law 1991 (the "Companies Law").

Background

The concept of cell companies was first introduced to Jersey in February 2006. In addition to the widely recognised principle of the protected cell company ("PCC"), a new concept of incorporated cell company ("ICC"), the first of its kind, was also implemented.

In the current economic environment, there are a number of entities that are being restructured. Our current experience has been that such restructurings fall into two areas, namely a debt for equity swap or a release of “toxic” assets from a group structure in order to minimise exposure to this asset class.

Debt for Equity Swap

The credit crunch has put pressure on a wide range of structures and, as a result, lenders, borrowers and other counterparties are looking more closely at the impact of possible insolvency proceedings. As Jersey companies have often been used in cross-border finance transactions, it is important to be aware of the differences between Jersey and English insolvency procedures for companies.  

What are the main Jersey insolvency procedures for a Jersey company?

These are:-