1. Purpose
This client briefing has been prepared in order to assist directors of companies which have listed debt securities on The International Stock Exchange (TISE or theExchange) pursuant to the listing rules (the Listing Rules) of The International Stock Exchange Authority Limited (the Authority). The Listing Rules are available on TISE's website.
Background
So what precisely is an asset protection trust and what is it, over and above a normal trust that an asset protection trust is seeking to achieve? This paper considers these issues from a Jersey law perspective and fundamentally asks the question to what extent a Jersey trust, once established, will protect assets from creditor claims.
RE Z III Trust [2019] JRC 069
The Royal Court of Jersey has determined that the preferred course to follow when winding up an insolvent trust is for the existing trustee to apply a formal winding up procedure under the Court's supervision. Key features of this procedure would be (i) a moratorium on legal claims; (ii) the trustee should advertise for claims on the trust assets; and (iii) the trustee should require creditors to prove their claims before distributing the assets.
The Z Trusts litigation
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Increasing cash flow pressure on many businesses has resulted in a heightened risk for directors that a company may be wrongfully trading and personal liability may then accrue to the directors.
Increasing cash flow pressure on many businesses has resulted in a heightened risk for directors that a company may be wrongfully trading and personal liability may then accrue to the directors.
The Royal Court in Jersey has a varied and challenging workload. The cases that have come before it this quarter certainly live up to that description. Here we discuss just a handful of cases that the Royal Court has determined, that, whilst in some respects are unremarkable, in other respects serve to illustrate the breadth of the experience that the Royal Court judiciary possesses.
Representation of Private Equity Fund Finance Limited [2018] JRC 194
The credit crunch has put pressure on a wide range of structures, resulting in lenders, borrowers and other counterparties looking more closely at the impact of possible insolvency proceedings. As Jersey companies are often used in cross-border finance transactions, it is important to be aware of the differences between Jersey and English insolvency procedures.
Main insolvency procedures
The main insolvency procedures for a Jersey company include:
In an important judgment published last week, the Royal Court of Jersey has provided guidance to trustees and other holders of fiduciary powers in relation to the exercise of powers when a trust is considered to be “insolvent”. Counsel in the case was unable to find any relevant authority on this subject in any other trusts jurisdiction, so this may well be one of the first cases to deal with this issue.
In a recent unreported decision, ENRC NV v. Zamin Ferrous Limited (2015) JRC 217, the Jersey Royal Court demonstrated its consent to ensuring that judgment creditors can enforce their judgments worldwide. In this case, the judgment creditor applied for an ex-parte order to freeze assets and to compel the judgment debtor to answer questions about its assets and assets held by its subsidiaries. The answers revealed two agreements had been entered into pursuant to which certain assets held by subsidiaries had been transferred to third parties.