The financial impact of the COVID-19 pandemic 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 entities are often used in cross-border finance transactions, it is important to be aware of the differences between Jersey and English insolvency procedures for companies, trusts and limited partnerships.
What are the main Jersey insolvency procedures for a Jersey company?
These are:
The EMEA Determinations Committee's recent bankruptcy determination involving Selecta CDS provides additional insight on the types of chapter 15 filings that are likely to trigger Credit Events.
In Short
The Situation: On August 11, 2020, a Credit Derivatives Determinations Committee for EMEA ("DC") unanimously determined that the Chapter 15 filing by British retailer Matalan triggered a Bankruptcy Credit Event under standard credit default swaps ("CDS").
The Result: The DC's decision diverged from its only prior decision (involving Thomas Cook) on whether a Chapter 15 petition constituted a Bankruptcy Credit Event.
Background
Jersey imposed travel restrictions in response to the Coronavirus crisis in March 2020 and has been operating a full lockdown for all residents, apart from essential workers, since 30 March.
The vast majority of employees in the Jersey financial services industry are now working from home and there has been no interruption to business continuity for the sector.
Introduction
Jersey entities have proved popular as vehicles for a wide variety of asset holding structures, such as those holding real property. The modern legal framework and tax neutral regime are attractive to professionals structuring transactions for their clients. As a consequence, lending institutions are frequently requested to put in place credit arrangements for Jersey entities. To protect its position in these circumstances, a lending institution needs to be aware of the material differences that exist between English law and Jersey law.
For the benefit of our clients and friends investing in European distressed opportunities, our European Network is sharing some current developments.
Recent Developments
On February 1, 2017, the Supreme Court of Singapore and the U.S. Bankruptcy Court for the District of Delaware announced that they had formally implemented Guidelines for Communication and Cooperation between Courts in Cross-Border Insolvency Matters (the "Guidelines"). The U.S. Bankruptcy Court for the Southern District of New York adopted the Guidelines on February 17, 2017.
The Act is a groundbreaking development in Singapore's corporate rescue laws and includes major changes to the rules governing schemes of arrangement, judicial management, and cross-border insolvency. The Act also incorporates several features of chapter 11 of the U.S. Bankruptcy Code, including super-priority rescue financing, cram-down powers, and prepackaged restructuring plans. The legislation may portend Singapore's emergence as a center for international debt restructuring.