The memorandum has been prepared on the basis of the law and practice in Guernsey as at 1 April 2010.

Introduction  

Introduction

If a company is insolvent, it is either not able to pay its debts as they fall due, or its assets are less than its liabilities.  An investor/creditor will have the ability to put the company into a formal insolvency procedure and, in most cases, appoint an independent third party to take control of the assets and investigate the conduct of the company’s directors, managers and other controlling functionaries.  Defined terms in this article are the same as the terms which were defined in the potential causes of action article.

The Insolvency Act 2003 of the British Virgin Islands (the “IA”) provides that the netting of financial contracts is legally enforceable notwithstanding any provisions of the IA or the Insolvency Rules. Significantly, this means that where an insolvent entity that is party to a financial contract goes into liquidation, what might otherwise be a voidable transaction will be upheld if carried out pursuant to a netting agreement.

The First Creditor Driven Schemes

The Commercial Court has very recently sanctioned four schemes of arrangement pursuant to section 179A of the BVI Business Companies Act 2004. These were the first two creditor-driven schemes to be proposed and sanctioned in the BVI. There has been one other scheme proposed and sanctioned in the BVI but this was a member’s scheme and was altogether more straightforward. Ogier BVI was instructed in relation to all four schemes.

The First Scheme

In the matter of the representation of Anglo Irish Asset Finance [2010] JRC087

This is the latest decision of the Royal Court in relation to an application by a UK creditor (a bank) for a letter of request to be issued to the English High Court requesting that an administration order be made in respect of a Jersey company.

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

Cayman Islands Court of Appeal, Unreported judgment given 9 September 2009.

As a matter of English and Cayman law, does the court have jurisdiction to appoint a receiver, at the behest of a judgement creditor, by way of equitable execution over a settlor’s power of revocation of a trust?

Facts

Introduction

If a fund is insolvent, it is either not able to pay its debts as they fall due, or its assets are less than its liabilities. An investor/creditor will have the ability to put the fund into a formal insolvency procedure and, in most cases, appoint an independent third party to take control of the assets and investigate the conduct of the fund’s directors, managers and other controlling functionaries. Defined terms in this article are the same as the terms which were defined in the potential causes of action article.  

(judgment 22/2009)

This case concerned whether the English Court of Appeal decision in Re Bayoil S.A. (the “Bayoil Case”) would be persuasive in Guernsey and how the Royal Court of Guernsey should exercise its discretion under section 406 of the Companies (Guernsey) Law 2008 (the “Law”).  

A recent ruling in the American Airlines bankruptcy case enforcing an automatic acceleration upon bankruptcy provision serves as a reminder that the enforceability of so-called ipso facto provisions in debt instruments remains an unsettled, forum-dependent question.