Introduction
In the context of insolvency, the principle of "modified universalism" (Universalism) is defined by Lord Sumption in Singularis Holdings v Prince Waterhouse Coopers as:
It has been common practice in recent years for the English Courts to make administration orders in respect of Jersey companies with English situs assets, based upon letters of request from the Royal Court of Jersey issued pursuant to section 426 of the UK Insolvency Act 1986. However, a recent case in the English High Court has challenged the basis upon which these administration orders have historically been made.
Background
Across the world, government support has kept insolvency rates down but as jurisdictions look to loosen restrictions and ease back into some kind of normality, governments can't foot the bill forever.
As financial support is withdrawn, restructuring, insolvency and corporate recovery practitioners will likely see a spike in activity, and offshore firms are braced for an increase in demand from clients. After that, there'll likely be lender enforcement resulting in formal insolvencies by the end of the year and into next year.
Case Summary
The case of Capita Trustees Ltd, RS, NS, The Trustees in Bankruptcy of RS - In the matter of the Dunlop Settlement [2013] JRC 029 concerns an application by Capita Trustees Limited (Capita) in its capacity as trustee of the Dunlop Settlement (the Trust) for approval to it entering into an agreement intended to settle various claims made against the Trust by creditors (the Agreement), the net effect of which would be to exhaust the assets of the Trust.
The Facts
This article first appeared in ThoughtLeaders4 FIRE Q1 2021 magazine.
It is important that trustees understand their obligations if their trust structure comes under financial stress. Helpfully, the Jersey courts have provided guidance on the principles applicable to 'insolvent' trusts, which is likely to be highly persuasive in other jurisdictions.
When is a trust insolvent?
Introduction
With the March quarter day fast approaching it is likely that there will be more businesses becoming insolvent. Some of those businesses will have an interest in Jersey property. For example as owners of Jersey property or holders of a lease of retail premises situated in the Island.
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:
IMMOVABLES
There are two principal insolvency procedures by which a lender can bring about the realisation of a property in Jersey, namely dégrèvement and désastre.
A debtor who fears that his property is going to be taken for his creditors either by way of a dégrèvement or by way of a désastre can apply to the Royal Court for a "Remise de Biens". A remise grants a debtor time to get his affairs in order and effect an orderly sale of all or some of his property thereby enabling him to retain that which he can afford.
Introduction
In the current COVID-19 environment it is likely that there will be more businesses becoming insolvent. Some of those businesses will have an interest in Jersey property. For example as owners of Jersey property or holders of a lease of retail premises situated in the Island. The business may also have locally employed employees to consider.
Ogier has successfully applied for the recognition by the Royal Court of Jersey of English fixed charge receivers. The decision of the Court in Re Estates and General Developments Limited1 is the first time that such an appointment has been recognised in Jersey.