Jersey insolvency
By Steven Wood, Practice Support Specialist (Insolvency)
1 February 2023
We are regularly asked queries about insolvency systems in crown dependencies, which are not part of the UK or the European Union but are self-governing dependencies of the crown.
The three crown dependencies are the Bailiwick of Guernsey, the Bailiwick of Jersey and the Isle of Man.
They have their own directly elected legislative assemblies, administrative, fiscal and legal systems and their own courts of law.
This article covers the Bailiwick of Jersey and forms part of a series looking at insolvency procedures in the crown dependencies.
Governing legislation
All formal insolvencies involving Jersey companies are governed by the Companies (Jersey) Law 1991 (the Companies Law).
The Companies (Amendment No.8) (Jersey) Regulations 2022 (the 2022 amendment) amended the Companies Law with effect from 1 March 2022 by granting the power to creditors to apply to the Court for an order to commence a creditors' winding up.
Procedures and liquidator
Summary winding up
A summary winding up is a solvent winding up, which commences when the shareholders voluntarily pass, or are deemed to pass, and file, a special resolution to do so. A liquidator is appointed by special resolution of the company members. No qualifications are laid down for a liquidator in a summary winding up. However, in many cases, particularly in respect of trading companies, the company may seek to appoint an insolvency practitioner as liquidator to ensure that the liquidator's duties are being discharged properly.
Creditors’ winding up
An insolvent winding up that can now either be initiated by shareholder resolution or by a creditor by application to the Royal Court.
The 2022 amendment granted the power to creditors to apply to the Court for an order to commence a creditors' winding up. This provides creditors with an alternative to désastre (see below) and allows the appointment of an insolvency practitioner as liquidator to manage the process as opposed to the Viscount. Prior to this a creditors' winding up could only be commenced where the shareholders had passed, or had deemed to have passed, and filed, a special resolution to do so, or where a summary winding up became a creditors' winding up.
The liquidator is required to have certain experience and qualifications (per Article 7 of the Companies (General Provisions) (Jersey) Order 2002) and to be registered on the Register of Approved Liquidators.
Désastre
Désastre arose out of the common law of Jersey and is unique to the Island. Prior to the 2022 amendment it was the principal mechanism for a creditor to initiate insolvency proceedings against a company.
An application for désastre can be made by the company or a creditor. In a désastre, all property and rights and powers of the company over its affairs (along with the capacity to take proceedings for exercising such powers) vests in the Viscount, who is the Chief Executive Officer of the Royal Court of Jersey.
Companies House equivalent and forms
Jersey Financial Services Commission
Court
The Royal Court of Jersey has a general jurisdiction, including jurisdiction to deal with bankruptcy proceedings within Jersey. There is an appeal to the Court of Appeal and, ultimately, to the Privy Council.
Best practice guidance
The Channel Islands Association of Restructuring and Insolvency Experts (ARIES) (a member of INSOL International) has produced guidance notes for use by its members and other professionals practicing in the area of restructuring and insolvency. The Jersey Statements of Insolvency Practice (JSIPs) were officially launched on 10 March 2021.
The three JSIPS are:
- JSIP1: Introduction to JSIPs
- JSIP2: Conduct of Restructuring Procedures and Assignments
- JSIP3: Fees and Disbursements in Formal Restructuring Work
The JSIPs are a voluntary industry initiative setting out best practice principles and compliance standards with which practitioners are encouraged to comply. They seek to harmonise the approach of Practitioners to particular aspects of restructuring and insolvency practice. They have been prepared to complement the prevailing statutory framework and seek to enhance standards across the industry and bridge gaps in the current Jersey legal framework.
Considerations
The laws applicable in Jersey would permit ICAS Members or insolvency practitioners to act in a summary winding up.
In relation to a creditors’ winding up, a liquidator is required to be entered on the Register of Approved Liquidators. That requires the individual to be ordinarily resident in Jersey, have the required level of experience, have a general and specific bond for each case and either be licensed in the UK to act as an insolvency practitioner or be a member of one of the CCAB bodies (but not CIPFA).
An individual who is not ordinarily resident in Jersey, but is otherwise qualified, may, together with an individual who is registered as an approved liquidator and entered in the Register of Approved Liquidators, be appointed as a liquidator of a company. The Viscount may then register the individual as a non-Jersey liquidator in the Register of Approved Liquidators.
In any event, consideration should always be given to the requirements of the ICAS Code of Ethics prior to accepting any appointment. In particular, the fundamental principle of professional competence and due care should be considered where specific threats may exist due to operating within an unfamiliar legal jurisdiction and with unfamiliar procedures in that jurisdiction.
Consideration should be given to seeking separate legal advice from a practitioner in Jersey or a party familiar with the law in Jersey.