Guernsey insolvency
By Steven Wood, Practice Support Specialist (Insolvency)
18 January 2023
We are regularly asked queries about insolvency systems in crown dependencies, which are not part of the UK or the European Union but 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 Guernsey and forms part of a series looking at insolvency procedures in the crown dependencies.
Governing legislation
All formal insolvencies involving Guernsey companies are governed by the Companies (Guernsey) Law, 2008.
The Companies (Guernsey) Law, 2008 (Insolvency) (Amendment) Ordinance, 2020 ('the Ordinance') and the Companies (Guernsey) (Insolvency Rules) Regulations, 2022 came into operation on 1 January 2023, following regulations made on 8 December 2022 by the Committee for Economic Development. Resultant changes to insolvency law only apply to insolvency appointments commenced after the changes came into force.
Who can act?
Historically any person could be appointed as liquidator of a company, regardless of connection to the company, and regardless of whether the company was solvent or insolvent (although in more complex cases, an accountant or qualified insolvency practitioner was generally appointed).
The Ordinance has amended this position for insolvent liquidation so that an independent Liquidator must be appointed, unless the Court approves otherwise.
All appointments are subject to the approval of the court, which will consider the relevant experience and qualifications of the proposed office holder. Such court appointed liquidators or administrators are invariably experienced insolvency practitioners.
There is no requirement for an ICAS member to hold an insolvency licence to take a Guernsey insolvency appointment. An ICAS member will, under the Public Practice Regulations, require to have a practicing certificate.
Companies House equivalent and forms
Court
The court with exclusive first-instance jurisdiction over insolvency matters in Guernsey is the Royal Court of Guernsey (Ordinary Division). Appeals can be taken to the Guernsey Court of Appeal and onwards, if permitted, to the Judicial Committee of the Privy Council.
Available procedures
- Schemes of arrangement in order to effect "in court" restructuring;
- Voluntary liquidation for solvent and insolvent companies (now distinguished between as a result of the introduction of a Declaration of Solvency by the Ordinance);
- Compulsory winding up for insolvent companies (including provisional liquidation);
- Administration orders for companies that are insolvent or likely to become insolvent; and
- Receivership orders, in relation to a Cell of a Protected Cell Company.
It should be noted that there are separate insolvency regimes applying to limited partnerships and limited liability partnerships.
Less formal collective insolvency procedures also exist (known as désastre and saisie) although these are not governed by legislation because they derive from the customary law which has existed in Guernsey since at least medieval times.
Best practice guidance
The Channel Islands Association of Restructuring and Insolvency Experts (ARIES) (a member of INSOL International) has produced a series of guidance notes, the Guernsey Insolvency Practice Statements (GIPS).
The five GIPS cover:
GIPS 1 – An introduction to the regime and the fundamental ethical principles
GIPS 2 – Investigations into the affairs of an insolvent company
GIPS 3 – Directors reports and disqualification of directors
GIPS 4 – Convening and holding creditors’ meetings where there is an insolvent liquidation
GIPS 5 – Pre-packaged sales of businesses
The GIPS are a voluntary industry initiative by ARIES setting out best practice principles and compliance standards with which practitioners are encouraged to comply. They serve to bridge a gap in the current Guernsey legal framework and are designed to complement the proposed Guernsey insolvency law reform, which includes a requirement for practitioners to report director misconduct and gives greater emphasis to the protection of creditors.
Considerations
The laws applicable in Guernsey would permit ICAS members or insolvency practitioners to act. However, consideration should be given to the requirements of the ICAS Code of Ethics prior to accepting any appointment. In particular the fundamental principal 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 Guernsey or a party familiar with Guernsey law.