Approaching Insolvency in Jersey
Jersey law stands distinct from that of the UK when it comes to avenues of insolvency available to businesses.
We explore companies’ options further in this exclusive interview with Alan Roberts, director at Grant Thornton, who also shares his thoughts on how the insolvency sector in Jersey may develop in the near future.
How are companies’ options for insolvency limited in Jersey?
The options for companies entering into a formal insolvency process in Jersey are currently limited to liquidation. This contrasts with Guernsey, where administration and a differing liquidation process exist. Importantly, Jersey law is markedly different from English law and anybody seeking an insolvency or restructuring solution in Jersey should consult a resident Jersey insolvency practitioner or experienced advocate on the island.
Unfortunately, at present, modern restructuring procedures such as administration or a Company Voluntary Arrangement do not exist. A recent law change in 2022 introduced a modern creditors’ winding up process whereby a creditor can issue a statutory demand and, if unanswered or a company is demonstrably insolvent, can petition the Court for a winding up order. The Jersey Companies Law has provision for compromises and arrangements with a cram down element, but these are not commonly used for insolvency restructuring processes other than in large cases.
The concept of receivership is not recognised in the Companies Law in Jersey. However, the Royal Court has recently appointed an asset receiver and there are law reform discussions taking place that contemplates introducing receivership into the Security Interests (Jersey) Law 2012 to permit appointment in the event of default of a secured debt.
It is fairly common for a Jersey-registered company that has its COMI elsewhere to have its affairs wound up in another jurisdiction. The best example of this is the UK administration process where letters of request are frequently issued by the Royal Court in Jersey to, for example, the English Court, for a Jersey company to be placed into administration in England. The disconnect with the two laws manifests itself at the end of the English administration, where no provision in the English law exists for a Jersey company to be placed into English creditors’ winding up. A Jersey liquidation may then follow!
Jersey law is markedly different from English law and anybody seeking an insolvency or restructuring solution in Jersey should consult a resident Jersey insolvency practitioner or experienced advocate on the island.
What are the most common insolvency-related concerns faced by businesses in Jersey?
Commonly encountered concerns for Jersey based businesses mirror the challenges of mainland economies as a result of the rise in interest rates and costs of supply chains. However, a small island economy has certain stresses magnified. This manifests itself in the shortage of labour in certain sectors due to housing and work permit limitations, the costs of the logistics chain for imports to a small island, and the cost of air and sea freight and passenger travel which has a knock-on effect on demand for hotel accommodation.
The scale of production also remains a constant challenge to the agricultural sector, which has reduced in recent years in the face of cheaper imports, although none of these areas have produced substantial insolvency or restructuring work in recent times.
The finance industry represents a major driver to the Jersey economy and government and stakeholders defend its continued success in the world of global wealth management.
How resilient has business proven in the wake of the COVID-19 pandemic?
The effect of COVID-19, so far as formal insolvency and restructuring is concerned, has been difficult to assess. There has been no significant increase in formal liquidation or restructuring work so far as this practitioner can report. However, changes are noticeable in activity in certain areas of the economy and, on a small island, businesses can discreetly close down without formal winding up.
Importantly, the just and equitable process for winding a Jersey company up has provided wide scope for restructuring, albeit within a liquidation. The Royal Court’s jurisdiction is wide when appointing a liquidator under this process. It is not, per se, an insolvency process and permits the court to tailor a winding up order to fit the desired restructuring. This has, in the past, permitted the effective administration, through a quasi-prepack process, of a Jersey group to allow survival of a business that would otherwise have closed.
Do you observe any significant trends in insolvency in your jurisdiction? Can you share any predictions for how it may be shaped in 2023?
The prospects for future insolvency and restructuring work in Jersey may be for a more modern legal process to be introduced along the lines of administration, if the finance industry encourages it. Voluntary arrangements and receivership would be positive moves to bring Jersey into line with other modern common law jurisdictions. Additionally, there may be a more proactive approach to sanctioning delinquent directors via a strengthened reporting regime by liquidators.
Alan Roberts, Director
2nd Floor, Kensington Chambers, 46/50 Kensington Pl, St Helier JE1 1ET, Jersey
Tel: +44 01534 885742
Alan Roberts is a director at Grant Thornton Limited. He is a Chartered Accountant, UK-licensed insolvency practitioner and Certified Fraud Examiner. He has specialised in insolvency and restructuring work for over 30 years across several jurisdictions, including the UK, US, Caribbean, Europe, Far East and the Channel Islands. He is one of only four Jersey-approved liquidators.
Grant Thornton Limited (Channel Islands) is a member firm of Grant Thornton with offices in Guernsey and Jersey. Both offices have been established for more than 35 years, with a history of providing top-quality professional services to a wide range of corporate and private clients that operate in a variety of different sectors both locally and internationally.