Domestic procedures
Cross-border procedures
Creditors
Avoidance transactions
Contributions to the liquidation estate and liability of officers
This article answers key questions regarding restructuring and insolvency in Guernsey.
Question |
Answer |
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What are the principal insolvency procedures for companies in Guernsey? |
The principal insolvency procedures are liquidation (winding up) and administration. A scheme of arrangement procedure can also be used for a company to come to an arrangement with creditors. |
Are any of the procedures available on a provisional basis? |
Yes. Compulsory liquidation can be made on a provisional basis. |
What requirements must be satisfied for the procedures to be pursued? |
Compulsory liquidation Voluntary liquidation – whether company is solvent or insolvent Administration
Scheme of arrangement
|
What is the procedure and how long does it typically take? |
Compulsory liquidation – no specific time and the court does not tend The company should be notified of the date, time and place of a winding-up Applications are typically filed on a Thursday and heard the following Tuesday (so The liquidator must, within seven days of the compulsory winding-up order, send a The court will appoint the liquidator at the hearing of the winding-up application. Voluntary liquidation – no specific time limits Once the resolution has been passed, a copy must be delivered to the registrar The company (by ordinary resolution) appoints a liquidator and fixes their Administration – no timeframe as to how long an administration order Notice of the hearing must be given to the company, the GFSC and anyone else that Notice of the application for an administration order should be given to the registrar The application is usually filed on a Thursday and heard the following Tuesday. The The administrators will be appointed by the court at the hearing and sworn into office. The administrator must:
Scheme of arrangement |
Can any procedures be pursued without the involvement of the court? |
Yes. Voluntary liquidation is a process which can take place without the involvement |
What is the effect upon control of the company and its assets during those procedures? |
Upon appointment (by the members or the court), the liquidator has custody and In a compulsory liquidation, the company ceases to carry on business and commits Wide powers of management are granted to administrators of Guernsey companies A scheme is not a formal insolvency process and so the company, under its directors, |
Is there an automatic moratorium and, if so, when does it come into effect and what is its effect? |
No. There is no moratorium in either a compulsory or voluntary liquidation. While the administration order is in force, no resolution may be passed or order |
Can a company be forcibly wound up other than when insolvent? |
Yes, if:
The GFSC can make an application for the winding up of a company which will be |
To what extent are the procedures designed to facilitate a rescue of a company's business? |
One of the primary aims of administration is to ensure that the company, or all or A scheme can be used as a rescue procedure because the company can come to a formal compromise with its creditors. |
Can the procedures be used to facilitate the sale of all or part of the insolvent company's business? |
Yes. In the case of administration and liquidation, the officeholder can sell the business and An administration process is better suited to facilitating a sale of the business as a Guernsey has also recently recognised the concept of the 'pre-pack', which allows the In a liquidation, a piecemeal sale of business and assets is common in order to generate realisations. |
Question |
Answer |
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To what extent do the |
Statutory recognition The liquidator or administrator will apply to the court in their jurisdiction and that court will send a letter of request to the Guernsey court. The Guernsey court will not comply with the letter if the result would be contrary to public policy or oppressive. The court can apply the insolvency law of either Guernsey or the foreign jurisdiction in relation to comparable matters falling within its jurisdiction. The court will seek to assist foreign insolvency procedures where possible (and the insolvency officeholder can seek recognition under the common law). However, the common law concept of 'modified universalism' has been restricted following the 2015 Guernsey case of Re X (a bankrupt). |
Are there any limitations |
Yes, if an insolvency officeholder seeking to exercise powers overseas must not only be exercising those powers under the law of the jurisdiction where they were appointed, but there is also a corresponding common law or legislative power in the foreign jurisdiction (view of the majority of the board in Singularis). The minority of the board in Singularis limited this further by suggesting that the officeholder can exercise the power only if there are specific legislative provisions both in the home and foreign jurisdictions. A Re X (a bankrupt) held that the Guernsey court prefers this minority view. |
What kinds of overseas |
Overseas administrators, liquidators, trustees in bankruptcy, regulatory court-appointed receivers and fixed charge receivers have been recognised in Guernsey. |
Do the courts in Guernsey |
Yes. The assistance described above is reciprocal. Under Section 426 (as extended to Guernsey), reciprocity is only with the UK and Crown dependency courts. Under the common law, it is, in theory, with any court worldwide. |
Question |
Answer |
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What are the principal |
Movable property
Immovable property
|
What is the effect on |
Secured creditors will be repaid from the proceeds once a property over which they hold security is sold. Where a creditor has a security interest granted under the Security Interests Law, that creditor is entitled to the proceeds of the sale of the collateral when it is sold. However, that creditor must apply the proceeds in the order specified by Section 7 of that law. |
Which creditors are |
Preferred debts include rent to a landlord, wages, accrued holiday remuneration, income tax and social insurance. However, preferred creditors do not have priority over secured creditors. |
What is the position regarding the recoverability |
For both compulsory and voluntary liquidation, all costs, charges and expenses properly incurred in a voluntary winding up of a company, including the remuneration of the liquidator, are payable from the company's assets in priority to all other claims. Practice directions of 2015 regulate the information that officeholders should give to the court regarding their remuneration and expenses. The court will then fix the officeholder's remuneration upon appointment based on that information and can review fee increase requests periodically. |
Question |
Answer |
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What if any categories |
Preferences Pauline actions enable transactions to be set aside if they have defrauded creditors. |
Who is responsible for |
The liquidator (preferences) and the victims or creditors (Pauline actions). |
Contributions to the liquidation estate and liability of officers
Question |
Answer |
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Can directors or |
Yes, in the case of:
|
What liability can directors or other officers attract in respect of an insolvent company? |
See above. |
In what circumstances can directors be disqualified |
When a director is considered unfit to be concerned in the management of a company by reason of their conduct in relation to a company or otherwise. Relevant factors for the court to consider include the director's conduct in connection with any company that has gone into insolvent administration. Disqualification orders can last for up to 15 years. |
For further information on this topic please contact Mathew Newman, Simon Davies, Alex Horsbrugh-Porter or Christopher Jones at Ogier by telephone (+44 1534 514 000) or email ([email protected], [email protected], [email protected] or [email protected]). The Ogier website can be accessed at www.ogier.com.
Paul Chanter, partner, assisted in the preparation of this article.