Introduction
Local business
Regulated business
International business
Comment


Introduction

Jersey imposed travel restrictions in response to the COVID-19 crisis in March 2020 and has been operating a full lockdown for all residents, apart from essential workers, since 30 March 2020.

Most employees in the Jersey financial services industry are now working from home and there has been no interruption to business continuity for the sector.

The government, the courts and the Jersey Financial Services Commission (JFSC), including the Companies Registry and the Security Interests Registry, are all operating using a mixture of remote working and essential worker presence. The JFSC has confirmed that while its physical premises are closed, a flexible business continuity strategy is being implemented. It also intends to take a pragmatic approach when dealing with filings and submissions and responding to clients (with most filings and submissions being done online).

This article sets out potential insolvency reforms which may be implemented in the Jersey financial services sector.

Local business

The government's aim for business is to:

  • preserve as many local jobs as possible;
  • maintain Jersey's key economic infrastructure; and
  • ensure that Jersey can navigate the COVID-19 medical emergency and recover quickly once the pandemic is over.

As such, the priorities are to maintain cash flow so that people can remain in employment and businesses do not have to close permanently and can restart trading as soon as social distancing and other containment measures ease.

With this in mind, the government has announced various initiatives to support local business, including:

  • the Coronavirus Government Co-funded Payroll Scheme;
  • the Business Disruption Loan Guarantee Scheme;
  • the Jersey COVID-19 Special Situations Fund (formerly the Jersey Recovery Fund);
  • the deferral of social security and goods and services tax payments;
  • the deferral or renegotiation of rent where the government is a landlord; and
  • the issuance of guidance to be followed by landlords and tenants of commercial property during the COVID-19 crisis.

Regulated business

The JFSC is responsible for regulating and supervising Jersey's financial services industry, including Jersey entities which conduct regulated activities and non-Jersey entities which conduct regulated activities in or from Jersey. Jersey has no special insolvency regime for regulated entities and it is unlikely that the JFSC will relax any financial resource or capital adequacy requirements at this time.

However, the JFSC has announced that it is mindful of the disruption and challenges that regulated businesses are currently facing and has therefore extended various regulatory deadlines, including those relating to the submission of audited and unaudited financial statements and other regulatory filings. The JFSC has also reminded regulated businesses of the importance of complying with their notification obligations under the JFSC Codes of Practice.

International business

The UK government recently announced proposals to temporarily suspend wrongful trading provisions for directors with retrospective effect from 1 March 2020 and to accelerate proposed amendments to its insolvency laws (first announced in 2018) to include new restructuring tools and provide greater protection to companies in financial difficulty.

Jersey is a creditor-friendly jurisdiction and does not impose a moratorium on enforcement of security following the commencement of insolvency proceedings. Any insolvency measures introduced must not disturb any international financing transactions structured using Jersey entities or affect secured creditors' rights.

Although it is too early to say what insolvency measures Jersey may adopt in response to the COVID-19 crisis, it is worth noting the following:

  • Although Jersey's wrongful trading statutory provisions are similar to the UK equivalent provisions, one key difference is that in Jersey it is a defence to a wrongful trading claim if a director takes "reasonable steps" with a view to minimising potential loss to the company's creditors after the point at which there is no reasonable prospect of avoiding insolvent liquidation, whereas the UK equivalent defence requires the director to take "every step" to minimise potential loss to the company's creditors. UK case law on directors' duties (including in relation to insolvency) is highly persuasive in Jersey.
  • Jersey has no equivalent of English law administration or other rescue procedures (apart from schemes of arrangement) and its corporate insolvency procedures are focused on liquidation using winding-up or désastre procedures, with secured creditors able to enforce their perfected security during those procedures.
  • There are proposals under discussion for the Companies (Jersey) Law 1991 to be amended to fill a gap and allow a creditors' winding-up to be commenced by a creditor (via an application to the Jersey court) rather than this procedure always being commenced by special resolution of the shareholders.

Comment

Jersey will no doubt continue to monitor international developments with regard to insolvency reform while protecting its status as a leading international finance centre, a creditor-friendly jurisdiction and a good place to do business.

For further information on this topic please contact Damian Evans or Bruce MacNeil by telephone (+44 1534 514 000) or email ([email protected] or [email protected]). The Ogier website can be accessed at www.ogier.com.