Restructuring and insolvency in Jersey: overview

A Q&A guide to restructuring and insolvency law in Jersey.

The Q&A gives a high level overview of the most common forms of security granted over immovable and movable property; creditors' and shareholders' ranking on a company's insolvency; mechanisms to secure unpaid debts; mandatory set-off of mutual debts on insolvency; state support for distressed businesses; rescue and insolvency procedures; stakeholders' roles; liability for an insolvent company's debts; setting aside an insolvent company's pre-insolvency transactions; carrying on business during insolvency; additional finance; multinational cases; and proposals for reform.

To compare answers across multiple jurisdictions, visit the Restructuring and insolvency Country Q&A tool.

This Q&A is part of the PLC multi-jurisdictional guide to restructuring and insolvency law. For a full list of jurisdictional Q&As visit


Forms of security

1. What are the most common forms of security granted over immovable and movable property? What formalities must the security documents, the secured creditor or the debtor comply with? What is the effect of non-compliance with these formalities?

Immovable property

Common forms of security and formalities. The form of security granted over immovable property is a hypothec. This is a registered encumbrance which attaches to either a:

  • Freehold property.

  • Contract lease (that is, a lease of more than nine years registered with the Royal Court of Jersey (Court)).

A hypothec is attached to either specific property or all the debtor's real property assets at the time of registration.

There are two main types of hypothec:

  • Hypotheque judiciaire (HJ). This is created by registering an obligation with the Public Registry (see below). The obligation can take the form of a:

    • promissory note;

    • bond; or

    • judgment debt, including a consensual judgment debt.

    The Public Registry (Le Registre Public) is a register, open to public inspection, of, amongst other things, almost all immovable property transactions in Jersey. It was established by Act of the States of Jersey (that is, the Jersey Parliament) in 1602. It is administered by the Judicial Greffe.

  • Hypotheque conventionnelle simple (HCS). The creation of an HCS usually only occurs in two circumstances:

    • when a property is sold and part of the purchase price is not paid to the seller but remains outstanding as an encumbrance on the property, representing the debt owed to the seller by the purchaser;

    • when the terms of borrowing in a real property transaction, with provision for security, are otherwise sworn to before the Court. The terms of borrowing are therefore available for public inspection at the Public Registry, which can make an HCS unattractive for commercial or complex lending.

    An HCS is itself immovable property, but an HJ is not.

The formalities for creating a consensual HJ, and an HCS, are as follows:

  • HJ. An HJ requires:

    • signature by or on behalf of the debtor or guarantor of a document which acknowledges the amount borrowed or the maximum obligation under a guarantee; and

    • registration at the Public Registry.

    By convention, the document is admitted to the Public Registry on a Friday, between 2.30pm and 4pm. Failure to register the document means that no HJ has been created. Subsequent registration will create the HJ, but priority will be lost if other hypothecs are created in the interim.

  • HCS. This is created by:

    • swearing to a contract before the Court which contains the terms of the borrowing and provides for the security; and

    • registering the contract at the Public Registry. As for an HJ, registration is essential for the creation of an HCS and priority will be lost if another HCS is created before registration.

Effects of non-compliance. An HJ, or HCS, will not be created unless either the document (in the case of an intended HJ) or contract (in the case of an intended HCS) is registered with the Public Registry (see above, Formalities).

Movable property

Common forms of security and formalities. These are as follows:

  • Tangible movable property. A pledge is the only form of security that can be taken over tangible movable property.

    Ships have a separate register of mortgages. There is no Jersey aircraft register.

  • Intangible movable property. Security can be created over intangible movable property (such as shares, units in property unit trusts, and bank accounts) by creating a security interest.

There are two other forms of security/quasi-security over movable property:

  • Liens. Contractual liens most commonly take the form of:

    • a banker's lien over property in a lender's possession; and

    • a lien of a company over its shares for amounts unpaid on that share, as set out in the company's articles of association.

  • Set-off. Set-off can be used to create quasi-security (see Question 4, Set-off of obligations).

A security interest cannot be created in a lease as such. However, although there is no case authority to support this approach, it is common practice to create a security interest over amounts payable under a lease (as distinct, separate or severable property capable of assignment by way of security).

The Security Interests Law is due to be replaced (see Question 13).

A pledge must be created through physical delivery of the property by the debtor and retention of the property by the creditor. In the event of default by the debtor, the creditor can either retain or sell the asset.

A security interest is created by and pursuant to a security interest agreement, which must be in accordance with the Security Interests (Jersey) Law 1983 (Security Interests Law). For a security interest agreement to be valid, it must (Security Interests Law):

  • Be in writing and dated.

  • Be signed by the debtor and identify the secured party.

  • Specify the collateral, the secured obligations and the events of default.

For a security interest to be created in shares, the creditor must do either of the following, pursuant to a security interest agreement:

  • Take possession of the share certificates.

  • Take an assignment of title to the shares. If the secured party takes an assignment of title to the shares, there is no security interest until notice of the assignment is given to the person from whom the debtor would have been entitled to claim the shares used as collateral (usually the issuer/company).

Effects of non-compliance. Failure to comply with any of the above formalities for creation of pledge or a security interest agreement renders the security void (in the sense that no security is created).

A security interest must be created pursuant to a valid security interest agreement. No security interest is created unless the statutory method relevant to the secured property (such as taking possession or title) is followed (see above, Formalities).


Creditor and contributory ranking

2. Where do creditors and contributories rank on a debtor's insolvency?

Two processes can be followed, which are (see Question 6):

  • Désastre, where the Viscount of the Royal Court of Jersey (Viscount) is appointed by the Court.

  • Creditors' winding up, where a liquidator is appointed by the company's shareholders and creditors.

Order of priority

The order of priority is essentially the same as follows:

  • Fees of the Viscount or the liquidator. This includes costs, charges and expenses (though the formal scope of the fees for a liquidator is slightly different from the fees of the Viscount in a désastre).

  • Debtor's employees. This is for arrears of wages for up to six months before the declaration of désastre/commencement of the creditors' winding up. Employee holiday pay and bonuses are also included.

  • Taxes, rent and rates. Payments include health insurance, social security, income tax, goods and services tax, rental arrears and parochial rates.

  • All other debts proved in the désastre/creditors' winding up.

On a company's dissolution, the remaining monies, if any, are distributed among the shareholders. A shareholder can claim as a creditor in respect of a shareholder loan made by it.

Secured creditors

Secured creditors in respect of immovable property are entitled to be repaid as a preference from the realisation of the property to which their security (hypothec) relates, less the costs, fees and charges incurred in the sale (see Question 1, Movable property).

A creditor holding a pledge over tangible movable property can retain or sell the asset (see Question 1, Immovable property).

Secured creditors who have a security interest granted under the Security Interests Law, in respect of the debtor's property, are entitled to the proceeds of sale (or application of cash and similar security) in respect of the collateral. The secured party must apply the proceeds of sale as follows (Security Interests Law):

  • Costs and expenses of the sale.

  • Discharge of any prior security interest.

  • Discharge of all monies properly due in relation to the obligation secured by the security agreement.

  • Payment, in order of priority, of the secured parties whose security interests were created after that being enforced.

  • Payment to the Viscount, liquidator or other "proper officer" (see Question 1, Movable property). The term proper officer is not defined in the Security Interests Law, but is taken to mean a liquidator/administrator or some such other properly appointed insolvency officer.

Secured creditors are therefore treated in accordance with the three sets of rules outlined above. Their security assets are not available to general creditors, except to the extent of any surplus proceeds. The priority of repayment between secured creditors is determined by the date of the hypothec (date of registration) or the security interest agreement, subject to any contractual subordination.

For the application of set-off, see Question 4, Set-off of obligations. This gives priority to a creditor to the extent of the set-off that is mandatory or allowed.

Foreign security

Jersey law does not mention holders of security created under foreign law over foreign (situated) assets in the order of repayment on insolvency. Their entitlement is a matter of foreign law, but duly constituted foreign law security is recognised in a Jersey insolvency. UK real property is an example commonly met in Jersey of foreign situated assets.

In practice, the way in which the holder of foreign security, or a receiver appointed by him, proceeds in the Jersey insolvency (in particular by way of self-help (that is, enforcement of security by a secured party outside the insolvency process, independently of the Viscount or the liquidator)), despite Jersey law, depends on the circumstances, including whether the secured party will want to claim in the Jersey insolvency for an unsecured amount.

By the Powers of Attorney (Jersey) Law 1995, powers of attorney granted in support of security, under foreign law as well as under a Jersey security interest agreement, survive insolvency.

In a désastre, all the assets of the debtor vest in the Viscount who takes those assets subject to security. If the debtor has granted title security, so that the secured party holds title to the secured property, that property is no longer an asset of the debtor.

In a creditors' winding up, the liquidator sits in the shoes of the insolvent company's directors. Although no assets are "vested" in the liquidator, only the liquidator can deal with the property of the company (unless and to the extent that the liquidation committee, or if none, the creditors authorise(s) the directors to continue exercising their powers), subject to any security and security rights over it.

For more information on the désastre and creditors' winding-up procedures, see Question 6.


Unpaid debts and recovery

3. Can trade creditors use any mechanisms to secure unpaid debts? Are there any legal or practical limits on the operation of these mechanisms?

In a contract for the sale of specific goods, the seller can attempt to secure unpaid debts by using a retention of title clause. The seller can expressly retain a right of disposal until the buyer meets certain conditions (Article 44, Supply of Goods and Services (Jersey) Law 2009 (SOGAS)). In the following cases the seller may retain possession of goods which are the subject of a contract for sale until the buyer has paid in full:

  • The goods have been sold without any stipulation as to credit.

  • The goods have been sold on credit but the term of credit has expired.

  • The buyer becomes insolvent (Article 70, SOGAS). In this situation the unpaid seller has a right to stop the goods in transit and resume possession, and retain them until payment (Article 73, SOGAS).

However, if the seller does not have actual possession of the goods, or the goods cannot easily be ascertained, the seller should proceed with caution when relying on such a clause. An unpaid seller of goods loses his right of retention if:

  • He delivers the goods to a carrier or depositee for transmission to the buyer and does not reserve a right of disposal.

  • The buyer or his agent lawfully obtains possession of the goods.

  • He waives the right of retention (Article 72, SOGAS).

Articles 74 and 75 of SOGAS provide detailed rules on the duration of transit and how stoppage in transit is effected. An unpaid seller's right of retention or stoppage in transit is not affected by a buyer selling or otherwise disposing of the goods, unless the seller has consented to the sale or disposal (Article 76, SOGAS). An unpaid seller's rights can however be defeated or overridden where a document of title has been lawfully transferred to a buyer or owner, and that person transfers it to a person who takes it in good faith.

4. Can creditors invoke any procedures (other than the formal rescue or insolvency procedures described in Questions6 and 7) to recover their debt? Is there a mandatory set-off of mutual debts on insolvency?

Compromise agreements

A company can enter into a compromise agreement with its creditors and shareholders, subject to specified majority votes (Article 125, Companies Law, with a similar provision at Article 167). The Court can approve a compromise agreement and, if so, a copy of the Act of Court (that is, court order) must be filed with the Jersey Companies' Registry (Registry).

A compromise agreement can also be binding outside of the Companies Law framework. However, in the absence of 100% creditor consent, these agreements may be liable to be set aside on a bankruptcy as being preferences (see Question 10).

Basic debt recovery

For basic debt recovery and enforcement, a creditor can obtain judgment from either the:

  • Petty Debts Court, for amounts of GB£10,000 or less.

  • Royal Court, for amounts above GB£10,000.

A creditor can enforce the judgment by sending it to the Viscount. The Viscount's powers include:

  • Arranging seizure of the debtor's wages directly from the employer. This can only be implemented if the debtor is an employee. It is not possible to seize the debtor's earnings if the debtor is self-employed.

  • The seizure of any valuable assets from the debtor and arranging for those assets to be sold at a public auction. The proceeds are used to pay off the judgment debt, less the Viscount's costs.

Set-off of obligations

Article 34 of the Bankruptcy (Désastre) (Jersey) Law 1990 (Désastre Law) provides for the mandatory set-off of sums due from one party to another at the date of the declaration of désastre (see Question 7, Désastre). The equivalent set-off of sums due on the commencement of the creditors' winding up is provided in Article 166 of the Companies Law. A set-off creditor has priority to the extent of the mandatory set-off.

A creditor may also exercise contractual set-off rights. To the extent the terms of the relevant agreement fall within the scope of the statute, these rights are given a privileged status by the Bankruptcy (Netting, Contractual Subordination and Non-Petition Provisions) (Jersey) Law 2005 (Netting Law).

Foreign element

For details of the position of foreign creditors and international rules, see Questions 2 and 13.


State support

5. Is state support for distressed businesses available?

There is no scheme of financial support for distressed businesses. However, organisations such as the Citizens Advice Bureau offer free and confidential advice on the options available to businesses in distress.


Rescue and insolvency procedures

6. What are the main rescue/reorganisation procedures in your jurisdiction?

There are no defined statutory or customary corporate rescue procedures in common use. It may be possible to use the just and equitable winding up jurisdiction under the Companies (Jersey) Law 1991 in certain limited circumstances, but this is an evolving area of law without consistent jurisdiction. There is also on older process under the Loi (1839) Sur Les Remises des Biens and named remise de biens which may be afforded by the Court to temporarily embarrassed debtors.

Objective. J&E: Winding up of the company with the possibility of the appointed liquidators selling parts of the business and assets as a going concern.

Remise: Payment of the secured creditors of the debtor's heritage (being Jersey situs immoveable (real) property including lease interests held which are for a term in excess of 9 years), excess to unsecured.

Initiation. J&E: Application by the Company or a director.

Remise: Application by the debtor.

Substantive tests. J&E: No stated test, save that the court must be satisfied that it is just and equitable in all the circumstances.

Remise: Debtor must have heritage and the court at the outset must be satisfied there is a real prospect that all secured creditors on that property will be paid.

Consents and approvals. J&E and Remise: Court processes subject to their discretion.

Protection from creditors. J&E: It would be common for orders to be made preventing creditor action without the leave of the Court.

Remise: Enforcement prevented because all of the debtor's assets are placed into the hands of the Court.

Length of procedure. J&E: No set timetable.

Remise: 6 months, but is customarily extended to 12 months if required.

Conclusion. J&E: By further court order or as may otherwise be set by the court.

Remise: On successful realisation of the heritage or if not done within 12 months then process automatically converts to bankruptcy.

7. What are the main insolvency procedures in your jurisdiction?


Objective. A declaration of désastre (strictly, a declaration that a person's property is en désastre) under the Désastre Law is granted by the Court and is a formal declaration of bankruptcy. A désastre can be granted against both individuals and companies. The purpose of the declaration is to collect and realise the debtor's assets for the benefit of its creditors as appropriate, including settling claims.

Initiation. If the debtor has realisable assets, the debtor, or a creditor with a liquidated claim of more than GB£3,000, can apply to the Court.

There are no specific consents and approvals required, except for the requirement that the declaration be made by the Court, which has discretion whether or not to make the declaration.

Substantive tests. The Court has discretion whether or not to grant a declaration in respect of the debtor (Désastre Law). A declaration will only be granted if the Court considers it just and equitable to do so. The applicant must be able to show that the debtor is insolvent (that is, unable to pay its debts as they fall due). A declaration of désastre under the Désastre Law does not require a balance sheet test.

However, there is provision in the Désastre Law for the debtor to recall the declaration if the debtor can prove that it can pay the claims in full. This might be the case, for example, when the debtor has sufficient assets, but those assets cannot be realised immediately.

Consent and approvals. A désastre can only be granted by the Court.

Supervision and control. The Court supervises the procedure. The Viscount controls the procedure and is responsible for the realisation and distribution of the debtor's assets.

Protection from creditors. If a creditor has a claim that can be proved in the désastre, it cannot do either of the following:

  • Seek any other remedy against the debtor.

  • Commence or, without the consent of the Viscount or leave of the Court, continue any other actions for recovery against the debtor (Article 10, Désastre Law).

Length of procedure. The désastre generally lasts for up to four years, although it can be longer or shorter.

Conclusion. After realising all of the debtor's property, the Viscount must:

  • Supply all of the creditors with a report.

  • Supply a set of accounts relating to the désastre which will be made available to the Court and the creditors.

  • Pay the final dividend due to the creditors.

  • Pay any surplus (if any) to the debtor, or where the debtor is a company, its shareholders.

If the debtor is an individual, it ceases to be liable for any debts provable in the désastre once an order of discharge has been granted. The order of discharge is usually granted after four years.

If the debtor is a company, the Viscount must notify the Registrar of Companies (Registrar) of the date the final dividend is paid. On receipt of that notice, the Registrar files a notice of dissolution in respect of the company.

Creditors' winding up

Objective. The purpose of this procedure is to wind up the company. It involves collecting and realising the company's assets for the benefit of its creditors as appropriate, including settling claims.

Part 21, Chapter 4 of the Companies Law provides the procedure for a creditors' winding up.

Initiation. The procedure is not initiated by the creditors of a Jersey company. Instead, a creditors' winding up is commenced when the shareholders pass a special resolution. If a declaration of désastre has been granted and has not been recalled, a creditors' winding up can only be commenced with leave of the Court.

The following steps are required in the following order:

  • The directors must by notice to the company's shareholders call a general meeting for the purpose of:

    • passing a special resolution for a creditors' winding up; and

    • making a recommendation to the shareholders that the company should be wound up.

  • The directors at the same time give notice to the shareholders of the identity of the proposed liquidator.

  • At least 14 days before the general meeting, the company must give postal notice to all creditors of the intention to hold a creditors' meeting and to nominate a liquidator. The creditors' meeting takes place on the same day as and is usually immediately after the general meeting. At the creditors' meeting, the creditors either:

    • approve the appointment of the liquidator nominated by the company; or

    • nominate a liquidator of their own.

  • At least ten days before the general meeting, the company must give notice in the Jersey Gazette to all creditors, informing them of the details of the creditors' meeting.

  • Within 14 days of his appointment, the liquidator must notify the following of his appointment:

    • the Registrar;

    • the company's creditors.

  • If the special resolution is passed, a notice must be published in the Jersey Gazette within 14 days of the general meeting, stating that the special resolution has been passed.

Substantive tests. A creditors' winding up is available if:

  • It is appropriate for the company to be wound up.

  • The directors cannot sign a statement of solvency in the form prescribed by the Companies Law for a summary (solvent) winding up.

Consent and approvals. The process can only be commenced by the members of the company voting by special resolution (two-thirds majority).

Supervision and control. The effect is a declaration of bankruptcy under Jersey law. The company must cease to carry on its business except so far as necessary for its beneficial winding up. The directors must surrender control of the company to the liquidator (unless and to the extent that the liquidation committee, or if none, the creditors, authorise the directors to continue exercising their powers). The liquidator or liquidation committee supervises and controls the winding up. The liquidator can make an application to the Court for directions in complex cases.

Protection from creditors. No action can be taken or proceeded with against the company once a creditors' winding up has commenced, unless leave is obtained from the Court (Article 159(4), Companies Law).

Length of procedure. There are various specific time frames set out in the Companies Law for providing notice and filing special resolutions. The duration of the procedure depends on:

  • The complexity of the company's operations.

  • The nature of the company's assets and liabilities.

  • Whether there are any investigations into the conduct of the company's officers.

A creditors' winding up can be completed quickly if all creditors are "on side" from the outset. A period of about six months to one year is not unusual.

Conclusion. After the affairs of the company are fully wound up, the liquidator must:

  • Make an account of how the creditors' winding up has been conducted.

  • Present the account at a general meeting and a meeting of the creditors (giving at least 21 days' notice).

Within seven days of the meetings, the liquidator must make a return to the Registrar, in a non-prescribed form document providing the dates of the meetings. If the company is a public company, the return must be accompanied by a copy of the account.

On receipt, the Registrar will register the return (and account where appropriate).

The company is deemed dissolved three months from the date of registration by the Registrar. The three month period can be extended by order of the Court.

Just and equitable winding up

Objective. The Companies Law provides that the Court can wind up a company, whether solvent or insolvent, if it is satisfied that it has the power to do so under Article 155 of the Companies Law (Part 21, Chapter 3, Companies Law) (see below, substantive tests).

Initiation. A just and equitable winding up can be commenced by:

  • The company.

  • Any director of the company.

  • Any company shareholder.

  • The Minister for Economic Development (Minister).

  • The Jersey Financial Services Commission (JFSC).

If the winding up is commenced by the company, the Court requires that it does so following an extraordinary general meeting held in accordance with the Companies Law and the company's articles of association. However, an individual director or shareholder does not need any special consent to make the application.

Once the Court has ordered a just and equitable winding up, the Act of Court must be registered with the Registrar within 14 days.

Substantive tests. The Court will only make an order for a company to be wound up where no declaration under the Désastre Law has been granted and it is satisfied that it is either (Article 155, Companies Law):

  • Just and equitable to do so.

  • Expedient in the public interest to do so (only the Minister or the JFSC can make an application on these grounds).

Consent and approvals. The process can only be approved by the Court.

Supervision and control. A just and equitable winding up is supervised by the Court. Under Article 155 of the Companies Law, the Court has the power to:

  • Direct the manner in which the winding up is conducted.

  • Make such orders as it sees fit to ensure the orderly winding up of the company.

  • Appoint a liquidator.

The directors or liquidator can only act in a way that has been specified directly by the Court. If it is beneficial to the company and its creditors, the Court may permit the company to continue trading, even if the company is unable to pay its debts as they fall due.

Protection from creditors. The Court can make any orders it sees fit. It can make orders equivalent to what Article 159(4) of the Companies Law provides (see above, Creditors' winding up: Protection from creditors), but there is no guarantee it will do this.

Length of procedure. As with a creditors' winding up, a just and equitable winding up can be completed quickly. However, each case must be considered on its own merits.

Conclusion. The Court is responsible for ensuring that the affairs of the company are wound up appropriately and that the company is dissolved. If the company is insolvent, the Court can order procedures for a creditors' winding up to be followed instead.


Objective. Dégrèvement is the process for removing all encumbrances from immovable property at the request of a petitioning or enforcing creditor. Réalisation is the process which runs parallel to dégrèvement and applies to the debtor's movable property.

Initiation. A dégrèvement or réalisation can be initiated by either:

  • A judgment creditor.

  • The debtor making voluntary cession (that is, voluntarily giving up all of its property with the leave of the Court).

If the dégrèvement or réalisation is initiated by a judgment creditor and the debt remains unpaid for more than one month after the judgment is obtained, the judgment creditor can apply for an Acte Vicomte chargé d'ecrire (AVC). The AVC is an order from the Court. The order authorises the Viscount to inform the debtor that unless the debt is repaid within a further two months, its property will be adjudged renounced by the Court and the immovable property will be the subject of a dégrèvement. An adjudication of renunciation is a declaration of bankruptcy under Jersey law.

No specific consent or approval is required.

Substantive tests. If the process (see below, Supervision and control) is complied with, the debtor has no legal remedy to prevent either the AVC or the adjudication of renunciation.

Supervision and control. Attournées are appointed to administer the process after the Court has made an order for dégrèvement or réalisation. The attournées are usually two qualified Jersey lawyers who act as agents for the creditor that initiated the process.

Once appointed, the attournées must:

  • Apply to the Judicial Greffier (that is, a judicial officer of the court holding limited powers to conduct hearings) for a dégrèvement hearing date. The hearing must be between four and six weeks from the date of the adjudication of renunciation and relates only to the dégrèvement.

  • Publish a notice advertising the dégrèvement and the hearing date in the Jersey Gazette on two consecutive Saturdays.

  • Issue a summons to all secured and unsecured creditors known to them to attend the dégrèvement hearing before the Judicial Greffier.

At the hearing, the Judicial Greffier must call the creditors in the following order:

  • Unsecured creditors. These are called as a collective and asked whether they would like to take the property, subject to any hypothecs on the property. It is usual for the unsecured creditors not to attend, or to refuse.

  • Secured creditors. These are ordered by date of registration. If the creditor holding the most recent security takes the property, it does so subject to paying off the earlier ranking secured creditors in full. This is not attractive if there are a large number of secured creditors and very little (or no) equity in the property. If a secured creditor refuses to take the property, it loses its security in respect of that property for its claim against the debtor. However, the creditor will retain an unsecured claim against the debtor.

In the case of a réalisation, the Viscount is responsible for selling the debtor's movable property at public auction. The proceeds of the sale are lodged with the Treasurer of the States of Jersey and the attournées are responsible for distribution to the creditors.

Protection from creditors. Protection from creditors is limited. Creditors who are not repaid from the dégrèvement or réalisation process retain their claims on an unsecured basis.

Length of procedure. This is a short procedure with a strict timetable prescribed by law, which must be complied with (see above, Supervision and control).

Conclusion. The effect of the dégrèvement is to remove all hypothecs from the immovable property which post-date that of the creditor who takes the property (Tenant). Any hypothecs which predate those of the Tenant will remain. In practice, the Tenant will be required to repay any secured creditor with such a higher ranking security in full. There is no obligation to account to the debtor for any equity in the property.

At the conclusion of the formal dégrèvement process, the property is legally transferred to the Tenant. When the Tenant has discharged the debts secured by the hypothecs which predate those of the Tenant, the property will become unencumbered. Other creditors retain unsecured claims against the debtor.


Stakeholders' roles

8. Which stakeholders have the most significant role in the outcome of a restructuring or insolvency procedure? Can stakeholders or commercial/policy issues influence the outcome of the procedure?


Creditors have the most significant role. Since administration or any other rescue or restructuring procedure is unavailable under Jersey law, the procedures generally focus on the creditors' interests.

Influence on outcome of procedure

Jersey processes are predominantly creditor driven. Where discretionary remedies are available, the Royal Court will have creditors' interests at the forefront of its considerations.



9. Can a director, partner, parent entity (domestic or foreign) or other party be held liable for an insolvent debtor's debts?

In the absence of any agency, guarantee or contractual obligation under which such a party could be liable (jointly and severally or otherwise), the possibilities are limited.

However, the director of a company may be liable (though not directly to creditors) in the following circumstances:

  • Breach of fiduciary duty. Directors must act honestly and in good faith with a view to the best interests of the company. To paraphrase, reasonable care and skill must be used when performing their duties (Article 74, Companies Law).

  • Wrongful trading. The director of a company may be liable, without limitation, for the debts or other liabilities of the company if (Article 177, Companies Law, and Article 44, Désastre Law):

    • liabilities are incurred before the commencement of a creditors' winding up or a declaration of désastre; and

    • the director then knew that there was no reasonable prospect that, or was reckless as to whether, the company would avoid a creditors' winding up or a declaration of désastre.

  • Fraudulent trading. The directors responsible will be liable for an amount the Court thinks proper if it is found, during the course of a désastre or creditors' winding up, that the company has been carrying on business with the intent to defraud (Article 178, Companies Law, and Article 45, Désastre Law):

    • its creditors;

    • the creditors of another person; or

    • for a fraudulent purpose.

Other possibilities for making a claim against a director, shareholder, parent company or other party include:

  • Establishing that the company was such a person's nominee.

  • Establishing that such a person has committed fraud using the company, enabling piercing of the corporate veil.


Setting aside transactions

10. Can an insolvent debtor's pre-insolvency transactions be set aside? If so, who can challenge these transactions, when and in what circumstances? Are third parties' rights affected?

A company in a creditors' winding up, or that has had its property declared en désastre, can have its pre-insolvency transactions set aside in the following circumstances:

  • Transactions at an undervalue. The liquidator or the Viscount can bring an action to challenge any transaction the company has made during the five years preceding the date of the commencement of the creditors' winding up or the date of the declaration of désastre, if the transaction was:

    • a gift from the company or was for consideration worth significantly less than the value of the consideration provided by the company; and

    • the company was insolvent (on a cash flow test) when it entered into the transaction, or became so insolvent.

    The burden of proof is reversed if the transaction was entered into with:

    • a person connected with the company; or

    • an associate of the company.

  • Preferences. The liquidator or the Viscount can bring an action against the company to challenge any action of the company, if it is believed the company has done anything (or allowed anything to be done) that has the effect of putting a particular creditor, surety or guarantor into a better position than if the company had not done that thing or allowed that thing to be done.

    The action can only be brought if:

    • the action occurred during the 12 months preceding the date of the commencement of either the creditors' winding up or declaration of désastre; and

    • the company was insolvent (on a cash flow test) when the preference was given, or became so insolvent.

    The burden of proof is reversed if the preference was given to:

    • a person connected with the company; or

    • an associate of the company.

The Court can order a preference or transaction at an undervalue to be undone. This is to restore the position to what it would have been had the debtor not entered into the transaction or given the preference.

There are certain defences and protections available, including protections for third party persons other than those who dealt directly with the company, who acted in good faith.

Rules in respect of transactions at an undervalue and preferences are in the Companies Law at Articles 176, 176A and 176B and the Désastre Law at Articles 17, 17A and 17B.


Carrying on business during insolvency

11. In what circumstances can a debtor continue to carry on business during rescue or insolvency proceedings? In particular, who has the authority to supervise or carry on the debtor's business during the process and what restrictions apply?

There is no administration process or other rescue procedure to provide the mechanics for a company to carry on its business during insolvency. It is therefore unusual for a company to continue to carry on its business in these circumstances.

Under Jersey law, a company is either:

  • Solvent and legitimately trading.

  • Insolvent and should not be trading (unless there are exceptional circumstances).

Once a company has commenced a creditors' winding up, it must cease to carry on its business, except so far as may be required for its beneficial winding up (Article 159, Companies Law).

If it is beneficial to the company and its creditors to continue trading when the business is insolvent, it is likely that the company will either:

  • Seek agreements from its creditors which enable the directors to conclude that its debts can be paid from available resources.

  • Seek a court order to approve such actions. This is most likely to be given in the context of a just and equitable winding up (see Question 7, Just and equitable winding up).

The authority to supervise or carry on the company's business depends on the type of insolvency procedure:

  • Désastre. In a désastre, the Viscount has a limited statutory power to carry on the debtor's business. This power enables the Viscount to carry on the business as far as is necessary or expedient for its beneficial disposal (Article 26(h), Désastre Law).

  • Creditors' winding up. The liquidator (or directors, to the extent that their powers continue) have power to carry on the company's business for its beneficial winding up.

  • Just and equitable winding up. Any arrangements for carrying on the company's business are directed by the Court, which will decide:

    • the overall manner of conducting the winding up;

    • whether and how the company's business is to be carried on;

    • if to be carried on, whether the business is to be carried on by the directors or a liquidator;


Additional finance

12. Can a debtor that is subject to insolvency proceedings obtain additional finance both as a legal and as a practical matter (for example, debtor-in-possession financing or equivalent)? Is special priority given to the repayment of this finance?

There are no express provisions for additional finance in either the:

  • Companies Law.

  • Désastre Law.

In addition, there is no Jersey equivalent of the US Chapter 11 procedure and its provisions for debtor-in-possession financing.

The debtor is prohibited from obtaining any additional credit during the course of a désastre beyond the current maximum threshold of GB£250, unless the bankruptcy is disclosed to the creditor (Article 25, Désastre Law).


Multinational cases

13. What are rules that govern a local court's recognition of concurrent foreign restructuring or insolvency procedures for a local debtor? Are there any international treaties or EU legislation governing this situation? What are the procedures for foreign creditors to file claims in a local restructuring or insolvency process?


Article 49 of the Désastre Law provides statutory provisions in relation to the assistance to and co-operation with foreign courts. However, such assistance is limited to the territories set out in the Bankruptcy (Désastre) (Jersey) Order 2006. These territories are:

  • The UK (comprising England, Scotland, Wales and Northern Ireland).

  • Guernsey.

  • The Isle of Man.

  • Australia.

  • Finland.

In all other matters, applications must be considered on a case-by-case basis, with regard to the principles of comity.

If the appointment of a UK administrator for a Jersey company is sought, the procedure is that the Jersey Court, on application to it, makes a request to a UK court to appoint the UK administrator.

Money judgments

In relation to a judgment in which a sum of money is payable, the final and conclusive judgment of any British court is recognised in Jersey without any re-litigation on the merits of the case. The judgment is also enforceable, subject to compliance with the Judgments (Reciprocal Enforcement) (Jersey) Law 1960. However, this is not the case if the sum is payable in relation to:

  • Taxes.

  • Charges that are similar to taxes.

  • Fines or penalties.

Concurrent proceedings

Jersey courts will consider existing proceedings in other jurisdictions and generally operate on the basis that concurrent proceedings are undesirable. However, each case is treated on its own merits.

International treaties

The Désastre Law and the Companies Law expressly provide that Jersey courts must have regard to the UNCITRAL Model Law on Cross-Border Insolvency 1997. Jersey is not part of the EU, save to a very restricted extent in respect of trade in goods. Therefore, Regulation (EC) 1346/2000 on insolvency proceedings (Insolvency Regulation) does not apply to Jersey.

Procedures for foreign creditors

There are no special procedures for foreign creditors. Each application must be made and treated in accordance with the underlying claim and the rules that apply to all creditors.



14. Are there any proposals for reform?

The Security Interests Law is due to be replaced by the Security Interests (Jersey) Law 201-, adopted by the States of Jersey on 19 July 2011. The new legislation is pending approval by the Privy Council and is not yet in force. The new legislation will:

  • Substantially reform the way security is created and enforced.

  • Introduce a registration system.

The existing Security Interests Law will remain in force and continue to apply to all security interests created before the new legislation comes into force. However, if a security interest created under the Security Interest Law is amended in certain ways after the new legislation comes into effect, the security interest will be subject to the new legislation.

It is not known when the new Security Interests Law will come into force.

There is a further proposal at the consultation stage for very low value personal bankruptcies, which might otherwise be excluded from the désastre process as a result of the debtor's failure to satisfy the requirement for having realisable assets. It is not envisaged there will be any legislative changes in this respect for some time.


Contributor profiles

Paul Sugden

Carey Olsen

T +44 1534 822 261
F +44 1534 887 744

Professional qualifications. Associate of the Chartered Institute of Bankers, 1977; England and Wales, 1983; Jersey (Advocate), 1996

Areas of practice. Banking; regulatory; restructuring and insolvency.

Recent transactions

  • Lead offshore counsel to a leading European bank, co-ordinating the integration of a recently acquired custody operation as part of new branch set ups in Jersey, Guernsey and the Isle of Man.

  • Acting for a major bank group on the registration and start-up of a new Jersey branch.

  • Acting for a global bank on a restructuring part of its Jersey banking operations.

Nicholas Crocker

Carey Olsen

T +44 1534 822 409
F +44 1534 887 744

Professional qualifications. England and Wales, 1984; Jersey (Solicitor), 1997

Areas of practice. Banking and finance; corporate and commercial; listing services; restructuring and insolvency.

Recent transactions

  • Acted for a major international bank on detailed preparations for enforcement of Jersey shares security (over the shares of a holding company of a very substantial Jersey structure) for substantial financing, including consideration of potential impact of supervening insolvency.

  • Acted on group corporate restructurings including treatment of a transaction at undervalue and distribution issues.

  • Acted for leading UK banks on debt restructurings, including treatment of a potential transaction at undervalue, distribution and preference issues.

Marcus Pallot

Carey Olsen

T +44 1534 822 427
F +44 1534 887 744

Professional qualifications. England and Wales, 1997; Jersey (Advocate), 2004

Areas of practice. Banking and finance; corporate and commercial; restructuring and insolvency.

Recent transactions

  • Novel application leading to an extension of the law of just and equitable winding up of a trading company permitted to carry on trading during process.

  • Sale of business and assets of insolvent trading company. Value was realised for the business and recovery for all creditors: which was not foreseeable in a bankruptcy.

  • A series of reciprocal recognition matters including acting for BOS and NAMA in commencing the process of administration in England for the Jersey incorporated Battersea Power Station borrowing companies.

  • Jersey's first quasi pre-pack application under the just and equitable jurisdiction leading to successful sale of business and assets out of liquidation.

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