Enhancing Jersey's Insolvency Framework

We are excited to share that an administration regime is being considered as part of the Consultation on Amendments to the Companies (Jersey) Law 1991, aimed at strengthening and modernising Jersey's insolvency framework. The proposals put forward by the Association of Insolvency and Restructuring Experts (ARIES) have been designed to support viable businesses facing financial distress and provide an alternative to the Creditors’ Winding Up procedure where a business is facing cash flow issues which make it technically insolvent.  

Key highlights:

1. Introduction of Administration Procedure: This new mechanism would provide crucial support for businesses in financial distress, offering a structured path to recovery. It allows companies to address cash flow issues without immediately resorting to liquidation, potentially leading to better outcomes for creditors and stakeholders.
2. Court Oversight: Applications for administration will be made to the Royal Court of Jersey, ensuring the integrity of the process and preventing abuse.
3. Moratorium on Legal Actions: The proposed moratorium during administration would offer essential breathing space for administrators to develop and implement effective recovery plans, free from the pressure of ongoing legal actions. This gives businesses the opportunity to stabilize and restructure without the immediate threat of creditor actions.
4. Administrator Powers: The comprehensive powers proposed for administrators, including managing the company’s affairs, removing directors, and calling creditor meetings, will enable effective restructuring and turnaround efforts. This ensures that businesses can be managed efficiently during the administration process.
5. Secured Creditors' Rights: Preserving the rights of secured creditors is vital to maintaining Jersey’s reputation as a creditor-friendly jurisdiction, balancing the interests of debtors and creditors.

A similar rescue procedure is already available in the UK and Guernsey and therefore the proposed changes will be familiar to many practitioners, investors, and intermediaries. The proposed amendments would represent a significant step forward for Jersey's insolvency and restructuring landscape and provide businesses with the tools they need to navigate financial difficulties and emerge stronger.

The Consultation paper can be viewed online.

If you have any questions, please contact us.