Vol 7 (2010) - Issue 6

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Jersey Companies and UK Administration

The Representation of Anglo Irish Asset Finance [2010] JRC087 was a recent decision of the Royal Court of Jersey relating to an application by a UK creditor for a letter of request to be issued to the English High Court, requesting that an administration order be made in respect of a Jersey company. It was a decision in what has been a developing line of Royal Court decisions over the past 8 years on this subject.

Background
Since the economic downturn, there has been a growing number of interested parties asking the question whether it is possible to put Jersey companies, particularly those holding UK real estate, but also other assets, into English administration. There is no Jersey statutory equivalent to administration. Where a Jersey company and its creditors are seeking to rescue the company as a going concern, or there is a desire to seek to achieve a better realisation for creditors through an alternative to an insolvent liquidation in Jersey (either by way of a désastre or a winding up), in the absence of a local alternative to the terminal effect of a liquidation, it is necessary to consider options available elsewhere. English administration may often offer an appropriate solution.
There are routes by which a Jersey company might fall within an insolvency regime of a foreign jurisdiction, essentially in circumstances where it is insolvent but has its management and/or assets in that foreign jurisdiction. Where a foreign company's centre of main interests is in England, there is English authority (such as Re BRAC Rent-A-Car International Inc [2003] 2 All ER 201 and Re DBP Holdings Limited [2004] EWHC 1941 (Ch)) to the effect that the English court has jurisdiction to hear a direct application to it for an order placing that non-English company into administration – Jersey companies would be no different. A Jersey company's 'centre of main interests' would be determined, for these purposes, in accordance with the EU Regulation on Insolvency Proceedings. Other English processes might be invoked against a Jersey company: for example, an English Law of Property Act 1925 receiver may potentially be appointed over the UK property of a Jersey company under the terms of an English law security agreement without involving the court. Having said that, depending upon the circumstances (essentially where there are steps to be taken in Jersey), it would be advisable for a receiver appointed in such circumstances to obtain recognition in Jersey. In any event, at the very least, the applicant for recognition would be well advised to liaise with the Jersey Viscount's Department (the Viscount being the officer of the Jersey Court with responsibility for the conduct of both corporate and personal bankruptcies under the Bankruptcy (Désastre) (Jersey) Law 1990) with regard to steps that might be required to be taken in respect of the company.
Notwithstanding the potential for a Jersey company to become subject to an English insolvency proceeding, the Jersey Court does have jurisdiction to seek the involvement of the English Court through the issue of a letter of request. There are a variety of reasons why a party might first seek an order of the Jersey Court for the issue of a letter of request in the context of an intended application for an administration order.
Although a matter of English law, it is understood that where a Jersey company's centre of main interests is not in England, any application for an English administration of the Jersey company would necessarily need to be made pursuant to a letter of request from the Royal Court to the English court, in order to provide a basis for the English Court to exercise its jurisdiction under Section 426 of the Insolvency Act 1986.