Vol 9 (2012) - Issue 6

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Guernsey Insolvency Update

Guernsey has a long established statutory corporate insolvency framework which has been updated from time to time. Unlike, for example, England and Wales, Guernsey’s corporate insolvency legislation is included under the companies law rather than under a standalone insolvency law. The most recent companies legislation is the Companies (Guernsey) Law 2008. The 2008 Law was the result of a wholesale revision and consolidation of the Guernsey corporate legal framework.
From an insolvency perspective, the 2008 Law consolidated the provisions concerning Administration Orders – a development introduced into Guernsey law in 2005 for ordinary limited companies. Those familiar with Guernsey will know that in recent months there have been a string of significant administration applications pertaining to UK orientated property portfolios (for example the administration of the four general partners constituting the ‘Gemini portfolio’ under the Propinvest Group). This feature sets Guernsey apart from Jersey where there is no equivalent jurisdiction, which has led to a degree of legal gymnastics in recent time to secure a similar effect through recognition of administration orders secured in England but generated through requests from the Royal Court of Jersey.
Not content to rest on its laurels, though, the States of Guernsey has announced recently the recommendations arising from the consultation carried out on proposed changes to the 2008 Law. Whilst its focus was on the corporate law aspects of the 2008 Law the consultation also encompassed the insolvency regime in Guernsey. The purpose of the consultation exercise was to determine what, if any, changes may be required now that the 2008 Law had been in place for some time. In terms of insolvency law (and pending specific and standalone revision of the insolvency regime in Guernsey) the consultation has recommended a number of amendments. The most significant proposed changes relating to insolvency are as follows:
(1) The introduction of express provision for the restoration of companies that have been dissolved on completion of a winding up.

The laws of other jurisdictions, particularly England and Wales, influence the development of Guernsey company law and make express provision for this. It is felt that an express provision would remove any uncertainty about the extent of the Court’s power to order restoration in circumstances where it is just and appropriate – for example to permit the disposal of an asset of a company that has come to light after completion of the winding up.

(2) To provide that the Guernsey Financial Services Commission must be given not less than seven days notice of any winding up application.

At the moment notice is only required under limited circumstances set out in section 409 of the 2008 Law:
– Where the company concerned is a ‘supervised company’;
– Where it is engaged in a financial services business; and
– Where it is in the class or description of companies prescribed by the GFSC.

The proposed amendment is considered necessary in order to ensure that an application for winding up does not impact upon any regulatory action being taken or contemplated by the GFSC. Whilst it is most unlikely that in the usual run of an application the GFSC would wish to make representations, this amendment will ensure that the GFSC can intervene where appropriate in order to safeguard the interests of, say, investors and uphold the reputation of Guernsey as a well regulated jurisdiction.