Insolvent Jersey companies: a creditor’s options

By Amy Benest

There was a ripple of concern in both Jersey and the UK after the High Court’s decision in HSBC Bank v Tambrook Jersey Ltd [2013] EWHC 866 (Ch). The High Court held that section 426 of the Insolvency Act 1986, which allows the English court to assist a Jersey court, was not triggered because the Jersey Court was not acting ‘in its function as an insolvency court’ by issuing a letter of request to the English court.

The High Court held that without the Royal Court determining insolvency proceedings, it was not entitled to seek assistance from the English court. The decision threatened to dismantle a developed practice by which creditors had been able to prompt Jersey companies to be placed into administration in the UK.

On HSBC’s appeal, the Court of Appeal overruled the lower court’s decision. Accordingly, it confirmed the established practice that a creditor could petition the Royal Court to issue a letter of request to the English court, further to which the English Court would appoint an administrator and the debtor company would be placed into administration. It stated that by hearing HSBC’s representation and issuing the letter of request, the Royal Court had exercised its insolvency jurisdiction and therefore did fall within the provisions of section 426. It is therefore confirmed that formal insolvency procedures are not required in both jurisdictions for the purposes of section 426…

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