Jersey insolvency laws: ancient and modern

The current insolvency regime in Jersey can be traced back to the 18th century. The Bankruptcy (Desastre) (Jersey) Law 1990 (the Bankruptcy Law) has been amended over time, but is largely in the same form, and offers the same options as regards insolvent entities, as when it was introduced back in 1991. Further, some of the historic regimes which are still used today, such as remise des biens and degrevement, remain governed by laws dating back to the 19th century. Unsurprisingly, there have been repeated calls for the insolvency regime in Jersey to be overhauled and updated to incorporate procedures available in other jurisdictions. One particular criticism has been the lack of flexibility under the Jersey system, and the lack of more modern insolvency regimes, in particular administration.

The Royal Court of Jersey has had to consider how procedures available under the current regime can be applied to modern scenarios and the following cases demonstrate the pragmatic approach the Court is adopting in order to apply laws with ancient origins to modern problems.

One of the key criticisms of the Jersey regime has been that it has no rescue procedure in place such as those which are available in jurisdictions which allow for administration (save for remise des biens, although the criteria and procedure mean that it has little relevance to corporate insolvencies and is generally only used by personal debtors facing degrevement or desastre). The options available in Jersey are inevitably fatal to the entity concerned, and are generally perceived to be expensive and potentially detrimental to the interests of affected parties, principally the creditors. The Royal Court has, however, applied the ‘just and equitable winding up’ procedure under Article 155 of the Companies (Jersey) Law 1991 to put in place mechanisms which allow for businesses to trade out as part of a winding up process. While still fatal to the entity concerned by the nature of being a winding-up process, it does offer more flexibility to the insolvency practitioner appointed to seek to run the business, pending its disposal in such a manner as to ensure the interests of affected parties are protected…

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