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5 things you didn’t know about Jersey

Nigel Sanders, partner at Ogier Jersey, takes creditors and insolvency practitioners through the island’s laws.

Nigel Sanders
partner, Ogier Jersey

As an international financial centre, Jersey’s insolvency law has developed through statutory frameworks and customary law principles in a way that is intended to balance the interests of creditors and debtors alike. The following 5 areas will be of particular interest to creditors doing business involving Jersey-based companies or individuals.

1 – Creditor led insolvency procedures in Jersey

Creditors with liquidated debt of in excess of £3000 can seek a declaration from the Jersey Court that their debtor be declared en désastre under the Bankruptcy (désastre) (Jersey) Law 1990 (the 1990 Law). There is no formal statutory demand process. Upon a declaration being made, title and possession of the property of the debtor vest automatically in the Viscount, an official of the Royal Court. With effect from the date of the declaration, a creditor (other than a secured creditor) has no other remedy against the property or person of the debtor, and may not commence or continue any legal proceedings to recover the debt.

A creditors’ winding up under the Companies (Jersey) Law 1991 requires a shareholder resolution to be passed. On a creditors’ winding up, liquidators are appointed, usually by the creditors. The liquidators will stand in the shoes of the directors and administer the winding up, gather in assets, settle claims and distribute assets as appropriate. After the commencement of the winding up, no action can be taken or continued against the company except with the leave of court.

There are no Jersey law insolvency procedures equivalent to the UK administration or administrative receivership or to the US Chapter 11 bankruptcy procedures. Insolvency proceedings in Jersey do not automatically combine parent and subsidiary companies’ assets into a single pool; the insolvency is on a company by company basis. However, the provisions in the Companies Law relating to just and equitable winding up have been applied by the Royal Court in a widening range of circumstances in recent years (including, for example, where a pre-pack sale of a business was under consideration).

2 – Secured creditors

Neither a declaration en désastre nor the commencement of a creditors’ winding up prevents secured creditors enforcing their pre-existing rights against the property of the company in respect of which security is held.

Under the Security Interests (Jersey) Law 2012 (which relates to security over intangible movable property such as shares), for security created under that Law, a secured creditor with fixed security (i.e. security perfected by control) or floating charge security (i.e. security perfected by description and registration) can enforce its security in the same way, usually by exercising a power of sale or appropriation.

Bankruptcy of the grantor of the security will not affect the power of the secured party to appropriate or sell the collateral provided the security is perfected. Un-perfected security will be void upon insolvency.

3 – Set-off

Article 34 of the 1990 Law provides for mandatory set off of mutual credits, mutual debts and other mutual dealing between a debtor and a creditor. By virtue of the Bankruptcy (Netting, Contractual Subordination and Non-Petition Provisions) (Jersey) Law 2005, contractual set-off provisions may survive the bankruptcy of any party or other person and will be enforceable in accordance with their terms, regardless of any lack of mutuality.

4 – Powers of a liquidator or the Viscount to set aside transactions

The liquidators, on a creditors’ winding up, and the Viscount on a désastre, may:

• disclaim any onerous property (including unprofitable contracts, but excluding Jersey real property) by giving notice to interested persons;

• apply to the Royal Court for an order setting aside any transactions at an undervalue or preferences entered into or given within a relevant period before the commencement of the creditors’ winding up or the declaration of désastre; and

• apply to the Royal Court for an order setting aside extortionate credit transactions entered into in the prior three years.

The relevant period for transactions at an undervalue is 5 years preceding the winding up or désastre, provided the debtor was insolvent at the time or became insolvent as a result of the transaction. For an undervalue transaction with a connected or associated person, the burden shifts such that the transaction will be deemed liable to be set aside unless it is provide that the debtor was solvent at the time or did not become insolvent as a result of it.

For preferences, the relevant period is 12 months. A preference arises where the debtor permits something to be done to put a creditor in a better position in the event of a winding up of the debtor than it would have been, provided that the Court is satisfied that the debtor was influenced to give the preference by a desire to put the creditor in the better position. Again, the burden of proof shifts for connected or associated persons.

On setting aside, the Royal Court has a broad discretion with regard to the orders that can be made, albeit the interests of third parties who have acquired property interests in good faith and for value.

5 – Cross-border insolvency – recognition and passporting

Article 49 of the 1990 Law provides that the Royal Court shall assist the courts of prescribed countries and territories (currently the UK, Guernsey, the Isle of Man, Finland and Australia) in all matters relating to the insolvency of any person to the extent it thinks fit. However, this does not exclude the pre-existing customary law right of the Royal Court to exercise its inherent jurisdiction to assist non-prescribed countries or to have regard to the rules of private international law. A letter of request is first required from the home Court seeking the assistance of the Royal Court.

Jersey has recognised a wide range of foreign office holders to enable them to act in Jersey in respect of insolvent overseas entities with interests or liabilities in Jersey (typically Jersey premises, employees and other creditors). These have included English administrators and liquidators and fixed charge receivers.

Although the EU Regulation on Insolvency Proceedings does not apply in Jersey, the Royal Court may still have regard to where the debtor’s centre of main interests is in considering applications to commence insolvency proceedings. It may be possible to put a Jersey company into administration under English law, by making an application for a letter of request from the Royal Court to the English court. It would be necessary to show in the application to the Royal Court that English administration would be likely to achieve the best possible outcome for the debtor and creditors (as opposed to local alternatives, such as a creditors’ winding up or a désastre).


Jersey insolvency law is undergoing regular review and consultation and it is anticipated that developments will be seen in the near future that will provide greater flexibility and options for creditors of Jersey companies.

Posted on 19th August 2015 by Fred Crawley



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