Anguilla Publishes Draft Bill For New Insolvency Legislation

The Anguillan government has published a bill for a new Insolvency Act for public review and consultation.

Background

Reform of Anguillan insolvency law is long overdue. Personal bankruptcy is presently regulated under the Bankruptcy Act (Cap B.15) which is based loosely on the English Bankruptcy Act 1914, but corporate insolvency is given only the most superficial treatment by existing statute law. A number of these difficulties were brought to the fore in the recent high profile bankruptcy of Cap Juluca (in which Harneys acted for the majority creditor group).

The new bill is closely modelled on the Insolvency Act 2003 of the British Virgin Islands (BVI) which was drafted by senior lawyers working in Harneys' BVI office. In many instances the relevant provisions have been copied across word for word, but the Anguillan legislature has also updated and revised certain provisions which had been separately considered for reform in the original BVI template legislation.

Key Provisions

The new statute, if enacted, will provide a comprehensive framework for insolvency in place of the current incomplete patchwork of provisions. As well as providing a clear structure for insolvent liquidations, the new regime will introduce creditors' arrangements and administration orders to facilitate rehabilitation of financially distressed companies. These provisions are however carefully circumscribed to protect the rights of secured creditors, although unusually a floating chargeholder does not have the right to block the appointment of an administrator.

The legislation will also reinforce the pari passu system of distribution between creditors on winding up generally, but introduces a new class of "postponed debts." The protection of parity between creditors is further bolstered by a new voidable transactions regime, whereby transactions entered into in the "twilight" period prior to insolvency may be challenged by a liquidator if they constitute an unfair preference, an undervalue transaction, a voidable floating charge or an extortionate credit transaction. The new law will also permit the liquidator to bring proceedings against errant directors for misfeasance, insolvent trading or fraudulent trading.

Under the new regime insolvency practitioners would be licensed...