Cross Border Insolvency - Putting Jersey Companies Into English Administration?

Jersey has its own distinct insolvency procedures, the most

important of which for companies are creditors winding up and

désastre (bankruptcy). A creditors winding up is

not instigated by creditors – it is the insolvent company

which initiates this non-court procedure and so it is more akin to

a voluntary winding up in the United Kingdom. Instead creditors

have to apply to the Royal Courts of Jersey to have the company

declared "en désastre". This is a

liquidation process driven by a court officer, the Viscount, who

acts rather like the Official Receiver in the United Kingdom.

In either case the inevitable result is the realisation of the

insolvent company's assets and the distribution of the cash

proceeds amongst creditors in line with the order of priorities set

out in statute, followed by dissolution. Although both Jersey

procedures have some flexibility, they do not necessarily provide

the same level of flexibility offered in practice by English

administration under the English section 426 Insolvency Act

1986. There is no equivalent administration process in

Jersey.

However, the Jersey courts have been willing to facilitate the

use of English administration for some Jersey companies whose

economic activities are mainly outside Jersey where that might

achieve the best possible outcome for creditors and the greatest

opportunity for salvaging the underlying business. The

United Nations Commission on International Trade

Law (UNICITRAL) model law on cross border insolvency has

been influential in that regard although its application in Jersey

is limited as discussed below.

Letter Of Request

To put a Jersey company into English administration, an

application must be made for a letter of request from the Royal

Court of Jersey to an English Court. There is no statutory

procedure. The application is made to the Royal Court under its

inherent jurisdiction following local authorities. It is,

therefore, a discretionary remedy. The application is instigated by

"representation" which is made by a Jersey advocate on

behalf of the applicant. The representation summarises the

background and reasons for the application and it details the

orders sought from the court including the form of the letter of

request.

The representation is supported by affidavits. These may perhaps

be sworn by a director of the insolvent company, representatives of

any security trustee or senior creditors and accountants. The

affidavits need to cover the nature and location of...