Guernsey operates a modern and flexible corporate insolvency regime, and the jurisdiction benefits from a professional services infrastructure including skilled and qualified administrators, insolvency practitioners and lawyers, and an experienced and independent judiciary.
Corporate insolvency in Guernsey is governed by the following legislation:
- The Companies (Guernsey) Law, 2008 (the "Law");
- The Companies (Guernsey) Law, 2008 (Insolvency) (Amendment) Ordinance, 2020 (the "Ordinance"); and
- The Companies (Guernsey) (Insolvency Rules) Regulations, 2022 (the "Insolvency Rules").
The Royal Court of Guernsey (Ordinary Division) (the "Court") has jurisdiction to make orders in respect of the following insolvency measures:
- administration;
- winding up (voluntary and compulsory winding up);
- schemes of arrangement; and
- receivership.
These statutory measures are only applicable to companies and protected cell companies. Separate statutory provisions are applicable to the winding up of partnerships, limited partnerships, foundations and trusts.
Insolvency practitioners in Guernsey are encouraged to use the Guernsey Insolvency Practice Statements (GIPS), which are guidance notes based on UK Statements of Insolvency Practice that set out best practice principles and compliance standards with which practitioners are encouraged to comply. These measures are voluntary and are not binding on practitioners.
Administration
The purpose of administration is to maintain the company as a going concern or achieve a more advantageous realisation of the company's assets than would be effected on a winding up.
- The administrator may do all things necessary or expedient for the management of the company's affairs, business and property (or cell, as the case may be), including the power to remove or appoint any director and call any meeting of members or creditors;
- An application may be made by the company, directors, any member, creditor, liquidator, or incorporated or protected cell (if applicable);
- Notice shall be delivered to the register at least two clear days before the application is heard by the Court; and
- Expedited or "pre-pack" administrations are available in Guernsey under the current legislative framework, the first case of which was successfully brought before the Court by this firm in 2014 (for more information, please see our briefing here).
Voluntary winding up
Voluntary winding up is an out of court process which commences upon the passing of the resolution for voluntary winding up.
- Voluntary winding up is possible if:
‒ the period fixed by the memorandum or articles for the duration of the company expires or any event occurs upon which the memorandum or articles provide that the company shall be dissolved – provided that, in each case, the company passes an ordinary resolution that it be wound up voluntarily; or
‒ the company passes a special resolution that it be wound up voluntarily.
- A distinction between solvent and insolvent voluntary winding ups was introduced by the Ordinance in 2023, with the introduction of a 'Declaration of Solvency' to be signed by a director. Though not a compulsory measure, if the declaration of solvency is signed and filed with the Registrar within 30 days then the voluntary winding up can be streamlined. If not signed, then an independent liquidator must be appointed and hold a creditors' meeting where a report is presented to the company's creditors.
Compulsory winding up
Winding up is the legal process by which a company comes to the end of its life, and by which its assets are realised and its liabilities determined, and any funds distributed to those entitled to receive them.
- An application for compulsory winding up can be made by the company, any creditor, member, director or interested party.
- The Court may make an order for winding up if, amongst other matters:
‒ the company by special resolution resolves it;
‒ the company is unable to pay its debts; or
‒ the Court considers it just and equitable to do so.
- A company is considered 'unable to pay its debts' within the meaning of the Law if the company fails to satisfy, within the period of 21 days, a written demand for payment served at its registered office via His Majesty's Sergeant, or if it fails to satisfy the solvency test.
- A company is considered to satisfy the solvency test within the meaning of the Law if it is able to pay its debts as they become due, the value of its assets is greater than the value of its liabilities or, in the case of supervised companies, any other requirements as to solvency as imposed by statute.
- Upon the making of an order for compulsory winding up, the Court may appoint a liquidator (an independent officer of the Court who is typically an insolvency expert) to be sworn into office to realise the beneficial winding up of the company.
- The liquidator must send a copy of the compulsory winding up to the Registrar of Companies within seven days.
Schemes of arrangement
Much like the English law system, a scheme of arrangement in Guernsey is a court-sanctioned agreement between a company and its creditors or members.
- An application may be brought by the company, any creditor, member, liquidator, administrator or receiver (if applicable).
- The scheme must be voted on by 75% in value of the members or class of members (excluding any shares held as treasury shares) or creditors (as the case may be), present and voting either in person or by proxy, before being sanctioned by the Court.
- The sanctioned scheme is to be filed with the Registrar of Guernsey Companies within seven days.
- The scheme is binding on all creditors, members and the company (also liquidator, administrator or receiver if applicable).
Receivership
The Court may make a receivership order in respect of one or more cells of a protected cell company – a structure frequently used in the insurance sector.
- This route is to be used for protected cell companies only.
- A receiver is appointed, who has the same powers as a liquidator.
- A receivership is equivalent to a winding up of a cell where its assets are unlikely to meet its liabilities. Receivership is used where the cell itself is insolvent and not where a liquidator has been appointed to the protected cell company as a whole.
Location: Guernsey
Related Services: Insolvency & Restructuring | Corporate & Commercial
