Domestic procedures
Cross-border procedures
Avoidance transactions
Contributions to the liquidation estate and liability of officers

This article answers key questions regarding restructuring and insolvency in Guernsey.

Domestic procedures



What are the principal insolvency procedures for companies in Guernsey?

The principal insolvency procedures are liquidation (winding up) and administration.

A scheme of arrangement procedure can also be used for a company to come to an arrangement with creditors.

Are any of the procedures available on a provisional basis?

Yes. Compulsory liquidation can be made on a provisional basis.

What requirements must be satisfied for the procedures to be pursued?

Compulsory liquidation
The main reasons are that a company cannot pay its debts or that it is just and equitable to do so. A recent Guernsey case has also seen a company wound up because it failed to provide accounts to its members.

Voluntary liquidation – whether company is solvent or insolvent
An ordinary resolution (as provided in the memorandum and articles of association) or a special resolution.

The company must be insolvent and the court must be satisfied that an administration
order can either:

  • ensure that the company survives or can be sold as a going concern; or
  • that there will be a more advantageous realisation of the company's assets
    than on liquidation.

Scheme of arrangement
A three-stage process must be followed:

  • The court must establish that it has jurisdiction to call meetings of
  • The meeting of creditors/members must be held in order to obtain the 75%
    approval of the scheme.
  • The court's sanction must be sought in respect of the scheme.

What is the procedure and how long does it typically take?

Compulsory liquidation – no specific time and the court does not tend
to impose time limits

An application can be made by the company, any director, member or creditor or any
other interested party (or by the Guernsey Financial Services Commission (GFSC)
in certain specified circumstances).

The company should be notified of the date, time and place of a winding-up
application; the court will not hear the application unless it is satisfied of this.

Applications are typically filed on a Thursday and heard the following Tuesday (so
that a company can be placed into liquidation within a few days). The court can also sit on an urgent basis if required.

The liquidator must, within seven days of the compulsory winding-up order, send a
copy of the order to the registrar.

The court will appoint the liquidator at the hearing of the winding-up application.

Voluntary liquidation – no specific time limits
The winding up commences upon the passing of the resolution for winding up.

Once the resolution has been passed, a copy must be delivered to the registrar
within 30 days of the date on which it was passed. Failure to do so will result in a
civil penalty.

The company (by ordinary resolution) appoints a liquidator and fixes their
remuneration (the company can delegate to creditors its power to appoint a liquidator).

Administration – no timeframe as to how long an administration order
remains in force and the court can set a time limit but rarely does so

The company, its directors, members and creditors and the GFSC can apply for an
administration order.

Notice of the hearing must be given to the company, the GFSC and anyone else that
the court directs, including the creditors, so that those parties can choose to make
representations to the court.

Notice of the application for an administration order should be given to the registrar
at least two clear days prior to the making of the application.

The application is usually filed on a Thursday and heard the following Tuesday. The
court can sit on an urgent basis if required.

The administrators will be appointed by the court at the hearing and sworn into office.

The administrator must:

  • within seven days of the administration order, send a copy of the order to
    the registrar; and
  • within 28 days send notice to creditors of the appointment.

Scheme of arrangement
The process can be relatively quick and will be reviewed on a case-by-case basis.

Can any procedures be pursued without the involvement of the court?

Yes. Voluntary liquidation is a process which can take place without the involvement
of the court.

What is the effect upon control of the company and its assets during those procedures?

Upon appointment (by the members or the court), the liquidator has custody and
control of the assets of the company. The powers of the directors and members of
the company cease, save for limited exceptions.

In a compulsory liquidation, the company ceases to carry on business and commits
an offence if it continues to do so, with some limited exceptions. Liquidators are
given powers which include bringing or defending civil actions.

Wide powers of management are granted to administrators of Guernsey companies
(Schedule 1 to the Companies Law).

A scheme is not a formal insolvency process and so the company, under its directors,
remains in control of its assets during and after the scheme process.

Is there an automatic moratorium and, if so, when does it come into effect and what is its effect?

No. There is no moratorium in either a compulsory or voluntary liquidation.

While the administration order is in force, no resolution may be passed or order
made for the winding up of the company, and any application on foot for the
company's winding up will be dismissed. No proceedings can be commenced or continued against the company, except with the consent of the administrator or the
leave of the court and, if the court gives leave, to such terms and conditions as the court may impose. This is a creditor-friendly moratorium so that creditors with security and creditors with set off may enforce those rights notwithstanding the moratorium in place.

Can a company be forcibly wound up other than when insolvent?

Yes, if:

  • it does not commence business within one year of its incorporation;
  • it suspends business for one year;
  • it has no members;
  • it has failed to comply with a direction of the registrar of companies to
    change its name or hold a general meeting of members;
  • it has failed to send its members a copy of its accounts or reports under
    specific provisions of the Companies Law; or
  • the court is of the opinion that it is just and equitable that the company be
    wound up.

The GFSC can make an application for the winding up of a company which will be
granted if the court is persuaded that the company should be wound up for the
protection of the public or the reputation of the Bailiwick.

To what extent are the procedures designed to facilitate a rescue of a company's business?

One of the primary aims of administration is to ensure that the company, or all or
part of its business, survives or can be sold as a going concern. This is in contrast to liquidation where the primary role of the liquidator is to realise the company's assets and make distributions according to a statutory order of priority.

A scheme can be used as a rescue procedure because the company can come to a formal compromise with its creditors.

Can the procedures be used to facilitate the sale of all or part of the insolvent company's business?


In the case of administration and liquidation, the officeholder can sell the business and
assets of the company.

An administration process is better suited to facilitating a sale of the business as a
whole because of the moratorium which allows the company to trade with a degree of

Guernsey has also recently recognised the concept of the 'pre-pack', which allows the
sale of the business to a buyer immediately upon the appointment of administrators, allowing for the seamless continuation of the business.

In a liquidation, a piecemeal sale of business and assets is common in order to generate realisations.

Cross-border procedures



To what extent do the
courts in Guernsey lend assistance to overseas
appointees (through recognition) and in what circumstances?

Statutory recognition
Guernsey will provide judicial assistance in relation to insolvency matters to the courts of England and Wales, Scotland, Northern Ireland, the Isle of Man and Jersey.

The liquidator or administrator will apply to the court in their jurisdiction and that court will send a letter of request to the Guernsey court.

The Guernsey court will not comply with the letter if the result would be contrary to public policy or oppressive. The court can apply the insolvency law of either Guernsey or the foreign jurisdiction in relation to comparable matters falling within its jurisdiction.

The court will seek to assist foreign insolvency procedures where possible (and the insolvency officeholder can seek recognition under the common law). However, the common law concept of 'modified universalism' has been restricted following the 2015 Guernsey case of Re X (a bankrupt).

Are there any limitations
typically imposed in
respect of the recognition
of an overseas appointee?

Yes, if an insolvency officeholder seeking to exercise powers overseas must not only be exercising those powers under the law of the jurisdiction where they were appointed, but there is also a corresponding common law or legislative power in the foreign jurisdiction (view of the majority of the board in Singularis).

The minority of the board in Singularis limited this further by suggesting that the officeholder can exercise the power only if there are specific legislative provisions both in the home and foreign jurisdictions. A Re X (a bankrupt) held that the Guernsey court prefers this minority view.

What kinds of overseas
appointee have been
recognised in Guernsey?

Overseas administrators, liquidators, trustees in bankruptcy, regulatory court-appointed receivers and fixed charge receivers have been recognised in Guernsey.

Do the courts in Guernsey
assist in applications to
subject a company
incorporated in Guernsey becoming subject to an insolvency procedure in another jurisdiction?

Yes. The assistance described above is reciprocal. Under Section 426 (as extended to Guernsey), reciprocity is only with the UK and Crown dependency courts. Under the common law, it is, in theory, with any court worldwide.




What are the principal
forms of security taken in Guernsey in respect of movable and immovable property?

Movable property

  • Tangible assets include liens, a pledge, a landlord's right to priority for unpaid rent, a mortgage and a reservation of title clause.
  • Intangible assets include a security interest under the Security Interests (Guernsey) Law 1993 or a security under the Law of Property (Miscellaneous Provisions) (Guernsey) Law 1979.

Immovable property

  • Security over real estate by either rente hypothèque, securing a fixed annual sum, or hypothèque conventionnel (a bond).
  • Bonds – either a general charge or a specific charge. Bonds in Guernsey are slightly different to bonds in other jurisdictions and have a number of specific characteristics and requirements which must be complied with before they are effective.

What is the effect on
secured creditors of the commencement of an insolvency procedure?

Secured creditors will be repaid from the proceeds once a property over which they hold security is sold.

Where a creditor has a security interest granted under the Security Interests Law, that creditor is entitled to the proceeds of the sale of the collateral when it is sold. However, that creditor must apply the proceeds in the order specified by Section 7 of that law.

Which creditors are
preferred and to what

Preferred debts include rent to a landlord, wages, accrued holiday remuneration, income tax and social insurance. However, preferred creditors do not have priority over secured creditors.

What is the position regarding the recoverability
and quantum of liquidator's fees and expenses of the insolvency procedure?

For both compulsory and voluntary liquidation, all costs, charges and expenses properly incurred in a voluntary winding up of a company, including the remuneration of the liquidator, are payable from the company's assets in priority to all other claims.

Practice directions of 2015 regulate the information that officeholders should give to the court regarding their remuneration and expenses. The court will then fix the officeholder's remuneration upon appointment based on that information and can review fee increase requests periodically.

Avoidance transactions



What if any categories
of transaction can be
avoided or set aside?

Guernsey law does not allow officeholders to claw back transactions at an undervalue, although it does allow clawback under the Customary Law notion of 'fraudulent preferences'.

Pauline actions enable transactions to be set aside if they have defrauded creditors.

Who is responsible for
seeking orders to set aside such transactions?

The liquidator (preferences) and the victims or creditors (Pauline actions).

Contributions to the liquidation estate and liability of officers



Can directors or
shareholders be required
to contribute to the
liquidation estate?

Yes, in the case of:

  • delinquent officers: appropriation or misapplication of company assets, breach of fiduciary duty, personal liability for company debts;
  • fraudulent trading: intention to defraud creditors or for any fraudulent purpose; and
  • wrongful trading: director knew or should have suspected at some time prior to the commencement of the winding up that there was no reasonable prospect of the company avoiding going into insolvent liquidation (unless they also took every reasonable step to minimise loss to creditors).

What liability can directors or other officers attract in respect of an insolvent company?

See above.

In what circumstances can directors be disqualified
as a consequence of a company being wound up?

When a director is considered unfit to be concerned in the management of a company by reason of their conduct in relation to a company or otherwise.

Relevant factors for the court to consider include the director's conduct in connection with any company that has gone into insolvent administration. Disqualification orders can last for up to 15 years.

For further information on this topic please contact Mathew Newman, Simon Davies, Alex Horsbrugh-Porter or Christopher Jones at Ogier by telephone (+44 1534 514 000) or email ([email protected], [email protected], [email protected] or [email protected]). The Ogier website can be accessed at

Paul Chanter, partner, assisted in the preparation of this article.