At the end of a financial year, there is likely to be an increase in the number of businesses becoming insolvent, some of which may have an interest in Jersey property (eg, as owners of Jersey property or holders of a lease of retail premises situated on the island).
Insolvency practitioners appointed outside Jersey in respect of an overseas person or company (or of a Jersey company subject to English insolvency proceedings) must be recognised in Jersey before they can deal with certain forms of Jersey property, as Jersey immovable property can be transacted only by passing a contract before the Royal Court. 'Immovable property' includes land and buildings (including flying freeholds) and leases for nine years or more (ie, a contract lease).
The assignment of a contract lease must be passed by the Royal Court. Therefore, an insolvency practitioner wishing to assign the benefit of a contract lease will require Jersey recognition.
Applications for recognition from practitioners appointed in the United Kingdom, Guernsey, the Isle of Man, Australia and Finland can apply under Article 49 of the Bankruptcy (Désastre) Jersey Law 1990. This provision allows the Jersey court to assist the courts of a foreign jurisdiction in insolvency matters on the basis of a letter of request. Practitioners from other jurisdictions must apply under customary law as a matter of comity.
In practice, there is little difference in the approach of the Jersey court to applications under Article 49 and applications under customary law - the below procedure is followed in both cases.
Consultation with viscount
The first stage is to consult with the Viscount's Department. The viscount is the executive officer of the court and has responsibility for bankruptcy matters. The department also governs recognition applications.(1)
The viscount will wish to ascertain:
- what action the practitioner intends to take within the jurisdiction of Jersey; and
- the impact of the insolvency on any locally employed staff.
There is no equivalent of the UK Transfer of Undertakings (Protection of Employment) Regulations in Jersey, but there is a law on unfair dismissal and redundancy payments. The viscount will also be interested in the payment of priority debts, which in Jersey include arrears of wages, holiday pay and bonuses, income tax, goods and services tax, social security payments, rent owed to landlords and parochial rates. The viscount will also wish to know how any Jersey unsecured creditors will be dealt with.
Having taken initial guidance from the Viscount's Department, the viscount must then be presented with a draft application. This will include:
- a draft representation setting out the relief sought;
- a draft affidavit in support; and
- a draft letter of request.
The viscount will provide feedback on the documents and indicate any concerns that he has with the application.
Letter of request
The third stage is to obtain a letter of request from the insolvency practitioner's home court. Once the letter of request has been issued, the finalised Jersey application must be sent to the viscount for formal approval. Assuming that the viscount has no further comments, he will write to the court indicating that his advice has been sought and he is content for the application to proceed. Alternatively, if the viscount has concerns, these will be indicated to the court and the viscount may wish to attend the recognition hearing.
The representation will be issued by lodging it with the court no later than Thursday lunchtime for a hearing on the following afternoon. If the application is straightforward, it will be dealt with that Friday afternoon and the hearing can be carried out in conjunction with the sale of property or the assignment of a lease. If the hearing is not straightforward (eg, the viscount has objections to the orders sought), the matter will be adjourned to a later date on which all interested parties can attend.
An insolvency practitioner may also seek recognition in Jersey for disclosure of assets and/or documents, examination of witnesses and freezing orders. In addition, some financial institutions will release assets or funds only where the practitioner has been recognised in Jersey.
The timescale for recognition depends largely on how long it takes for the practitioner to obtain a letter of request from the home court. If the matter is urgent, the Viscount's Department will typically respond to enquiries within a few days. Therefore, the Jersey part of the process can be carried out in three to four weeks (or less), assuming that no complications arise.
For further information on this topic please contact Jonathan Hughes or Elena Moran at Ogier by telephone (+44 1534 504 000), fax (+44 1534 504 444) or email (firstname.lastname@example.org or email@example.com).
(1) A full guide issued by the department can be accessed on the Jersey government website, www.gov.je.1.