The Security Interests (Jersey) Law 1983 (the “1983 Law”) governing security over intangible movable property in Jersey (eg shares, units, accounts and contractual rights) has been in force for almost three decades. While the 1983 Law is a concise and clearly drafted law which has generally worked well, it has become increasingly outdated in the context of modern banking and finance transactions.
The 1983 Law will soon be replaced by the Security Interests (Jersey) Law 201- (the “New Law”), which has recently been passed by the States of Jersey and is expected to come into force in early 2012. Ogier has been closely involved throughout the lengthy consultation and drafting process in relation to the New Law.
Jersey entities (eg companies, trusts and limited partnerships) are often established as holding bodies (eg for real estate or operating groups), investment funds and special purpose vehicles. When lending in structures including Jersey entities, banks and other lenders usually take Jersey law security over the shares and offshore assets of the Jersey entities (as well as security over any underlying onshore assets).
We are anticipating an increased amount of financing and refinancing activity involving Jersey entities once the New Law comes into force in 2012, especially as this coincides with European debt of up to €50-75 billion being due to mature and come to market for refinancing over the next five years (Refinancing 2011: The Scramble to Refinance European Debt, Debtwire, March 2011).
The table below compares/contrasts the 1983 Law to the New Law and summarises the main upcoming changes.
Click here to see the table.
As will be clear from the table above, there are a number of potential advantages to lenders in having security under the New Law once in force (in particular, in relation to public registration and enforcement). There will be grandfathering of security interests created under the 1983 Law, so existing security interest agreements (“SIAs”) will not have to be amended or publicly registered once the New Law comes into force. However, we believe that in many cases lenders will wish to improve their position by requiring that existing SIAs be amended or replaced once the New Law comes into force (for example, in reliance on further assurance provisions in existing documentation referring to the New Law).