Winding up a Jersey trust company on just and equitable grounds

During the course of last year, serious concerns led the JFSC to replacing the board of local trust company, Centurion Management Services Limited. It swiftly became clear to the new board that the company had breached numerous legislative provisions and regulatory codes of practice and that the only realistic option was for the company's client base to be transferred out to other fiduciary services providers. A sale and revenue sharing agreement was entered into with Trustcorp Services Limited, who agreed to take some, although not all, of the company's clients.

It became obvious that Centurion could not continue in business. It was insolvent on a cash flow and balance sheet basis, and would of course have no ongoing revenue once its clients had all exited. So what is the most appropriate way, for those with vested interests in mind, to bring about the inevitable end of such a company in these circumstances? The court-based options are either winding up on public interest or just and equitable grounds or desastre. The out of court option is creditors' winding up. The directors applied for a court winding up on just and equitable grounds under Article 155 of the Companies (Jersey) Law 1991, which they argued had advantages over the other options including maintaining client and creditor confidence and the ability of a court appointed liquidator to continue the business whilst remaining clients were transferred to Trustcorp or other providers.

Whilst the application was uncontested, the court still had to justify the decision to exercise its discretion to grant the remedy, which is wholly discretionary. There is no exhaustive list or fixed criteria for its application; although when the remedy is granted it almost invariably falls into a recognised category. In the case of Belgravia [2008] JRC 161, for instance, the need for an investigation was paramount.

In this case the court did not alight upon any defined category in which to place the exercise of its discretion. This is a reminder of the flexibility of winding up on just and equitable grounds, which is particularly desirable where trading needs to continue for some reason. The argument could almost certainly have been successfully put forward on public interest grounds, although not on the application of the company or the directors. Applications on public interest grounds are reserved for the Minister for Economic Development or the JFSC.