New Law Journal: Overview of Insolvency in the Channel Islands – Insolvency/Bankruptcy

In the first of a three-part series on Jersey and Guernsey law in the New Law Journal, group partner Simon Hurry, along with barrister James Tee and senior partner Karen Stachura provide a quick overview insolvency in the Channel Islands and guide you through the options available to you.

This article was first published in the New law review and an online version of the publication can be viewed

Insolvency in the Channel Islands – what are your options?


The two main pieces of legislation governing insolvency in Jersey are the Companies (Jersey) Act 1991 and the Bankruptcy (Disaster) (Jersey) Act 1990 (BDJL). The first is mainly based on the Companies Act 1985 of the United Kingdom, the second on the old common law of Jersey.

A Jersey business is deemed insolvent if it is unable to pay its debts as they fall due: the “cash-flow” test. Unlike other jurisdictions, the company’s liabilities do not have to exceed its assets.

Jersey has no statutory rescue procedure such as administration, although a court-supervised ‘pre-pack’ sale of a company’s activities is a potential option.

Three procedures can be used to liquidate an insolvent company.

1. Creditors’ Liquidation (CWU)

A CWU results in the appointment of an insolvency practitioner (IPs) to administer the liquidation for the benefit of the creditors. The CWU regime was expanded to include creditors from March 1, 2022 – prior to this, a CWU could only be initiated by company shareholders.

The main aspects of the new regime are:

  • A creditor may apply to the Royal Court of Jersey (RCJ) for a CWU if he has a claim against the company in excess of the prescribed minimum (£3,000) and the company is insolvent in terms of cash, which is established when:
    • the creditor has proof of the insolvency of the company; Where

    • the creditor served a summons on the company and the company did not pay the sum or reasonably dispute the debt within 21 days.

  • A creditor must normally provide the company with at least 48 hours notice before applying for the CWU.

  • A creditor may request the appointment of a provisional liquidator pending the decision of the CWU to preserve the assets and records of the company

2. Disaster procedure within the framework of the BDJL

Before March 1, 2022, catastrophic insolvency proceedings were the only insolvency proceedings available to creditors. A creditor can ask the RCJ to order the declaration of the assets of the company in disaster (in case of disaster). A successful application places the company’s assets (wherever they may be) in the hands of the Viscount of Jersey, the managing director of the RCJ, who then facilitates the distribution of his assets to his creditors.

3. A liquidation for just and equitable reasons (I)

A J&E request can be submitted to the RCJ by the company, an officer or a shareholder when:

  • shareholders have lost confidence in management;

  • the main purpose/purpose of the business has been lost;

  • there is an impasse between the members and/or management; Where

  • it is in the interest of the creditors to allow the company to trade.

If successful, an IP is appointed to administer the liquidation. Drawing on case law in England and Wales, the J&E scheme is flexible and results in a bespoke order to suit particular needs.

In the absence of statutory rescue proceedings, a fourth option is to place a Jersey company in administration under UK insolvency law (AI). This can potentially facilitate a better return for the company’s creditors.


Guernsey’s insolvency regime derives from both common law and statute. The Companies (Guernsey) Act 2008 (CGL) provides procedures that will be familiar to practitioners in England and Wales, being AI-based.

The starting point under the CGL is whether the company passes the solvency test, which verifies a company’s creditworthiness by assessing whether it:

  • is able to pay its debts as they become due;

  • has more assets than liabilities; and

  • complies with all of its regulatory financial adequacy requirements, where regulated by the Guernsey Financial Services Commission (GFSC).

The assumption that the company is or is likely to be insolvent can determine whether it should be placed into administration or liquidation.


The CGL provides for the administration of a company for the best realization of its assets or for its survival.

The Royal Court of Guernsey (RCG) can make an administration order where the company is or is likely to become insolvent. The orders are generally granted for one year, after which the administrator must return to the RCG.

As soon as a request for an administration order is filed, the company benefits from a moratorium.

If the company is saved by the administrator, the administration can be terminated. Otherwise, the company is put into liquidation.


A company can be automatically dissolved by the RCG and a designated liquidator. The role of the liquidator is to collect and realize the assets of the company and to distribute the dividends according to an order of statutory priority.

The RCG can make a winding-up order in several circumstances, the most common when the company is “unable to pay its debts”, the criterion of which is that:

  • a creditor has served the company with a written demand for payment in excess of £750 and the company fails to pay within 21 days; Where

  • it is proven to the satisfaction of the RCG that the company does not pass the “solvency test”.

Once appointed, the liquidator takes control of the affairs of the company and has all the powers necessary to liquidate it. When the assets of the company are distributed, then the company is dissolved.


  • Guernsey does not have a moratorium under the compulsory liquidation regime.

  • In theory, anyone can be liquidator of a Guernsey company – no registration or qualification required; although the RCG will ensure that any compulsorily appointed person is suitably qualified for appointment.

  • There are no publicity requirements for liquidation requests and no formal process to cancel legal requests.

  • UK IPs frequently use Section 426 of the IA to gain recognition in Guernsey. This is useful because of the broad powers granted to PAs under the IA, which the RCG can apply when hearing Letters of Request.

  • Guernsey has no fixed or floating fees, and security is only available for a handful of asset classes.

A PDF of the article can be downloaded here.

The content of this article is intended to provide a general guide on the subject. Specialist advice should be sought regarding your particular situation.

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