Insolvency Law at Guernsey (Crown Dependency)
Guernsey, a Crown Dependency, has a well-structured insolvency framework that aligns with international standards, offering various procedures for both corporate and individual insolvencies. (Guernsey's corporate insolvency regime | Bedell Cristin)
🏛️ Key Insolvency Procedures in Guernsey
1. Administration
Administration aims to rescue a company or achieve a better result for creditors than immediate liquidation. It can be initiated by the company, directors, members, creditors, or a liquidator. The Royal Court of Guernsey grants administration orders for a specified period, which may be extended if the purpose is still achievable. During administration, the company's directors retain their positions but are restricted in their powers without the administrator's consent. The administrator has wide powers to manage the company's affairs, including the authority to remove or appoint directors and call meetings of members or creditors. The process is flexible, with no formal rules or requirements for reporting, and the general procedures for handling claims and distributing assets that apply in liquidation do not necessarily have to be followed. (Insolvency in Guernsey: Enforcement and Recovery | Collas Crill, Guernsey's corporate insolvency regime | Bedell Cristin, Guernsey Restructuring and Insolvency Guide (Mondaq) | Carey Olsen)
2. Voluntary Liquidation
This procedure is initiated by a resolution of the company's members. A declaration of solvency is required, and if solvency cannot be declared, an independent liquidator must be appointed. This ensures independent scrutiny in relevant circumstances. The liquidator's role is to collect and realise the company's assets and distribute dividends in line with a statutory order of priority. The process concludes with the dissolution of the company. (Jersey insolvency | ICAS, Key Changes To Guernsey's Insolvency Law From 2023 - Insolvency/Bankruptcy - Insolvency/Bankruptcy/Re-Structuring - Guernsey, New Law Journal: Overview of insolvency in the Channel Islan | Collas Crill, Guernsey Restructuring and Insolvency Guide (Mondaq) | Carey Olsen)
3. Compulsory Winding Up
A company may be wound up compulsorily by the Royal Court of Guernsey if it is unable to pay its debts or if it is just and equitable to do so. An application can be made by the company, creditors, members, directors, or interested parties. The court may appoint a liquidator to manage the winding-up process, which includes collecting and realising the company's assets and distributing dividends to creditors. The company continues to exist until the winding-up process is complete and it is formally dissolved. (New Law Journal: Overview of insolvency in the Channel Islan | Collas Crill, Guernsey's corporate insolvency regime | Bedell Cristin)
4. Désastre and Saisie
These are less formal collective insolvency procedures rooted in Guernsey's customary law. In a désastre, the company's assets vest in the Viscount, who facilitates the distribution to creditors. Saisie is a similar process for individuals, where creditors may take possession of the debtor's property to satisfy debts. While these procedures are not governed by legislation, they provide an alternative means of addressing insolvency. (Guernsey insolvency | ICAS, Jersey insolvency | ICAS, Insolvency In Guernsey: Enforcement And Recovery - Insolvency/Bankruptcy - Insolvency/Bankruptcy/Re-Structuring - Guernsey)
📋 Director Responsibilities and Solvency Test
Under the Companies (Guernsey) Law, 2008, a company satisfies the statutory solvency test if: (Guernsey Restructuring & Insolvency 2025 (Lexology) | Carey Olsen)
The company is able to pay its debts as they become due.
The value of its assets is greater than the value of its liabilities. (Guernsey Restructuring & Insolvency 2025 (Lexology) | Carey Olsen, Guernsey's corporate insolvency regime | Bedell Cristin)
Directors must act in the best interests of the company, considering both present and future creditors. If a company fails the solvency test, directors may face personal liability for trading while insolvent. (Guernsey Restructuring & Insolvency 2025 (Lexology) | Carey Olsen)
⚖️ Court Oversight and Cross-Border Recognition
The Royal Court of Guernsey has exclusive jurisdiction over insolvency matters. While Guernsey has not adopted the UNCITRAL Model Law on Cross-Border Insolvency, it assists courts in other jurisdictions, particularly the UK, Jersey, and the Isle of Man, in enforcing insolvency-related orders. This facilitates international cooperation in cross-border insolvency cases. (Guernsey insolvency | ICAS, Guernsey insolvency law – administration orders | Bedell Cristin)
🔄 Recent Reforms (Effective 1 January 2023)
Guernsey's insolvency laws underwent significant reforms to modernize the regime: (Guernsey welcomes new insolvency law – Guernsey Investment & Funds Association)
Declaration of Solvency: Directors must declare solvency before initiating voluntary liquidation. If solvency cannot be declared, an independent liquidator must be appointed.
Winding Up of Non-Guernsey Companies: The Royal Court can now wind up non-Guernsey registered companies with assets or operations in Guernsey.
Enhanced Powers for Insolvency Practitioners: Liquidators and administrators have broader powers, including the ability to recover assets from third parties and terminate unwanted contracts.
Improved Cross-Border Cooperation: The reforms enhance Guernsey's ability to assist foreign insolvency officeholders, especially those outside the UK. (Key Changes To Guernsey's Insolvency Law From 2023 - Insolvency/Bankruptcy - Insolvency/Bankruptcy/Re-Structuring - Guernsey, Guernsey welcomes new insolvency law – Guernsey Investment & Funds Association)
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