States of Guernsey approves proposed changes to Guernsey's insolvency laws

The States of Guernsey has approved proposed changes to Guernsey’s corporate insolvency laws and directed that legislation be prepared to put the proposals into place.

The proposals follow a period of extensive consultation involving industry, practitioners and members of Guernsey's insolvency law working-party. They seek to enhance the current corporate insolvency law to ensure that it continues to be modern and effective and to ensure predictable and equitable outcomes when a business fails.

The key proposals which have been approved include:

The introduction of formal insolvency rules, to address procedural aspects of practice, overseen by a standing rules committee that will include practitioners

A requirement for consultation with creditors during liquidation and administration

Providing administrators with the power to make distributions to creditors and allowing administrators to apply to dissolve the company at the conclusion of the administration

A requirement that independent liquidators be appointed on a voluntary liquidation where the company is insolvent

Formal proof of debt procedures with rules for making claims in the winding up of the company

To give liquidators the power to require statements of affairs from the company’s directors and officers and to apply to the court to set aside extortionate credit transactions and claw back transactions at an undervalue

A power for the Guernsey court to wind up foreign companies

While legislation to give effect to the proposed changes is now to be drafted, onceimplemented the reforms will enhance the protection currently afforded to creditors and investors, while maintaining the flexibility currently present in Guernsey’s insolvency laws.

Mourant Ozannes partner and insolvency law working-party member, Abel Lyall said: “The changes, when introduced, will be a significant advance in Guernsey’s insolvency laws. The introduction of formal insolvency rules will add much greater clarity and certainty to insolvency practice, while creditors will warmly welcome greater consultation and additional powers for liquidators to pursue those who have caused the company loss.”

For a detailed discussion of some of the key amendments please see our briefing.