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We look at the reforms to the insolvency law of the Channel Islands prompted by the coronavirus (COVID-19) pandemic. Written by Stephen Alexander, Partner & Advocate, Mourant Ozannes, Jersey (INSOL Europe member) and Abel Lyall, Partner & Advocate, Mourant Ozannes, Guernsey.
In the meantime, the government is continuing to consider insolvency specific legislative reforms. It is expected that these will include a government statement designed to give guidance to directors of Jersey companies as to the application and enforcement of Jersey’s wrongful trading rules. It is noteworthy that Jersey’s existing wrongful trading rules are more relaxed than the equivalent UK rules. Once a director concludes (or should have concluded) that there was no reasonable prospect of the company avoiding a declaration of bankruptcy or an insolvent winding-up, the director has a duty to take reasonable steps with a view to minimising the potential loss to the company’s creditors (failing which the director may be made personally liable for the company’s debts). In the UK the equivalent test is that the director must take every step with a view to minimising the potential loss to the company’s creditors.
Guernsey has also implemented a number of measures to maintain employment and to financially assist eligible businesses during the period of shutdown:
other measures to support business include the deferral of Social Insurance contributions, local business rates and rent owed to States entities
Guernsey introduced significant amendments to its corporate insolvency laws in January 2020, which are expect to come into effect shortly. There are no plans at present to introduce further changes to insolvency laws in order to address specific challenges arising from coronavirus, though developments in the UK are likely to be closely monitored.
A tracker of insolvency reforms globally produced by LexisNexis in partnership with INSOL Europe is now available: Coronavirus (COVID-19) Tracker of insolvency reforms globally.
We look at various countries worldwide which are expediting reforms to their restructuring and insolvency laws, temporarily suspending onerous insolvency law provisions, increasing limits for statutory demands, suspending enforcement powers and introducing other measures to deal with the coronavirus crisis. As the situation is rapidly evolving with more countries adding new measures daily, you should contact local lawyers in the relevant jurisdiction to check the current measures in force.
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