REVIEW OF 2016 OFFSHORE PETITION FILINGS & COURT ORDERS Contents Executive Summary 2 Winding up Petitions - The Global Picture 3 Analysis of 2016 Filings by Jurisdiction Bermuda 5 British Virgin Islands 6 Cayman Islands 7 Mauritius 9 Guernsey 9 Isle of Man 10 Jersey 11
2 EXECUTIVE SUMMARY This Snapshot Report provides our annual review of the petition filings and resultant court orders in respect of distressed companies in six* offshore jurisdictions. Throughout each year, we closely monitor company notices and petition activity across our network of offices offshore in the following categories: Tony Heaver-Wren Partner Dispute Resolution Cayman Compulsory winding up, by shareholders or creditors; Conversion of voluntary liquidation to court supervised liquidation; Schemes of arrangement; and Capital reduction. The key findings that emerge from our full-year, multi-jurisdictional review and analysis for 2016 are outlined below and explored further over the following pages. Number of petition filings Total filings across the offshore jurisdictions fell, down 10% on the previous year. Petition numbers varied widely, from just 13 in the Isle of Man to 87 in Mauritius. Some of the lowest numbers of filings occurred in jurisdictions where alternative insolvency processes to petitions exist (BVI and Isle of Man). Mauritius again returned a disproportionately high number of filings, fuelled by a significantly larger population and domestic economy. The BVI and Isle of Man saw modest increases in the number of petitions filed in 2016. Court Orders The Cayman Islands recorded the highest conversion rate - two thirds of petitions filed in Cayman resulted in conversion to final orders, essentially as sought. The conversion rate was lowest in Mauritius, where only 13% of petitions resulted in final orders, although the significant lag between orders being made and reported in that jurisdiction contributed to that low percentage. The average time between the date an insolvency petition was submitted and the date a court order was made in the offshore jurisdictions in 2016 was seven weeks, a week longer than the previous year. Our analysis in this report sets out to add further context to these statistics. Petition filings and conversion rates in each of the jurisdictions analysed are also explored in more detail, and the trends are placed in a global context. We trust that you find our analysis over the following pages useful but please don t hesitate to get in touch with your usual Appleby contact should you wish to discuss anything in more detail. Tony Heaver-Wren Partner Cayman * Jersey s corporate insolvency regime is not Petition-based but a summary of its insolvency and restructuring options is included on page 11.
3 WINDING UP PETITIONS - THE GLOBAL PICTURE Offshore In total, across the six offshore jurisdictions reviewed, there were 184 winding up petitions filed during 2016, and 79 winding up orders were made. OFFSHORE WINDING UP PETITIONS* 120 100 The total number of filings in 2016 reflected a drop-off in insolvency petition filings across most offshore jurisdictions, relative to the previous year. Bermuda, Cayman and Mauritius all saw a notable decrease in the number of filings. Despite small increases in the BVI and Isle of Man, winding up petition filings fell 14% overall across the six jurisdictions. Winding up Petitions 80 60 40 20 TOTAL WINDING UP FILINGS, ALL JURISDICTIONS 0 Key 2008 2009 2010 2011 2012 2013 2014 2015 2016 Mauritius Bermuda 225 Pe ons 208 Pe ons 215 Pe ons 184 Pe ons BVI Isle of Man Cayman *Guernsey petitions are not reported The United Kingdom In 2016, there were 3,745 compulsory company liquidation orders across the whole of the UK, being a level of filings similar to the previous year. UK-wide petition data is not reported, but in 2015 the latest available figure the 128 Orders 125 Orders 129 Orders 79 Orders Royal Courts of Justice for England & Wales recorded 4,554 petitions and 2,112 orders, a 46% conversion rate. 2013 2014 2015 2016 The figures recorded for 2016 continue to reflect a levelling off in the number of filings since the high point of 2013. Although the number of petition processes was down in 2016, numerous complex restructuring negotiations were underway during the year (particularly in the oil and gas sector), without having reached the point of petition filings for formal restructuring. The general fall in petition filings in offshore jurisdictions in 2016 to some degree reflects this movement toward restructuring over the course of the year and is expected to be reflected in the 2017 petitions profile. Insolvency petitions are estimated to make up 0.24% of the UK company registry in 2015. With the exception of Mauritius, this is considerably higher than any offshore jurisdiction, with most of them well below 0.10%. Partly this can be put down to the much larger population and the increased presence of active trading companies, as opposed to holding companies or companies used for tax efficient structuring. Also the absence in most offshore jurisdictions of a government-funded official receiver often means that companies with no assets simply cease to be active and will be administratively struck from the register, rather than formally wound up. The United States of America The offshore flattening off trend in petition filings in the surveyed jurisdictions also reflected trends seen in the USA in 2016, where a slight drop was recorded in bankruptcy court petitions published by the Administrative Office of the US Courts. Business petitions fell 2% to 24,457 in 2016, just 525 companies fewer than the previous year.
434 WINDING UP PETITIONS - THE GLOBAL PICTURE cont d WINDING UP PETITION TOTALS 34,892 2016 CONVERSION RATE 2016 AVERAGE SPEED OF CONVERSION 28,319 24,985 24,457 BERMUDA 5,258 5,524 4,554 Key 60% 6 WEEKS 225 208 215 184 USA 2013 2014 2015 2016* England & Wales Offshore *England and Wales figures not available for this year. RATES OF CONVERSION The conversion rates of winding up petitions into orders fell in Offshore centres in 2016, as more companies were able to successfully oppose winding up petitions or reach consensual resolution. In 2016, the overall offshore conversion rate clusters around 44%, down from the 60% range of earlier years. The BVI has seen a particularly steep fall, with just 45% of petitions resulting in a court order. Mauritius is clearly the biggest outlier with a rate of just 13%, but lengthy reporting delays in that jurisdiction are likely to be a factor. Using previous years as a guide, we can expect the conversion rate in Mauritius to be more than one in four, following adjustments for reporting. CAYMAN BVI 45% 41% 8 WEEKS 6 WEEKS SPEED OF CONVERSION During 2016, across the surveyed jurisdictions, the average time between the date a petition was filed and the date a court order was made was seven weeks, during which time there is usually a requirement of advertisement and one or more hearings. ISLE OF MAN Bermuda, Cayman and the Isle of Man were the jurisdictions in which winding up orders were made the quickest, with an average of six weeks to conversion, while Mauritius tended to take the longest, with an average duration of nine weeks. 62% 6 WEEKS For Cayman, there are also separate figures available for the conversion rates of petitions for Schemes of Arrangement and Reduction of Capital. These follow a more intensive court process, a scheme typically requiring an initial filing, a directions hearing, advertisement, a scheme meeting, the filing of further evidence and then a sanction hearing. Unsurprisingly, these generally take longer to convert, on average about eight weeks. MAURITIUS 13% 9 WEEKS
55 ANALYSIS OF 2016 FILINGS BY JURISDICTION BERMUDA During the course of 2016, Bermuda witnessed 15 compulsary winding up petitions, which converted into nine orders. The number of petitions was therefore down 29% compared to the 21 petitions recorded in 2015, and the lowest number of filings seen since 2013. As well as fewer petitions, the conversion rate for Bermuda has dropped as well, with two out of three petitions converted, as against a conversion rate of 76% in 2015. While the number of weeks between an initial application being submitted and a court order being made averaged at six, this figure is something of a simplification. Several high profile cases, such as the winding up of the historic Riddell s Bay Golf & Country Club, took place over a matter of days, while others lingered for several weeks. Just one scheme of arrangement, for Grande Holdings Limited, was ordered by the Bermudian Court during the course of 2016, as compared to three that were ordered during 2015. Reduction of Issued Share Capital Notices of the reduction of share capital were up dramatically, almost doubling from 36 in 2015 to 64 last year. 2016 WINDING UP ORDERS, BERMUDA Case Number Company 2016-118 Riddell s Bay Golf & Country Club Limited 2016-136 Energy XXI Limited 2016-183 Up Energy Development Group Limited 2016-193 Euro Home Bermuda Ltd 2016-240 Eastern Insurance Company Limited 2016-271 C&J Energy Services Ltd 2016-272 C&J Corporate Services (Bermuda) Ltd 2016-400 St Pancras Too Company Ltd BERMUDA - IN OUR VIEW The Companies Act 1981 and the Winding Up Rules 1982 govern insolvencies and reorganisations in Bermuda. There are two types of insolvent liquidations - voluntary and compulsory. Compulsory liquidations are commenced by way of a petition presented to the Supreme Court in Bermuda upon which the Court will be asked to make a winding up order. Creditors may petition for a winding up order or the company may resolve to petition to wind itself up under this procedure. Voluntary liquidations, usually referred to as a creditors voluntary or CVL, occur where members of a company decide to wind up the company deemed insolvent. A meeting of creditors is then convened to decide on the appointment of a liquidator. As CVL s do not require the involvement of the courts, they are not measured in this report. A winding up petition to the court sets out the basis for the winding up order and the appointment of a provisional liquidator. Court-supervised liquidation usually commences with the making of a winding up order after the hearing of the petition. The winding up order sets the date for evaluation of claims and appoints either a liquidator or the Official Receiver. Bermuda s courts have recently adopted new rules designed to help struggling international companies to stay afloat. The rules give effect, with minor modifications, to the Singaporefounded Judicial Insolvency Network (JIN) guidelines. The JIN Guidelines are designed to increase the coordination and effectiveness of insolvent restructuring proceedings involving companies that are incorporated in and/or doing business in different parts of the world, where related proceedings are simultaneously taking place in multiple courts. Restructuring options The primary restructuring mechanism available under the Companies Act 1981 is a scheme of arrangement. It is a compromise or arrangement between a company and its members or its creditors. An application to, and sanction of, the court is required. Schemes can be used in various types of transactions, including acquisitions, reorganisations, and in the restructuring of complex debt arrangements. The court must be satisfied that the proposal is realistic and likely to be accepted by the creditors who will be asked to vote. It is a fundamental principle of Bermuda company law that the share capital of a company should be maintained. However, a company limited by shares usually has the option to reduce its share capital by a resolution of its members. A company may want to reduce its share capital in order to create distributable reserves and/or eliminate losses, return surplus capital to shareholders, assist a buyback or redemption of shares, or distribute assets to shareholders. In our experience, creating distributable reserves and/or eliminating losses are the main reasons. 2016-xxx ICIP Insurance Company Limited
6 ANALYSIS OF 2016 FILINGS BY JURISDICTION con t BRITISH VIRGIN ISLANDS In the BVI, the most accurate ascertainable measure of insolvency filings centres on how many companies have gone into liquidation. In 2014, these figures nudged above 50 for the first time, but the most recent numbers for 2016 show that insolvency processes have reduced considerably, as there were just 35 appointments of liquidators during the course of the year. In the BVI, the members of an insolvent company have an alternative option to using the court and can pass a resolution appointing an eligible insolvency practitioner as liquidator of the company and, indeed, some of the biggest liquidations seen in the BVI have been shareholder driven. 17 appointments to insolvent companies were made without applications, using shareholder resolutions. There were 40 court applications to appoint a liquidator, and of these, 22 progressed no further as the companies concerned were able to resolve their situations or, in at least one case, the appointment was made on a competing application. The other 18 applications resulted in a court order and progressed to the compulsory winding up stage. A number of these applications related to the same group of companies. Most court orders followed about six weeks after any initial application to appoint a liquidator was announced, although a handful took longer. INSOLVENCY APPOINTMENTS OF A LIQUIDATOR, BVI 70 60 50 40 30 20 10 0 2008 2009 2010 2011 2012 2013 2014 2015 2016 40 By shareholders resolution By court order BVI 2016 COMPULSORY LIQUIDATION APPLICATIONS AND NOTICES Applications to the court for appointment of a liquidator 22 Court Orders to 18 proceed issued 35 17 Applications did not proceed further Liquidators appointed 17 directly by shareholders Liquidations ordered THE BVI - IN OUR VIEW Corporate insolvency in the BVI is governed by the Insolvency Act 2003 and the Insolvency Rules 2005. The effect of an insolvent liquidation is to put the affairs of an insolvent company in the hands of a professional liquidator who is required to take possession of, protect and realise the company s assets for the benefit of the company s creditors. Proceedings are typically brought in the Commercial Court of the Eastern Caribbean Supreme Court in the BVI. A court application (the filing of a petition) may be made by a creditor, the company, its directors, and its shareholders, the Attorney General or the Financial Services Commission. The grounds for appointment are that the company is insolvent, it is just and equitable that the company be wound up or it is in the public interest to wind it up. The most common ground is insolvency. As an alternative to the court appointment of a liquidator, the members of an insolvent company may, by a majority of at least 75%, pass a resolution appointing an eligible insolvency practitioner as liquidator of the company. Liquidation marks the end of a company s business and does not have a rescue function. Once the liquidation is complete, the company will then be struck from the register of companies in the BVI and dissolved. Restructuring options The BVI Business Companies Act provides two mechanisms for achieving a wide range of corporate restructurings by way of court approval: Schemes of arrangement, which are equivalent to those available in England; and Plans of arrangement, which are equivalent to those available in US jurisdictions. Both mechanisms provide for compromises to be reached between a BVI company and its creditors or members.
7 ANALYSIS OF 2016 FILINGS BY JURISDICTION cont d CAYMAN ISLANDS In 2016, the Cayman Islands recorded 70 petition filings across all categories, converting in to 46 orders. While the petition filing total remained identical to the previous year, there were 13 less insolvency petitions (see next section), or a negative swing of 22% on the previous year. The conversion rate also fell slightly from 73% down to 66%. However, this still marks the highest conversion rate of all the offshore jurisdictions surveyed. Insolvency petitions There are two routes into a liquidation that is subject to the oversight of the Cayman Court. The first of these is a winding up petition (most commonly a compulsory process initiated by creditors or shareholders of the company) and the second is by conversion of an out-of-court voluntary liquidation into a Court supervised liquidation, further to a petition seeking that conversion. The time taken for an initial petition to reach a court order varied widely in Cayman, with some taking just a matter of weeks and others taking several months. On average, a court order followed six weeks after the filing of a winding up petition, and eight weeks for the conclusion of a scheme of arrangement or capital reduction. CAYMAN ANNUAL FILINGS For the purposes of this report, given the frequency with which insolvent companies elect to enter a liquidation through the two-step approach of appointment of a voluntary liquidator followed by a petition to convert the liquidation to bring it under the Court s supervision, these two classes of Cayman petitions for Court liquidations are each refered to here as insolvency petitions. This includes petitions for the winding up of a company on just and equitable grounds (i.e. where the petitioner seeks to appoint liquidators on grounds other than the company being unable to pay its debts). 3 8 5 2 There were 46 insolvency petitions in 2016, making up twothirds of the total petitions filed over the year. This is down from 2015 when insolvency petitions made up a remarkable 84% of the annual total of petition filings. 17 3 14 24 17 CAYMAN INSOLVENCY-BASED PETITIONS & RE-ORGANISATION FILINGS 120 13 100 22 35 29 80 60 2014 2015 2016 Joint Reduction & Scheme Scheme of Arrangement (Section 86) Reduction of Share Capital (Section 15) Court Supervision (Sections 124 & 131) Winding up Petition 40 20 0 2008 2009 2010 2011 2012 2013 2014 2015 2016 Reduction & Scheme Petitions Insolvency Petitions
8 ANALYSIS OF 2016 FILINGS BY JURISDICTION cont d Insolvency orders The 46 insolvency petitions of 2016 converted into 27 court orders. 19 petitions either failed or were resolved and did not progress any further. CAYMAN INSOLVENCY ORDERS 2015 & 2016 15 2016 2015 23 22 5 Court-Supervised Liquidation Winding up Reduction of Capital Petitions for capital reductions in 2016 reached the highest total recorded since 2008. Provided the Articles allow, the amount of capital held by a Company can be reduced by returning capital pursuant to the authority of a special resolution of its shareholders. Once the special resolution is passed, the Company petitions the Court to seek confirmation of the resolution. It is important to note, however, that although a capital reduction can form part of a scheme of arrangement between an insolvent company and its creditors, on a stand-alone basis, a capital reduction is not an insolvency remedy and indeed will not be available when there is any risk of nonpayment to the company s creditors. The spike in capital reduction filings in 2016 is therefore attributable to the return of capital to shareholders (or other capital reorganisation) of solvent companies, rather than a measure of insolvent restructurings. CAYMAN ISLANDS IN OUR VIEW In Cayman, insolvency petitions fell away despite 2016 being a year that was fraught with economic challenges in sectors to which Cayman companies have exposure. The oil and gas service provider sector illustrates why this trend is likely to have occurred. Many participants in oil and gas exploration or service providers to producers have Cayman companies in their structure, either as pure holding companies or as companies that raise the finance for the operating subsidiaries. While there were some Cayman insolvency petitions against oil and gas exploration companies and service providers, the remedy of placing companies in liquidation offered little hope of recovery to unsecured creditors given the market conditions and pessimism around significant recovery of commodity prices. Even secured creditors with the right to enforce against hard assets were forced into workout rather than enforcement options because banks and other secured finance providers were reluctant to become owners of drilling rigs which would then need to be cold stacked and become a wasting asset for an indeterminate period. As a consequence, alternatives to winding up were necessarily explored in 2016 in many cases that could otherwise have seen petitions filed. The lead-time for negotiating debt restructuring deals in such cases is often significant and accordingly many distressed scenarios resulted in no filing (insolvency petition or scheme of arrangement) in the review period. It is anticipated that this movement toward restructuring rather than liquidation in many cases will be reflected in 2017 filings. Chinese enterprises continued to be well represented in Cayman petition filings in 2016. One novel and notable example of this was the filing of a winding up petition against Bona Film Group Limited in the midst of an appraisal action following a Cayman statutory merger. Although outside the purview of this report, dissenting shareholder claims (appraisal actions for determination of fair value of shares of minority shareholders) on take-private/chinese management buyout mergers was a dominant trend in 2016, and the filing of an insolvency petition in this similar context represents an interesting development that may see like filings in future cases add to Cayman insolvency petition totals. Schemes of Arrangement petition filings remained at a low level in 2016, despite numerous companies being engaged in workout and restructuring negotiations during the period. The relatively long lead-time for restructuring activity ahead of any filing effectively masked the extent of creditor pressure and involvement of distressed companies in such negotiations across 2016.
9 ANALYSIS OF 2016 FILINGS BY JURISDICTION cont d MAURITIUS To date, Mauritius has reported 87 petitions, converting into 11 orders for 2016. There is often a big lag in reporting conversions in the jurisdiction, however, with a considerable number of 2015 s petitions not showing up as orders until well into 2016. The 2016 rate is therefore likely to increase as more cases get updated, and at the moment shows just a handful or conversions, with the court order following on average about two months after the initial petition. However, even discounting the time lag, the conversion rate is expected to remain low, with just a quarter, having converted in 2015. GUERNSEY Guernsey petitions are not publically available; it is only possible to capture the number of winding up orders for the jurisdiction. However, based on the figures we can see namely winding up orders, registry size and population the landscape in Guernsey appears to be very similar to that of Bermuda. It seems likely, therefore, that the number of petitions is also likely to be close to those seen in Bermuda. Guernsey orders in 2016 were down on 2015, with nine fewer recorded for the year, one of the lowest totals we have seen. The relatively large population of Mauritius (1.3 million) compared to most offshore locations means that there are a correspondingly higher number of active trading companies, which is also likely to contribute to the high liquidation figure. However, in view of the delays, costs and the possibility of applications being resisted by debtors, the creditors tend to reach settlements with debtors rather than pressing for court orders, thereby explaining the low conversion rate. MAURITIUS - IN OUR VIEW MAURITUS IN OUR VIEW Under Mauritian law, the main insolvency procedures are Liquidation and Receivership. Receivership enables secured creditors (such as a bank that has made a secured loan to the company) to enforce their charges, usually by sale of property or other assets. Liquidation is the process of winding up a company unable to pay its debts by selling all or part of the business, or individual assets, in order to distribute the proceeds among the creditors and (if there is a surplus) shareholders. There are two types of liquidation for insolvent companies: Compulsory liquidation by the court (measured in this report) Creditors voluntary liquidation As an alternative to liquidation, the Insolvency Act 2009 introduced administration, which provides an opportunity for the company to continue in existence, or alternatively to ensure better returns for the company s creditors and shareholders. GUERNSEY COURT ORDERS ISSUED AND LIQUIDATORS APPOINTED 2016 2015 2014 2013 2012 GUERNSEY - IN OUR VIEW 5 Guernsey is currently embarking on a reform of its commercial and personal insolvency legislation. The first phase of the reform is anticipated to include the introduction of insolvency rules; a requirement for independent office holders in an insolvent voluntary winding up; greater consultation with creditors in an insolvent winding up; and greater powers for office holders to obtain information from directors and officers. These changes will make the insolvency regime far more robust and will enhance Guernsey s reputation as a safe place to do business. 11 14 19 20 Mauritian law also provides for restructuring of companies outside of a formal liquidation or administration. This can be either by way of a compromise with creditors approved at a creditors meeting, or a scheme of arrangement approved by the Court.
10 ANALYSIS OF 2016 FILINGS BY JURISDICTION cont d ISLE OF MAN The Isle of Man continues to see the lowest number of petitions and orders out of all the jurisdictions measured, despite its company registry being bigger than Bermuda, Guernsey or Mauritius. In 2016 the jurisdiction saw 13 petitions, more than double the total of the previous year. Eight orders were converted. There are a number of factors contributing to the low petition count. The Isle of Man does not have a state-funded official receiver. Consequently, unless a debtor company has recoverable assets from which to fund its liquidation, or the Financial Services Authority is prepared to fund a liquidation in the public interest, then often insolvent companies will simply cease trading and eventually be struck off the Register. Moreover, as the Isle of Man s voluntary liquidation procedure is both user friendly, comparatively inexpensive and very similar in form to that used in the UK, the vast majority of companies wound up in the Isle of Man do so voluntarily. Finally, the common use of Manx companies for the tax efficient holding of assets means that insolvencies are inherently less frequent than for companies that trade. Creditors Voluntary Liquidations The Isle of Man s corporate law regime is attractive to secured creditors who in most cases will exercise their rights to appoint receivers out of Court to save costs, rather than go down the court winding up route. During 2016, there were 48 Creditors Voluntary Liquidations, down considerably on the 70 that were recorded in 2015. 29 ISLE OF MAN INSOLVENCY WINDING UP ACTIVITY 2016 Petitions to the court for an order winding- 13 up a company Creditors voluntary 48 liquidation 8 5 Court Orders to proceed issued Petitions did not proceed to liquidation ISLE OF MAN - IN OUR VIEW Companies in the Isle of Man can either be incorporated under the Companies Act 1931 or the Companies Act 2006. The primary legislation governing insolvent companies can be found in the 1931 Act and is applicable to companies incorporated under the 2006 Act. There are two types of insolvency proceedings available: Creditors voluntary liquidation Compulsory liquidation ordered by the court A creditors voluntary liquidation is frequently used by insolvent companies that are unable to pay their debts as they fall due. A debtor company can seek to wind itself up by way of a members voluntary liquidation but if the directors of the company are unable to make the statutory declaration of solvency then the company must proceed by way of a creditors voluntary liquidation. Alternatively, creditors of a company can file a claim for the appointment of a liquidator (i.e. an involuntary liquidation) under the Chancery Procedure at the High Court of Justice. Liquidation can stop the company s creditors position from deteriorating and bring closure to an unsustainable position for the company s directors, with all the attendant anxiety and stress. Since the directors powers cease upon liquidation, it is the liquidator who takes responsibility for selling the company s assets, distributing the funds to the creditors and dealing with the company s employees. Restructuring options Isle of Man law does not provide for company voluntary arrangements and administrations. Debtors can, however, use the process set out in both the 1931 Act and the 2006 Act for arrangements, mergers and consolidations. Schemes of arrangement involve a company entering into a compromise or arrangement with its creditors or members, or both. The majority of new Isle of Man companies are now incorporated under the highly flexible Companies Act 2006. Conversion from 1931 Act to 2006 Act is a relatively simple process that is commonly undertaken to provide access to this flexibility. Provided the 2006 Act company can meet a statutory solvency test, a reduction of share capital can take place without the need to make a Court application.
11 ANALYSIS OF 2016 FILINGS BY JURISDICTION cont d JERSEY JERSEY S INSOLVENCY REGIME Jersey s corporate insolvency regime is not Petition based. Rather, in principle one of the primary routes for corporate insolvency in Jersey is a désastre in accordance with the Bankruptcy (Désastre) (Jersey) Law 1990 this is the equivalent to a court ordered compulsory winding up with the Viscount, in essence, performing the role of an official receiver. A judgment debt is generally regarded as a necessary precursor to a désastre, but this is not an absolute requirement. Realisable assets are, however, generally required. A creditors winding up is a more frequently used procedure. The process is not court-driven but is instigated by the insolvent company itself and leading to the appointment of a liquidator. Very occasionally an application for a remise de biens may be made by a corporate debtor. This is a type of court relief to permit the debtor an orderly sale of assets under the court s supervision. It is, however, not akin to an administration. It is usually associated with relief from another creditor remedy over local immoveable property (a dégrèvement) and is highly unlikely to be used in an international context. However, by far the most frequently used winding up procedure is a summary winding up available for solvent companies on a voluntary and administrative basis backed by solvency statements made by the directors. The directors themselves may handle the winding up or liquidators may be appointed in more complex cases. Corporate insolvencies are also sometimes dealt with by way of an application for winding up on a just and equitable basis. This option provides great flexibility in dealing with both insolvent and solvent companies forming part of a group and also with cross border businesses. The initial application is often made ex parte. Recent case law provides helpful guidance on the winding up of insolvent Jersey trusts whereas foundations are subject to similar statutory regimes as described above. Again the frequency of such insolvencies appears very low. Restructuring Options Corporate insolvency in general and désastre proceedings in particular are relatively rare in Jersey in practice. There were only four such désastre proceedings in 2016, and just one per year going back to 2013. Jersey s courts are also willing to grant recognition of overseas insolvency procedures where appropriate. In particular, recognition of foreign insolvency office holders including receivers and administrators is frequently granted, ensuring that secured creditors rights are protected (as they are in Jersey s principal insolvency procedures). In terms of restructuring, corporate schemes of arrangement in Jersey have been seen in similar numbers to the Cayman Islands over the past three years. These have proved effective and flexible, and can be used in parallel with other jurisdictions on a cross-border basis as are similar insurance schemes. Capital reductions can also be carried out with, and in some circumstances without, the sanction of a court, providing a useful tool in restructuring. Secured creditors holding Jersey law security interest agreements have a number of very flexible options to enforce their security swiftly and cost-effectively without involving the courts.
ABOUT APPLEBY Appleby is one of the world s leading offshore law firms. The Group has offices in the key offshore jurisdictions of Bermuda, the British Virgin Islands, the Cayman Islands, Guernsey, Isle of Man, Jersey, Mauritius, and Seychelles, as well as a presence in the international financial centres of Hong Kong and Shanghai. Appleby has been ranked as one of the world s largest providers of offshore legal services by number of lawyers in The Lawyer s 2016 Offshore Survey. With over 470 people, including lawyers and professional specialists, across the Group, Appleby delivers sophisticated, specialised services, primarily in the areas of Corporate,, Private Client and Trusts, Regulatory and Property. The Group advises public and private companies, financial institutions, and high net worth individuals, working with these clients and their advisers to achieve practical solutions, whether in a single location or across multiple jurisdictions. For further information contact: John Wasty Partner Group Head, Bermuda jwasty@ Eliot Simpson Partner Group Head, Hong Kong esimpson@ Andrew Willins Partner Group Head, British Virgin Islands awillins@ Mark Holligon Partner, Isle of Man mholligon@ Tony Heaver-Wren Partner, Cayman Islands theaverwren@ Fraser Robertson Partner Group Head, Jersey frobertson@ Anthony Williams Partner Group Head, Guernsey awilliams@ Gilbert Noel Partner Group Head, Mauritius gnoel@ RESEARCH METHODOLOGY The data for this publication has been collected from a review of the Court filings, newspaper advertisements and Registrar notices in Bermuda, British Virgin Islands, the Cayman Islands, Guernsey, Jersey, Isle of Man and Mauritius, between 1 January 2016 and 31 December 2016. The conversion rate is the number of initial filings that later converted into actual court orders. Some court orders may not yet have been published, so figures are subject to change as new information becomes available. Cases have been attributed to the year that they commenced, so for example a case that began with a November 2015 petition and resulted in a January 2016 court order would be included as part of the 2015 count. Appleby Global Group Services Ltd 2017. Published in the Cayman Islands. All Rights Reserved.