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The Company Administration Regime in Guernsey

March 2013 - Finance. Legal Developments by Ogier .

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The Companies (Guernsey) Law, 2008 ("Companies Law") provides for companies, protected cell companies ("PCCs"), incorporated cell companies ("ICCs") and cells of PCCs and ICCs to be placed into administration and for an administrator to be appointed to manage that entity's affairs whilst the administration order remains in force.  The concept of administration in Guernsey was first introduced for PCCs only in 1997 but has expanded its scope to cover all other types of company that can be registered in Guernsey.  Administration, like the equivalent procedure in other jurisdictions, provides insolvent companies with a breathing space in order to maximise realisations and asset values without increasing liabilities, which, in turn, favours creditors.  However it is important to note, at the outset, that there are substantive differences from a creditor's perspective between the process in Guernsey and, for example, England. 

Pursuant to section 374 of the Companies Law, a company, PCC, ICC or cell may be placed into administration by the Royal Court upon the application of certain parties.  During the term of the administration order, the affairs, business and property of the company are managed by an administrator who is appointed by the court for that purpose.  The Royal Court will only make an administration order if various requirements are fulfilled.  These are that the entity in question must fail or be likely to fail the "solvency test" as set out in section 527 of the Companies Law, and that one or both of the purposes of administration (as set out below) may be achieved by the making of the administration order.  For the rest of this note, and for the sake of brevity, the term "company" also refers to PCCs, ICCs and their cells, unless otherwise stated.