What section 380A means for administrators
We recently achieved a significant milestone by obtaining
permission from the Royal Court of Guernsey for Joint
Administrators to make a distribution to unsecured creditors during
an administration. This marks the first order granted under section
380A of the Companies (Guernsey) Law, 2008.
Historically, administrators in Guernsey had no power to make
distributions to creditors during administration. Section 380A,
introduced on 1 January 2023, changed this by permitting
distributions where they assist the statutory purposes of
administration:
- The survival of the company or part of its undertaking as a going concern
- A more advantageous realisation of assets than in a winding up
Key considerations for court approval
The Law does not specify what factors the Court should consider when granting permission. In this case, we referred to the English decision in Re MG Rover Belux SA/NV (In Administration), where His Honour Judge Norris outlined considerations such as:
- Whether the distribution supports the objectives of administration
- The interests of creditors as a whole
- Alternatives to the proposed distribution
- The conduct of the administration to date
- Impact on any proposed exit route
How English case law influenced the Royal Court's decision
The Royal Court adopted a flexible approach, drawing on these principles while recognising that each administration involves unique circumstances.
Why this ruling matters for future administrations
Section 380A now offers administrators a valuable tool to make payments to unsecured creditors where appropriate. This decision provides clarity and sets a precedent for future applications.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
