Long-Overdue Changes To The Jersey Companies Law

Until now, barely a week could go by for finance lawyers and trust company directors in Jersey without someone entering into a long-standing debate about whether an "upstream" guarantee could be a distribution for the purposes of Jersey Law. However, that has changed. This article considers the benefits and practical implications of the Companies (Amendment No. 11) Jersey Law 2014 (the Amendment) in respect of deemed distributions, curing previously unlawful distributions, and ratification of directors' other breaches of duty.

THE UPSTREAM DEBATE

Prior to the entry into force of the Amendment, it was necessary to consider whether an upstream guarantee or other similar arrangement could be a distribution. If, for example, a guarantee were given to guarantee the obligations of the sole shareholder of the guarantor, and the guarantee were to be called upon the next day, there would be little in the Law (pre-Amendment) to rule out the possibility that a distribution