This year has already seen a number of major high street casualties in the sectors of retail and casual dining, with reports that the number of UK based restaurants "going under" increased by a fifth in 2017, with 2018's tough market appearing to be just as punishing. The introduction of the National Living Wage and Apprenticeship Levy in the UK, difficult trading conditions and food inflation have all been pointed to as ingredients in a recipe that has been difficult to swallow.
In addition, the owner of high street food chains Café Rouge and Bella Italia has posted a sharp increases in losses, despite a rise in like for like sales.
Toys R Us and Maplin have both fallen casualty to tough trading conditions, with New Look recently announcing proposals to close 60 stores via a company voluntary arrangement.
High street names are in the headlines on an almost daily basis and insolvency practitioners in the UK are increasingly seeing themselves advising or appointed over businesses that span jurisdictions and aren't just limited to the confines of the UK. Insolvencies of Woolworths, Austin Reed, Jaeger and most recently, Carillion, have all seen insolvency practitioners seeking to deal with assets or subsidiaries of these companies situated in Jersey. But how is this done in practice?
Foreign insolvency officials need to have authority to act in Jersey. The appointment of administrators or liquidators in the UK is governed by the laws of England and Wales and will require recognition by the Royal Court of Jersey before the appointed officeholders have any standing to be able to deal with or realise Jersey situs assets of the insolvent company.
Procuring recognition in practice would involve engaging with the Viscount (the Jersey court insolvency official), to explain the strategy of the administration or liquidation, how Jersey employees, creditors and other stakeholders are to be dealt with and why the administration or liquidation is likely to deliver the best result for these interested parties. Once the Viscount is satisfied with the proposed strategy, the English insolvency practitioners should then approach the English court for a Letter of Request (LoR), to be issued to the Royal Court of Jersey seeking recognition of their appointment in Jersey. This application will need to be made by English solicitors acting for the insolvency practitioners, but the Appleby team have extensive experience in advising on the wording of the LoR and in liaising with the Viscount. Once the LoR has been issued, an application will need to be made to the Royal Court of Jersey for an order giving effect to the terms of the LoR.
This process needs to be followed even if the appointed insolvency practitioners need to simply assign a lease to a buyer of the assets of an insolvent business, which is often the case on a retail insolvency where proprietary rights to the store itself ultimately allows continuance of trade. The officeholders would have no standing to procure such assignment, however, unless and until their appointment is recognised in the jurisdiction of the asset.
Jersey Incorporated Entities
In circumstances where it is proposed to place a Jersey incorporated company into an English insolvency procedure, such as administration, recognition would still, ultimately, be required to enable the appointed administrators to deal with Jersey situs assets. Recognition would follow an exchange of LoRs between the Royal Court of Jersey and the English High Court, with the Viscount and the Royal Court of Jersey first being satisfied that creditors will be better served by an English insolvency process than a Jersey process.
Whilst the EC Regulation on insolvency proceedings does not apply in Jersey (as Jersey is not an EEA state) the Royal Court in Jersey will consider and recognise the general principles of comity as persuasive. There is authority for the position that the Jersey court will exercise its inherent jurisdiction to issue a LoR to place an insolvent Jersey company into administration in England, if it is appropriate to do so and in the best interests of the company's creditors, the company's COMI being in the UK.
As the retail, leisure, healthcare and construction sectors face challenging market conditions which has been evidenced by a number of high profile insolvencies and reports of distress in the first quarter of this year, insolvency practitioners will more frequently find themselves handling cross border insolvencies. There may be assets to be realised in Jersey, or the corporate structure may have offshore entities within it over which appointed officeholders need to take control. In Carillion, for example, the Jersey registered Carillion Finance (Jersey) Limited was a wholly owned subsidiary of the PLC and a bond issuer in its own right, but it was also a co-obligor with the PLC of the group's debts. The Royal Court of Jersey recognised the need for urgency in this matter and appointed liquidators over the Jersey entity on a just and equitable basis, avoiding the potential for parallel cross border processes which might disrupt the main centre proceedings.
Jersey is an international finance centre and the Royal Court of Jersey is well versed in matters of cross border restructurings and insolvencies. There are numerous authorities that can be pointed to demonstrating the willingness of the Royal Court to support general principles of comity and extend co-operation to other courts and Appleby is well placed to assist with this.
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.