The Royal Court of Jersey’s decision to allow the sale of The Collections Group’s business and assets to a new buyer has set a precedent in Jersey which opens the way for new interpretation of the island’s insolvency law.
Carey Olsen partner, Advocate Marcus Pallot, represented Richard Clews, a director of The Collections Group, at the hearing and was instrumental in devising the deal which has allowed the group’s business to be sold and around 40 jobs to be saved. Mr Pallot said, unlike in the UK, Guernsey and other jurisdictions, Jersey’s insolvency law made no express provision for administration or any similar process. He explained that, under laws in other jurisdictions, placing a company into administration gave the appointed liquidators the opportunity to try and rescue the insolvent business.
“In Jersey the insolvency process has no soft edges; the business of an insolvent company is brought to an abrupt stop, a liquidator is appointed with a duty to sell the company’s assets as soon as possible. Before this case, a business was either solvent and trading or insolvent and shut. “In the case of The Collections Group, and in conjunction with the liquidators Grant Thornton, we were able to expand the use of just and equitable winding up under the existing Companies’ Law in Jersey to produce something approaching a “pre-pack” administration where the Court permitted the liquidators to consider a sale agreement with an already-identified purchaser. “We see this as a step towards administration without the need for new law to be enacted in Jersey.
The result means that much of The Collections Group was sold as a going concern and many of the former employees have already been re-employed.” The Royal Court was able to consider this innovative idea because there was more of a prospect of creditors of the Collection Group recovering something in respect of their debts under this plan than by following the usual path to an insolvent liquidation.
Mr Pallot said: “I believe this was the best solution that could possibly have been achieved and a fascinating case in which to have been involved. It should prove to be influential in the future as other insolvency cases involving trading businesses are heard.”