Corporate insolvency regime changes ‘will enhance the island’s reputation’
CHANGES to Guernsey’s corporate insolvency regime ‘will benefit consumers and creditors as well as enhance the island’s international reputation’.
Todd McGuffin, a partner at law firm Babbe, pictured, said the reforms to The Companies Law (Guernsey) 2008 would be positive, with the changes expected to come into force by the end of March next year.
‘Previously it was not uncommon for directors or shareholders of companies to be appointed as liquidators to conduct an insolvent voluntary liquidation,’ added Advocate McGuffin.
‘However, where such liquidators might benefit from refusing to acknowledge the claims of some creditors, potential conflicts of interest may arise. ‘The changes will require the appointment of independent liquidators to insolvency voluntary winding ups.’
Reforms include the requirement for a liquidator in an insolvent voluntary liquidation to give notice of their appointment to creditors, to hold at least one meeting with creditors and to report to creditors on an ongoing basis.
Creditors will be better able to engage with the liquidator and understand their rights.
Additional powers will be given to liquidators, whether the liquidation is voluntary or compulsory, to demand the production of information from directors at the earliest opportunity.
This should allow liquidators to understand more quickly and efficiently the state of the company’s assets, liabilities, debts and creditors.
Liquidators will also be able to apply to the Royal Court for an order requiring other individuals with knowledge of the company’s affairs to be examined and be compelled to provide information.
These new powers will sit alongside a proposed ongoing obligation on liquidators to report any findings or suspicions of misconduct on the part of directors or officers of a company which will assist the authorities in identifying delinquency and potential wrongdoing.