Insolvency 2020

Last Updated November 19, 2020


Law and Practice


ISOLAS LLP has developed specific expertise in insurance insolvency, having been the principal legal adviser for the liquidators in Hill Insurance & Lemma Europe Insurance. The department’s expertise in this area has been rewarded with new instructions from the UK Financial Services Compensation Scheme (Confidential) as well as the Financial Services Commission (within the regulatory context). It is also leading the jurisdiction in advising and representing large international DLT/crypto clients in contentious matters and disputes that have tested the way in which common law/equity applies to this new technology and disputes that may arise as a result, and remains strong in general civil litigation, continuing to act in a variety of high-value and high-profile contentious matters. Employment also remains a strong practice for ISOLAS, both contentious and non-contentious, acting mainly for employers including gaming/insurance companies, private banks.

The Gibraltar government has been particularly receptive to the challenges businesses have faced and will face as a result of COVID-19 and have made some significant temporary amendments to the Insolvency Act 2011. These amendments have introduced amongst other measures, a temporary moratorium period during which the ability of hostile creditors to place companies (and any other form of legal entity, sole trader or partnership) into administration or liquidation is suspended.

Further measures have also been introduced into the law to protect directors (and their equivalents in other forms of legal entities), and the decision they make during the COVID-19 pandemic to alleviate concerns regarding insolvent trading and other statutory remedies for which personal liability may arise. It is not clear how long these temporary measures will remain in place.

The main legislative framework for restructurings, insolvencies and liquidations consist of two Acts both of which commenced in 2014. The Companies Act 2014 and the Insolvency Act 2011re modernised Gibraltar’s previous regime (then constituted by the Companies Act 1930 and Bankruptcy Act 1934 which largely replicated the English Companies Act 1929 and was amended over time to keep pace with developing EU regulations).

The Insolvency Act 2014 (the Act) forms the basis for all matters in relation to corporate and personal insolvencies. The Act made various changes to the Insolvency landscape in Gibraltar, the most prominent of which was the introduction of the "administration" route which was not ordinarily available as an option for restructuring under the previous regime. Administrative Receivership, Voluntary Insolvent liquidations, Company Voluntary Arrangements (CVAs) and Individual Voluntary Arrangements (IVAs) were also introduced by the act. The Act also expanded malpractice and introduced disqualification orders for directors.

The Companies Act 2014 is also an important part of the insolvency regime in Gibraltar. Voluntary solvent liquidations (otherwise known as Members Voluntary liquidations) as well as schemes of arrangements are governed by this Act.

Gibraltar registered companies often have the choice of undertaking multiple different forms of voluntary and involuntary restructurings. Gibraltar law provides for, voluntary arrangements (CVAs), administration, voluntary liquidations and compulsory liquidations, as well as schemes of arrangements. There is also the option for creditors to appoint receivers or administrative receivers.

Individuals have the option of filing for bankruptcy or entering into an individual voluntary arrangement (IVA).

See 4.2 Rights and Remedies, 6.1 Statutory Process for a Financial Restructuring/Reorganisation in respect of CVAs and schemes of Arrangement, and 7.1 Types of Voluntary/Involuntary Proceedings in respect of administration and liquidation.

Whilst there are no prescribed time limits for entering formal insolvency proceedings, Gibraltar law places the obligations on the company and its directors to ascertain when the company is insolvent (or likely to be insolvent) and to act accordingly.

As is typical in other jurisdictions (such as England and Wales) there are consequences for directors should it be determined that a company traded insolvently and/or for the purposes of defrauding creditors including likely personal liability for losses or shortfalls attributable for the period in which a company traded insolvently. Additionally, directors may face the prospect of a disqualification order should they have permitted the company to trade insolvently and/or for the purposes of defrauding creditors or have committed misfeasance whilst in office, see 10.1 Duties of Directors.

Creditors (subject to the recently introduced Insolvency (Amendment) Act 2020 (the COVID-19 amendments),which imposes a moratorium on a creditors ability to petition to place a company into an insolvency process) may typically petition the courts to place a company into administration, liquidation or if they are the holders of a charge or security to appoint a receiver or an administrative receiver if the charge they hold is over the whole or substantially the whole company.

"Insolvency" is not required under the Companies Act 2014 to place a company into a solvent voluntary liquidation (previously known as a member’s voluntary liquidation).

There is generally a requirement for “insolvency” to place a company into liquidations, administrations etc. However, holders of security or charges may also appoint a receiver or administrative receiver to realise their charges. The concept of "insolvency" in the Insolvency Act distinguishes between insolvency and presumed insolvency. Insolvency is defined as a company’s inability to pay its debts as they fall due or the value of its liabilities exceeds its assets. Conversely, a Company will be presumed to be insolvent if they fail to comply with the requirements of a statutory demand or are unable to satisfy a judgment or order that has been issued against them.

Ordinarily, creditors will tend to establish presumed insolvency through the use of a statutory demand, however, this only creates a rebuttable presumption of insolvency which could potentially (but not frequently) be disproved by the company.

Modified insolvency procedures apply in certain sectors. Most notably, the Financial Services (Recovery and Resolution) Regulations 2020 introduced a modified regime for financial institutions, specifically investment firms, subsidiaries of credit institutions and financial holding companies amongst others.

The Financial Services (Insurance Companies) Regulations 2020 makes specific amendments to insolvency claims for insurance companies in which the insurance creditors have preference over ordinary unsecured creditors.

Gibraltar is a small jurisdiction and, as such, from a reputational perspective it is generally preferable for the company and its stakeholders to avoid formal court-proceedings such as administration and liquidation. It is often preferable for informal restructuring processes to be adopted prior to administration or liquidation. With this in mind, banks are generally receptive and supportive of borrower companies (as well as individuals) which are experiencing financial difficulties and will often attempt to reach solutions which do not involve court involvement.

There is no requirement in Gibraltar law for mandatory consensual restructuring negotiations.

As stated in 3.1 Consensual and Other Out-of-Court Workouts and Restructurings, there is no requirement in Gibraltar law for mandatory consensual restructuring negotiation. However, for large multi-jurisdictional companies’ larger formal restructurings are not uncommon. Typically, an insolvency practitioner or legal adviser is brought on board to liaise with creditors and attempt to co-ordinate proposals for restructure. This will include providing information sought by creditors who will typically want a high level of transparency as to a company’s financial position when assessing the prospects of success for any restructure.

After gathering the required information, the Creditor will either seek to  enter into individual arrangements (such as standstill if they are a particularly large creditor) or in larger restructurings and situations  where the company is close to a complete collapse, creditors will agree wider standstills and/or other collective agreements such as subordination agreements to avoid formal proceedings being commenced. The manner of the restructure is dependent on the company structure as well as its prospects of success and profitability.

In most circumstances, any investor who provides new money would seek to mitigate risk by taking security over assets of a company. It is not uncommon for existing creditors to have part security for their debts and in these circumstances, there may be a willingness to co-operate and enter into formal agreements in order to entice new money to be injected (such as partial subrogation’s).

Further, it is not uncommon for large creditors or groups of larger creditors to each agree to inject new money in order to prevent an overall collapse which would leave them in a considerably worse off position. These arrangements however tend to be short term arrangements and linked with administrations or other supervised processes.

There are no legal doctrines or statutes which regulate the relationship or impose duties on creditors. 

The CVA is an informal but binding agreement between the company and its unsecured creditors. It is the most popular form of out of court financial restructuring. However, it should be noted that it requires 75% (based on value) of the unsecured creditors to approve and agree with the proposed plan, and 50% of all voting unconnected creditors must support the CVA for approval. Once approved, all unsecured creditors are bound irrespective of how they voted.

Alternatively, if appropriate, a company and its creditors may elect to use a scheme of arrangement. Schemes of arrangement can bind any secured or preferential creditor without their consent. This differs from CVAs in which secured and preferential creditors cannot be bound without their consent.

Other contractual tailor-made solutions are possible and may provide for “cram-down” mechanisms if all creditors have previously agreed to arrangements which include these but they would not bind creditors who were not parties to such agreements.

Ordinarily, the most utilised forms of security and formalities for immovable property are:

  • Mortgages: a mortgage is a security interest created by transfer of legal title in the secured asset. The borrower has an "equity of redemption", allowing recovery of legal title once the secured obligation is fulfilled, and the lender has the right to take possession of the property and may foreclose if the borrower defaults on the security repayment.
  • Fixed Charges: a fixed charge is a charge created over identified property which restricts the debtor’s powers to dispose of or otherwise deal with the property without the creditors consent. Title will ordinarily remain with the charger.

The most utilised forms of security for moveable property are:

  • Floating charges: unlike fixed charges, a floating charge allows a company to provide security over assets which can be dealt with in the ordinary course of business. This means that the asset can be continually turned over, used up and replaced as a matter of trading. Therefore, granting greater flexibility for the company to trade. However, the charge will crystallise into a fixed charge when certain events take place, such as the company entering into liquidation.
  • Pledge: this involves providing a creditor with control over an asset. Ownership of the asset remains with the pledgor; however, the creditor will gain ownership in the event of default.
  • Lien: lien’s do not confer the right on its holder to dispose of the relevant assets if the debtor is not paid. However, a lien does provide the right on the holder to retain possession of another person’s property until a debt is settled.

In order for such securities to be valid against a company they must comply with the formalities as set out in the Companies Act 2014. Specifically, the security document must be in writing and signed, this is ordinarily done by Deed. Additionally, every charge which is registrable against a company must be registered with Companies House and the Registrar of Companies within 30 days beginning with the date of creation of the charge. Note, charges which are not registered with Companies House are deemed void.

Pledges do not require registration.

Typically, secured creditors will generally be free to enforce their securities.

A secured creditor may typically exercise powers to appoint a receiver over secured assets. Receivership is an out-of-court enforcement mechanism. The receiver’s main function is typically to sell the charged assets and to account to the appointing secured creditors for the sale proceeds. It should of course be remembered that whilst the receiver owes duties to the company, its directors, other creditors and shareholders, this is secondary to the duty to realise the charged assets on behalf of the appointing chargee.

A secured creditor holding a charge over the whole or substantially the whole company also has the option of appointing an administrative receiver. An administrator receiver has wider powers than a receiver including the power to run the company, however as with receivership the administrative receiver’s primary duty will still be with the secured creditor. Additionally, should the security be in the form of a mortgage, then the mortgagee may take physical possession of the property and can sell the asset to discharge the debt due. However, where a company is in administration (or about to be placed into Administration) such enforcements actions may not be actionable without the consent of the administrator or the Courts.

A secured creditor will typically have direct rights over assets which would not form part of the assets of the liquidation once enforcement action is commenced. Secured creditors are entitled to commence proceedings immediately upon an event of default, subject of course, to any stay of enforcement and/or moratorium periods.

When distributions are to be made in a formal insolvency proceeding, such as liquidation, creditors and shareholders are paid in the following order of priority:

  • the costs and expenses properly incurred by the liquidator in accordance with the prescribed priority as set out in the prescribed priority;
  • payment of preferential claims as prescribed in the Insolvency Rules;
  • floating charge holders;
  • unsecured creditors; and
  • shareholders.

See 5.5 Priority Claims in Restructuring and Insolvency Proceedings.

It is not typical that unsecured trade creditors are kept whole. Rather either they are paid as per usual priority or agreements such as a CVA may be utilised in order to keep unsecured creditors whole or provide for a larger payment. Unless special arrangements are entered into contractually between creditors, unsecured creditors must be treated pari passu once liquidation proceedings have commenced and in financial services related liquidations (such as insurance companies) it is atypical for unsecured creditors to receive much if at all as the priority is modified to include certain creditors (who would otherwise be unsecured) who will be given priority over ordinary unsecured  trade creditor (for example debts due which are insurance debts such as a claim made and not paid would take priority in an insurance insolvency).

As unsecured creditors are amongst the last persons to receive payment during liquidation, it is advisable for the creditor to attempt to recover their debts before the company enters into liquidation. This can be done either through the instigation of civil proceedings or if the debt is undisputed, through a statutory demand.

Unsecured creditors also have the right to apply to the court to stay compulsory court appointed administration or liquidation proceedings.

In Gibraltar, pre-judgment attachments take the form of freezing injunctions (otherwise known as a freezing order) which would prevent a debtor from disposing or dissipating assets.

In insolvency claims an unsecured creditor may ask the court to freeze the company’s assets up to the value of the claim, to do so they will need to satisfy the court that there is a real risk that the company will dissipate the assets should an injunction not be granted.

See 5.1 Differing Rights and Priorities.

Gibraltar law does provide for priority claims, although note that these will only apply to assets which form part of the insolvent estate (secured assets for which enforcement action is taken will not usually be included) and the liquidator fees.

Preferred creditors include the employees of the Company (both past and present) and the Gibraltar government. The priority of preferred creditors is set out in the Insolvency Rules 2014 and include:

  • wages and salaries (including accrued holiday pay) due to past and present employees; it should be noted that only the first GBP10,000 will be deemed preferential;
  • social security payments – these claims are not capped;
  • employee pension contributions and medical insurance capped at GBP5,000 per employee; and
  • taxes owed to the Gibraltar government in respect of duty, stamp duty, licence fee or permit – these claims are not capped.

It should be noted that all preferential claims rank equally between themselves and in the event that the assets are insufficient to meet the claims in full they are paid rateably.

Companies in Gibraltar have two statutory processes which permit them to financially restructure or reorganise their business. This may be done by either a Company Voluntary Arrangement (CVA) as permitted by the Insolvency Act or a scheme of arrangement which is governed by the Companies Act 2014.


The purpose of a CVA is ultimately to avoid liquidation and permit a company to enter into a legally binding compromise with its creditors, including its employees. One of the main benefits of entering into such arrangements is that the directors remain in post And continue to operate the company subject to the oversight of the appointed supervisor.

This process is ordinarily commenced by the company’s directors provided that the company is not in liquidation or administration. The directors may only propose the arrangement if they reasonably believe that the company is or will become insolvent, and must subsequently pass a resolution in this respect. Further they must approve a written proposal containing the information prescribed by the rules. However, it may also be commenced by a liquidator if the company is in liquidation or an administrator if the company is in administration. 

The process is supervised by an Interim Supervisor (IP) who must be an eligible insolvency practitioner. The practitioner must prepare a report on the proposal and call a creditor’s meeting, at which the creditors can approve, amend or reject the proposal. In order for the arrangement to be valid 75% of the creditors (based on value) and 50% of all voting unconnected creditors must agree to the terms, this will bind the company and each member and creditor of the company will be bound by such terms, except for preferential and secured creditors.

Scheme of Arrangement

Arrangements are generally dealt with and governed under Part VIII the Companies Act 2014. This will involve the court ordering a meeting of the creditors or class of creditors, or of the members of the company or class of members upon an application made by the company, any creditor or member of the company, liquidator (if the company is being wound up) and administrator (if company is in administration).

Ordinarily, there will be separate creditors’ meetings for different classes of creditors or members (as the case may be). It is the responsibility of the party proposing the scheme to determine the correct classes. It is of vital importance for the correct class of creditors to be identified as the Court will not have jurisdiction to sanction the arrangement if the incorrect class meeting is held. Whilst the Companies Act 2014 does not set out a substantive test that the court must apply, it is worth noting that secured and unsecured creditors would constitute separate classes.

Any meeting that is summoned by the Court under the Companies Act must include a statement explaining the effect of the compromise or arrangement and in particular state any material interests of the directors of the company, whether as directors or as members or as creditors of the company or otherwise and the effect of those interests of the compromise or arrangement, in so far as it is different from the effect on the like interests of other persons.

For any proposed compromise or arrangement put forward under a scheme to become binding, it must be approved by 75% in value of the creditors, class of creditors, members or class of members (as the case may be) and then the court must sanction said arrangement.

This process is concluded once all of the terms of the agreement are satisfied.

CVAs and schemes of arrangements do not provide automatic moratorium periods or automatic stay of claims.

The company’s directors will remain in place throughout the CVA and arrangement period and will therefore continue to run the business, there are no restrictions on their powers, save as for those explicitly stated by the terms of the scheme or the CVA.

CVAs are entered into by unsecured creditors and the company, this means that secured creditors will not be bound by the CVA and will not be able to vote in a CVA or the CVAs proposals.

Once a Court sanctions a scheme of arrangement, it will be binding on all affected members and creditors of the company.

CVAs must be agreed by 75% of the unsecured creditors, all unsecured creditors will be bound by a CVA, however, secured creditors will not be affected.

Although uncommon, there are no provisions in Gibraltar law which prohibit claims against a company undergoing a CVA or a scheme of arrangement from being traded. However, it should be noted that if the claim is traded after a CVA or arrangement is entered into such persons acquiring the claim will be bound as the original creditor was. The acquirer must notify the supervisor of the CVA that he has acquired the claim.

Persons who acquire a claim prior to the approval of a CVA or sanctioning of a scheme of arrangement will have the freedom to deal with the claim as they view fit. Although, the claim will still be subject to any obligations which attached to it prior to the purchase.

Whilst arrangements are most commonly used to restructure corporate groups it is also possible for a CVA to be used for such purposes. The doctrine of single legal personality applies to Gibraltar companies and as such any CVA which is entered into will apply to each company separately. This means that should a CVA be utilised for such purposes each company within the group would need to agree to separate CVAs.

Gibraltar law does not prohibit a company from using or selling its assets under a CVA or scheme of arrangement, this, however, is subject to the terms of said CVA or scheme which may impose its own restrictions.

There are no asset disposition procedures in Gibraltar law, meaning that such procedures are created and determined purely on  the terms of a CVA or a scheme of arrangement.

Any asset disposal would require the company to pass a board resolution authorising the disposal, this would be done through the directors of the company and not by an office holder.

Any purchaser of a disposed asset will acquire good title and would be free and clear of any claims.

There is nothing in law which prevents a creditor from bidding on the sale of an asset or attempting to purchase an asset simply due to his position as a creditor. This is of course subject to the terms of the CVA or the arrangement which may well prohibit that action. The directors of the company would also be subject to the ordinary fiduciary duties and must ensure that the transactions are for good consideration and in the company’s best interest 

Secured creditors do not have voting rights in respect of respect of CVA proposals and are therefore not bound by them. This is not the case with schemes of arrangement which may bind a secured creditor if the required voting percentages are achieved in their respective creditor class and the scheme is approved by the court.

It would be possible for a company to obtain new money, this may be obtained either through the CVA or the scheme of arrangement.

If the new money is introduced as part of or in a scheme of arrangement then such money can be secured against pre-existing secured creditor’s assets, provided of course that the relevant approval of the relevant share class is obtained. However, such money cannot be secured against any asset which is already secured in a CVA, as secured creditors interests cannot be affected by CVAs.

The statutory process may be used for determining the value of claims. However, the process between the CVA and the scheme of arrangement is different.

In a scheme of arrangement, the value of the claim will be set out in the explanatory memorandum of the arrangement. It is of vital importance that the memorandum is fairly drafted both procedurally and substantively as a failure to do so may result in the court not approving the scheme.

CVAs, however, follow a different process in which unliquidated, or contingent unsecured claims have to be valued by the chairman. Creditors who feel aggrieved by the chairman’s valuation may apply to the court to challenge such valuation. However, the courts are generally unreceptive to such claims, provided that it can be shown that the chairman has acted fairly. Liquidated claims are admitted in full.

The Court does not have to approve a CVA unless it is challenged by a creditor. A creditor may challenge the CVA if they find that it is unfairly prejudicial to their interests and a court may set aside the CVA if they find that the CVA is unfairly prejudicial or they may order a further meeting to be called. 

A scheme of arrangement has to be sanctioned by the court, and the court will only sanction said arrangement if all parties agree. In other words, if a reasonable class member could not support such a proposal then the court will not sanction such arrangement

Non-debtor parties can be released from liabilities under both CVAs and schemes of arrangements. In the case of CVAs this can only be done if it gathers sufficient support from the unsecured creditors and provided that this was stipulated in the proposal.

CVAs and schemes of arrangement do not provide creditors with the right of statutory set-off and contractual or equitable set-offs must be included in the proposals of both the CVA and the arrangement. Nonetheless, the parties may agree to suspend or terminate particular rights of set-off, provided that they get the required majority in the case of the CVA and the court’s approval for the arrangement.

Ordinarily, a CVA will end if the company fails to observe the terms, this will entail the supervisor filing a notice of termination with the registrar and sending a notice of termination to the company and each creditor of the company who is bound by the arrangement. The report will explain any material difference between the implementation of the arrangement and the proposal approved by the creditors. 

A creditor who fails to observe the terms of the CVA could be restrained by way of injunction.

A scheme of arrangement, once sanctioned and effective, has the same legal status as a contract and thus any failure to observe the terms of the arrangement will be dealt with in the same manner as a breach of contract, as such the parties who have suffered the breach will be entitled to the same remedies. This applies to both the company and the creditors who will have the same rights.

A CVA or scheme of arrangement may modify the ownership of the company, however, the CVA and arrangement must make specific provisions in this respect, failing which the existing equity owners will retain ownership of the company.

The main statutory proceedings in Gibraltar include administration and liquidation.


This is specifically designed to rescue an insolvent company; the aim of administration is ultimately to avoid liquidation. Administrators must perform their functions with the objective of:

  • rescuing the company as a going concern;
  • achieving a better result for the creditors as a whole than would be likely if the company were to be wound up; or
  • realising property in order to make a distribution to one or more secured or preferential creditors.

Ordinarily, an administrator will be appointed by the court through an administrative order. In order to issue such an order, the Court must be satisfied that the company is, or is likely to become unable to pay its debts, and that the order is reasonably likely to achieve the purpose of the administration. However, it should be noted that an administrator may also be appointed out of Court by a floating charge holder.

The appointment of an administrator leaves the directors of the company with very little powers, and the administrator will owe duties to the company and not the creditors. Whilst appointed the administrator will act to further the objectives and will have wide ranging powers as all the company’s assets are under the administrators control.

An automatic moratorium will come into effect after an application for administration or a notice of intention to appoint an administrator is filed at Court. This would prevent any person from acting against the company and prevent any creditor from enforcing their security against the company.


A company may be liquidated voluntarily or compulsory. A voluntary liquidation requires the members of the company to pass a special resolution authorising the liquidation of the company. It is therefore open to solvent and insolvent companies. Alternatively, a company may need to be compulsorily wound up which requires a court order and is a court proceeding.

In respect of compulsory liquidation, the Court will ordinarily appoint a liquidator for one of the following reasons:

  • the company is insolvent;
  • the number of members is reduced below the minimum number required under the Companies Act;
  • the Court is of the opinion that it is just and equitable that a liquidator should be appointed; or
  • the Court is of the opinion that it is in the public interest for a liquidator to be appointed.

An application for the appointment of a liquidator may be made by the company, a creditor, a member, the director, the Minister for financial services, the Financial Services Commission, if the company is in administration the administrator and the administrative receiver of the company.

Once appointed, the liquidator will control the company’s assets, the directors whilst remaining in office will no longer have any powers in respect of the Company, and the company ceases to trade. Liquidation is concluded once the Court makes an order releasing the liquidator or when the liquidator files a certificate of compliance.

Voluntary Liquidation

Voluntary liquidations are governed by Part X of the Companies Act 2014. In voluntary liquidation it is the shareholders that place a company in liquidation. Unlike compulsory liquidations, the company must be in a solvent state for it to be wound up. The directors or the majority of directors must at a meeting make a statutory declaration of solvency in which they directors state that they have made a full enquiry into the company’s affairs and that having done so, they have formed the opinion that the company will be able to pay its debts in full together with interest at the judgment rate, within such period, not exceeding 12 months from the commencement of the voluntary liquidation. It is an offence for a director to make a statement of solvency without reasonably grounds for the opinion that the company will be able to pay its debts in full together with interest.

The statement of solvency must be made within five weeks of the date of the passing of the resolution for the appointment of a voluntary liquidator and must be delivered for registration within fifteen days following the date the resolution for liquidating the company is passed.

The liquidator is appointed by passing a special resolution, which must be advertised in the Gazette within 14 days of the passing of the resolution.

If the voluntary liquidator forms the opinion that the company will be unable to pay its debts, within the period specified in the director’s statutory declaration of solvency he must notify the official receiver and if the company is authorised by the Financial Services Commission (the Commission). The voluntary liquidator must then call a meeting of creditors of the company within 21 days of notifying the official receiver. The voluntary liquidator is required to conduct the liquidation in line with the provisions of the Insolvency Act as soon as he becomes aware that the company is not, or will not be able to pay its debts. It is open for the creditors during the first creditors meeting to appoint another liquidator in the place of the liquidator appointed by the members of the company.

Whilst a company is in liquidation or administration it will be the office-holder (the liquidator or administrator) who will negotiate, execute and authorise the sale of assets. Prior to selling any company assets the office-holder must obtain the consent of the secured creditors (if the asset in question is partially secured), and will seek to obtain directions from the Courts If agreement with secured creditors is not possible.

The way an asset is secured will determine whether the title is sold with good title and free and clear from liabilities. Assets subject to floating charges may be sold as an unsecured asset whereas assets which are subject to a fixed charge may be sold free and clear of the fixed charge, but this would be subject to negotiation. The office holder will account for the proceeds in both instances, and will ordinarily indemnify themselves from any potential liabilities arising as a result of the sale.

The manner in which creditors are organised and committees formed is dependent on the process which is being utilised. Such committees are relatively common in administration or liquidation proceedings and the number of persons on said committee ordinarily varies although it shall comprise of at least three but not more than five members

A committee’s function will be dependent on whether the company is undergoing liquidation or administration. In liquidation it is the committee’s responsibility to agree to the liquidator’s remuneration and exercise supervision over the liquidator. Administrators have broader statutory powers than liquidators as prescribed by Schedule 2 of the Insolvency Act, as such administrators will often require less supervision from the committee. 

Overseas insolvency proceedings may be recognised in Gibraltar through the Courts common law powers, Section 426 of the Insolvency Act 1986 (England and Wales), through EU Regulation (EC) 1346/2000 on insolvency proceedings and the UNCITRAL Model Law on Cross-Border Insolvency as enacted by the Insolvency (Cross Border Insolvencies) Regulations 2014.

It is open to the Courts of Gibraltar to exercise their inherent jurisdiction under the common law and to grant relief in conjunction with foreign proceedings. Gibraltar Courts will be restricted by private international law principles which may limit how the Court recognises foreign judgments.

Section 426 of the Insolvency Act 1986 allows a "relevant country or territory" to apply to the English Courts for assistance. Gibraltar is considered to be a relevant country or territory and as such the Gibraltar Courts can apply to the Courts of England and Wales for assistance in insolvency proceedings. However, it is the English Court’s discretion whether to grant assistance to the requesting court.

The UNCITRAL Model law on Cross-Border insolvency provides for officeholders in foreign insolvency proceedings to apply to the English court to be recognised as a “foreign representative”. The regulations provide uniform legislative provisions to deal with the cross-border insolvency and promote:

  • co-operation between the courts and competent authorities involved in cases of cross-border insolvency;
  • fair and efficient administration of cross-border insolvency that protects the interests of all creditors and other interested parties, including debtors;
  • the protection and maximisation of the value of the debtors’ assets; and
  • the rescue of financially troubled business.

Gibraltar has not expressly amended its regulations to introduce EU Insolvency Regulation 2015/848 which replaced EU Insolvency Regulation 1346/2000. Nonetheless, EU Directives have Direct Effect in Gibraltar and thus Gibraltar entities would be capable of using the Insolvency Regulations of England and Wales. It is worth noting that whilst the EU Insolvency Regulation sanctions the use of protocols no reported judgment on this has emanated from Gibraltar Courts.

See 8.1 Recognition or Relief in Connection with Overseas Proceedings.

There are no special provisions for foreign creditors. However, any foreign currency debts will be converted into pounds sterling at the prevailing exchange rate at the relevant time, which means the commencement of proceedings.

The statutory officer appointed in a proceeding is dependent on the insolvency proceeding. A liquidator will be appointed if a company is being liquidated, an administrator will be appointed when a company is in administration and a receiver will be appointed over secured assets in order to realise the benefit of the asset for the holder of the security.


Liquidators have various and wide-reaching powers; however, a liquidator’s main duty is to wind up the company and collect and realise the company’s assets so that distributions can be made to the company’s creditors and if there is any surplus remaining to the shareholders.

Liquidators act in the name of the company and not in their own name and as such a liquidator will owe their duties to the company and not the creditors of the company. These duties are fiduciary duties and include the duty to act honestly and in good faith, their duty to exercise their powers with proper purpose and their duty to avoid conflict of their personal interests with that of the company.

Liquidators have far reaching powers, including the right to "claw-back" company property which has been sold or released by the company in the period immediately preceding the winding up (this includes transactions undertaken at an undervalue and transactions which are deemed to be an unfair preference) as well as the right to require wrongdoers of the company to make personal contributions to the assets of the company (misfeasance, fraudulent conduct and insolvent trading). The full powers of a liquidator are listed in Schedule 2 of the Insolvency Act 2011.


Administrators are appointed for the specific purpose of rescuing an insolvent company from being liquidated and if this is not possible, to ensure that creditors receive a better result for the creditors as a whole than would be likely if the company were wound up. If the administrator decides that it is not reasonably practicable to achieve those objectives, then they must realise the company’s property and make a distribution to one or more secured or preferential creditors. As is the case with liquidators, administrators must act in the best interests of the creditors and administrators owe the same fiduciary duties to the company as liquidators.

Administrative receivers can be appointed out of court by or on behalf of a debenture holder or other security instrument which is secured by a floating charge or by the court. An administrative receiver is the receiver of the whole or substantially the whole of the business, undertaking and assets of a company. The powers of administrators and administrative receivers are listed in Schedule 1 of the Insolvency Act 2011. 

Liquidators, administrators and administrative receivers have a duty to submit a written report to the official receiver if they consider that the conduct of a director or former director makes them unfit to be considered in the management of a company.

Liquidators, administrators and administrative receivers must all be insolvency practitioners who are licensed and authorised by the Financial Services Commission.

Appointing Liquidators

There are various ways in which a liquidator may be appointed, this ultimately depends on the type of liquidation in question. In a voluntary liquidation, the members of a company may by special resolution appoint a liquidator of their choice. Alternatively, the liquidator may be appointed by the official receiver, this will occur where a special resolution has been passed because the official receiver has exercised the voting rights attaching to the company’s shares.

Members forfeit their rights to select the liquidator where they apply to the Court to wind-up the company. In other forms of compulsory liquidation (eg, where a company is unable to pay a debt and the creditor seeks for the company to be wound up) it is the Court who will appoint the creditor, this may be the official receiver or another eligible insolvency practitioner. Members of a company will not have the right to appoint a liquidator where the liquidator does not consent in writing to his appointment.

Removing Liquidators

The process involved in removing the liquidator is dependent on the type of liquidation which has taken place. In voluntary liquidation a liquidator may be removed by a resolution in a general meeting of the company. In a compulsory liquidation, a liquidator would ordinarily be removed by a Court order.

Liquidators may also be removed from the company if an application is made to the Court. An application may be made by the creditors committee, a creditor of the company or, with the leave of the Court, a member of the company or the official receiver. Such an application may be made if the liquidator is not eligible to act (ordinarily this is due to a conflict of interest), breaches any duty or obligation imposed on them under any of the Insolvency Rules and Regulations or the liquidator fails to comply with any direction or Court order. However, the Court will only remove the liquidator when it is satisfied that the conduct is below the standard of a reasonably competent liquidator, the liquidator is conflicted or some other reason requires their removal.


An administrator may be appointed by an order of the court on the application of the company, the directors, a creditor, the supervisor of an arrangement, the Financial Services Commission where relevant, or a liquidator of the company. Holders of floating charges are also entitled to appoint an administrator. In Gibraltar, it is usually the case that more than one administrator is appointed to act jointly.

Administrative receivers are appointed and chosen by the holders of floating charges. Administrative receivers may only be removed by a Court order and cannot be removed in accordance with the charge or other instrument under which he was appointed.

Director’s duties in Gibraltar derive from common law and equitable principles. The Gibraltar Companies Act did not codify such duties. Nonetheless, directors in Gibraltar must, inter alia:

  • act in good faith and in the best interests of the company;
  • exercise a reasonable degree of care, skill and diligence; the standard applied will be that which could reasonably be expected from a person with his knowledge and experience;
  • act within the powers conferred on them by the company’s constitutional documents;
  • act within their powers; and
  • not abuse their position of trust.

Acting in the best interests of a company which is insolvent or on the verge of insolvency may require directors to consider the interests of creditors and act in their interests as well as the Shareholders of the company. There is no set time as for when the directors should consider the interests of creditors and it is often difficult to pin-point when this should occur. Directors of insolvent or near insolvent company’s should therefore bear this in mind when taking any decisions.

In assessing whether a director acted in the best interests of the company the Court will apply a subjective test which considers the subjective belief of the directors. This ultimately plays into directors’ favour as they would simply need to show that any they reasonably and genuinely believed that any decision they made was in the company’s best interests.

Directors of insolvent company’s may be liable to make up for the short-fall of such company’s if they have committed misfeasance, which involves the misapplication or retention of company assets or breach of any fiduciary or directors’ duties owed to the company. Directors of company’s which have been trading fraudulently, whilst insolvent or who have committed fraudulent conduct may all be personally liable for the Company’s obligations.

In addition to making directors personally liable for the company’s obligations the Court may also impose a director’s disqualification order on said directors. Such order may not exceed ten years and may also be extended to shadow directors, voluntary liquidators, and receivers or insolvency practitioners.

Disqualified Directors

Disqualified directors who engage in prohibited activities are liable on summary conviction to imprisonment for two years or a fine at level 5 on the standard scale or both and on conviction on indictment to imprisonment for five years or a fine of twice of the statutory maximum or both.

A director owes duties only to the company, even in instances where a company is insolvent. The distinction that arises is that the directors must consider the creditors interests instead of the interests of the shareholders of the company but the directors.

As stated in 9.2 Statutory Roles, Rights and Responsibilities of Officers liquidators have wide ranging powers to claw back monies in connection with transactions at an undervalue, at a preference and transactions defrauding creditors.

Transaction at an Undervalue, Unfair Preference and Voidable Floating Charges

Preference transactions include any transactions where the company puts a creditor in a better position in the event of the company’s insolvency than he or she would otherwise have been. There is a rebuttable presumption that the transaction is preferential if it is entered into with a connected person. The company must have been influenced by a desire to prefer the creditor and this must have occurred within six months or two years of the insolvency, depending on whether the person had a connection to the company.

A company will enter into a transaction at an undervalue where the company makes a gift or receives significantly less consideration for the transaction that should have been due. In instances where there are linked transactions (ie, multiple different assets) the Court will look towards the value received for the items as a whole. The Court will not find that a transaction has been entered into at an undervalue where it was entered into in good faith and as part of the purposes of the business or where there was a reasonable belief from the persons executing the transaction that it would benefit the company.

Additionally, floating charges which are created during the vulnerability period and which are deemed to be insolvency transactions will also be considered to be void unless consideration has been provided in exchange for the floating charge.

The court will also be prepared to void any transaction which it deems to be an extortionate credit transaction if it occurs within the vulnerability period. Transactions will be deemed to constitute an extortionate credit transaction where the terms of the credit provided to the company require grossly exorbitant payments to be made in respects of the provision of credit or if the transaction is deemed to grossly contravene ordinary principles of fair trading.

The vulnerability period in respect of all of the aforementioned transactions is two years prior to the onset of insolvency in respect of a connected person and six months for those persons who are not deemed to be connected persons. Extortionate credit transactions may be voided if they had been entered into within five years of the onset of insolvency.

It is not clear whether there are any limitation periods in respect of bringing claims for undervalue or preference transactions, however, it is worth noting that such claims are ordinarily brought by liquidators who are trying to maximise creditors returns and as such they will ordinarily be brought before the Court as soon as reasonably practicable. 

Only liquidators and administrators have standing to bring a claim for the court to set aside the effects of transactions at an undervalue or preference. However, any creditor who has been defrauded can bring a claim in that respect.


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Law and Practice


ISOLAS LLP has developed specific expertise in insurance insolvency, having been the principal legal adviser for the liquidators in Hill Insurance & Lemma Europe Insurance. The department’s expertise in this area has been rewarded with new instructions from the UK Financial Services Compensation Scheme (Confidential) as well as the Financial Services Commission (within the regulatory context). It is also leading the jurisdiction in advising and representing large international DLT/crypto clients in contentious matters and disputes that have tested the way in which common law/equity applies to this new technology and disputes that may arise as a result, and remains strong in general civil litigation, continuing to act in a variety of high-value and high-profile contentious matters. Employment also remains a strong practice for ISOLAS, both contentious and non-contentious, acting mainly for employers including gaming/insurance companies, private banks.

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