Jersey, like Guernsey, is a British Crown dependency with its own legislature and independent legal system. It is responsible for own domestic affairs, economy and tax regime. Given its role as a financial centre, corporate insolvency laws and procedures play an important role. Much of the insolvency regime is based on modern and adaptable insolvent and solvent winding-up processes which will be familiar to English and other common law practitioners.
However, there are some important local distinctions. One example is the insolvency process known as désastre, a form of court-ordered winding-up under which a court official known as the Viscount acts as official liquidator. Whilst originating in Jersey case law over 200 years ago, the désastre process is now substantially set out and updated in a statute designed to meet modern day needs. The major change in 2022 was the introduction of provisions in the Companies Law making it possible for the main alternative form of insolvent winding-up of a Jersey company – a creditors' winding-up carried out by a liquidator – to be instigated by creditors as well as by the company's shareholders. As a result of this change, it seems likely that the désastre process will be less frequently used in the future as a form of creditor-initiated compulsory winding-up of Jersey companies, although it is too early to ascertain the extent to which this is happening.
Jersey is not a member of the EU and does not have legislation giving effect to UNCITRAL Model Law on Cross-Border Insolvency (although the court is empowered to take it into account in rendering assistance to foreign courts). However, there is much in Jersey insolvency procedure and legislation regarding schemes of arrangement that is based on English principles, and which thus reflects processes available in the UK and many other Commonwealth jurisdictions.
Like Guernsey, the close relationship of Jersey with the UK and in particular the City of London, as well as Europe more broadly, means that the restructuring and insolvency market is generally impacted by prevailing market conditions in those locations.
Creditors' Winding-Up as a Form of Compulsory Winding-Up
As mentioned above, recent amendments to the Companies Law have made a creditors' winding-up available as a form of compulsory insolvent winding-up that can be instigated by a company's creditors. Previously a creditors' winding-up was a purely voluntary form of insolvent winding-up, in that it could only be commenced by the company's shareholders. The procedure for the new option, which in most cases will involve the making of a statutory demand, is not dissimilar to that which applies to the making of a creditors' winding-up petition under the UK Insolvency Act 1986 (see 2.4 Commencing Involuntary Proceedings).
It is worth adding, however, that similar changes have not yet been introduced to the creditors' winding-up processes that apply to other Jersey entities, such as a limited liability company formed under the Limited Liability Companies (Jersey) Law 2018 or a foundation formed under the Foundations (Jersey) Law 2009. In those cases, creditors will still need to look to the désastre jurisdiction.
Other notable legal developments in the last few years have included the increasing use of a court-ordered just and equitable winding-up of companies in preference to the more traditional routes of a désastre or a creditors' winding-up (see 2.2 Types of Voluntary and Involuntary Restructurings, Reorganisations, Insolvencies and Receivership).
In recent years, the court has also allowed assets and liabilities of group companies to be pooled so as to enable a more cost-effective liquidation to proceed for the benefit of creditors.
There is a continuing absence of an administration procedure designed to encourage the rescue of an insolvent company as a going concern. Nevertheless, Jersey companies have been placed in UK administration under the UK Insolvency Act 1986 either where the UK courts have direct jurisdiction to do so and, where they do not have direct jurisdiction, the same result may be achieved through the Jersey court requesting assistance under Section 426 of the UK Act, the Jersey court being satisfied that the company's connections with the UK are such that administration is likely to be in the interests of creditors and the company and that the request is likely to be acceded to by the UK court.
Schemes of Arrangement
As a result of Jersey's prominence as a financial centre, the court sanction of schemes of arrangement are commonplace in Jersey. The regime in Jersey set out under in the Companies Law, in large part, replicates similar provisions under the UK legislation. Shareholder schemes are common, but schemes can also be used to effect insolvent restructurings such as by a debt for equity swap or by a wide variety of other debt-reduction strategies. The court has wide discretion under the Companies Law to make appropriate directions to ensure that the scheme is effectively implemented, which includes the grant of a stay or moratorium against legal proceedings. Schemes of arrangement continue to be used mainly for shareholder schemes rather than those with creditors.
In 2012, the Security Interests Law replaced the original 1983 legislation regarding security interests in intangible movable property. It is based on the Personal Property and Security Act (PPSA) model. It remains the intention to extend the scope of the Law to include security in tangible movable property but this had not yet been effected.
During 2021, the Channel Islands Association of Restructuring and Insolvency Experts has produced a series of guidance notes deriving from UK Statements of Insolvency Practice.
The principal legislation governing company restructuring, schemes of arrangement and insolvent winding-up of Jersey companies is the Companies (Jersey) Law 1991 (the Companies Law).
In addition, a company may the subject of a court-ordered declaration of désastre under the Bankruptcy (Désastre) (Jersey) Law 1990 (the Désastre Law), which is another form of insolvent winding up that can be used both on a voluntary and involuntary basis.
Certain other entities are wound up in insolvent circumstances under legislation specific to them (such as an incorporated limited partnership under the Incorporated Limited Partnerships (Jersey) Regulations 2011).
Older forms of insolvency proceeding – remise de biens, dégrèvement and réalisation – are unlikely to be encountered in an international context, as they are dependent on the debtor owning Jersey immovable property. These procedures are not, therefore, covered in this chapter.
The Companies Law contains provisions similar to those under UK company legislation regarding schemes of arrangement between companies and their creditors and/or shareholders.
As to the insolvent winding up of Jersey companies, there are two main forms.
In addition, there are circumstances where the court has ordered the winding up of an insolvent company on just and equitable grounds under Article 155 of the Companies Law. Whilst a just and equitable winding-up is more commonly used in respect of solvent companies, it has also been used on several occasions by the Royal Court in order to wind up insolvent companies where action is required to be carried out more swiftly, conveniently or flexibly than is possible under a désastre or creditors' winding-up or where it is important that the liquidator is appointed by and answerable to the court. There must, however, be good reason to prefer the just and equitable route to the more normal process of désastre or a creditors' winding-up.
An application for a just and equitable winding-up can be made as a part of a cross-border insolvent restructuring. In Re Lydian International Limited (2021) JRC 207, the court agreed to give assistance to an Ontario court by ordering the just and equitable winding-up of an insolvent Jersey company. The Ontario court had approved a plan relating to the group of which the Jersey company was part and this envisaged the assignment of the company's assets to a new entity owed by the senior lenders and then a just and equitable winding-up of the company. The Jersey court was satisfied that a just and equitable winding-up was on the facts preferable to a désastre and that a creditors' winding-up was not an available option.
There is no direct equivalent in Jersey to administration under the UK Insolvency Act 1986, which has the primary objective of rescuing a company as a going concern rather than proceeding straight to a liquidation. However, the existing insolvency regime provides a significant level of adaptability through the just and equitable winding-up jurisdiction, which allows the Royal Court to exercise its discretion (and it is not uncommon for it to do so) to permit the business of the debtor to be continued in the interests of stakeholders and/or other related ancillary orders, designed to improve the ultimate returns for stakeholders. This extends to the sanctioning of a “pre-packaged sale” of a debtor company's assets.
If formal administration in the UK sense is desirable and is in the interests of the creditors, it may be possible to seek a UK administration order for a Jersey company. The Jersey court has jurisdiction to send a letter of request to the UK court asking it to exercise its powers of assistance under Section 426 of the 1986 Act by placing the company in administration. This has been done on many occasions in cases where there the UK court has no direct jurisdiction to make an administration order, but there are assets or creditors in the UK and a UK administration will have advantages for creditors as opposed to the winding-up options available in Jersey. The efficacy of this was confirmed by the English Court of Appeal in HSBC v Tambrook Jersey Ltd 2014 1 Ch 252.
Brief mention may be made of Jersey trusts. They are not separate legal persons but there is a developing case law in the Royal Court for the orderly winding up of trusts where the assets of the trust exceed the amount to which the trustee is entitled by way of indemnity for liabilities reasonably incurred by it in connection with the trust.
There are also other types of Jersey entity – such as various types of partnership and a foundation – which fall outside the scope of this chapter.
No provision directly compels an insolvent company to enter into an insolvency procedure. However, under Article 177 of the Companies Law and Article 44 of the Désastre Law, a director is potentially liable without limit for company debts incurred after the director either knew that there was no reasonable prospect that the company could avoid a creditors’ winding-up/désastre or, on the facts known to the director, they were reckless as to whether the company would avoid such a winding-up/désastre. A director will not be liable if they can satisfy the court that they took reasonable steps with a view to minimising the potential loss to the company’s creditors.
There are also provisions imposing personal liability in the event of fraudulent trading and provisions for the disqualification of directors.
It may sometimes be more appropriate, in the interests of creditors, to continue trading and seek an accommodation with them. Depending on the facts, however, a liquidation process, may be the best way to avoid loss to creditors and mitigate the directors' risks of liability.
Directors also have general duties owed to the company, which will include the interests of creditors where the company is insolvent or near-insolvent. This is considered further in 10.1 Duties of Directors.
Voluntary Insolvent Winding-Up
In terms of options available to a Jersey company for its own voluntary insolvent winding-up, there are three options.
Application for a désastre
The first is to make an application to court for a désastre. Subject to any internal restrictions on the directors' powers, the decision to make such an application falls within the competence of the board of directors, rather than the shareholders. Under the Désastre Law and the Bankruptcy (Désastre) (Jersey) Rules 2006, not less than 48 hours' notice of the application must be given to the Viscount. In practice, the notice is accompanied by a draft of the application and supporting documents. Longer notice may be needed in more complex cases as, in practice, it is important that the application is not objected to by the Viscount.
The application is made ex parte to the court, supported by a statutory statement, which sets out the estimated value of the company's assets and liabilities. The test of insolvency is a cash flow test – inability to pay debts as they fall due.
The second option for the insolvent company is a creditors' winding-up. The availability of a creditors' winding-up has been extended to creditors, but it also remains available to the company itself. The option available to shareholders requires no application to court but rather the passing of a shareholders' special resolution, and it is therefore more squarely a decision for them. A special resolution must be passed by a majority of at least ⅔ of the votes cast by shareholders present, in person or by proxy, being entitled to attend and vote. If, however, the articles of the company specify a greater majority than ⅔ (or unanimity), the special resolution must be passed by that greater majority (or unanimity).
There is a strict timetable and procedural requirements. Creditors may, at the meeting, nominate their own person as liquidator, and in the case of disagreement with the company, the identity of the liquidator or liquidators will be determined by the court on the application of a director, shareholder or creditor of the company.
Just and equitable winding-up
The third option is an application to the court for the company's own just and equitable winding-up. Article 155 of the Companies Law enables such application to be made by the company itself, by a director or a shareholder (as well as various official bodies). If it is made by the company, this would again (subject to any internal restrictions) be under the authority of a decision of the board of directors rather than the shareholders.
As noted, creditors now have two main options for instigating a court-ordered insolvent winding up of a Jersey company: a creditors' winding-up and a désastre. The main difference between the two processes is that a creditors' winding-up is carried out by a liquidator, whereas a désastre is carried out by the court official known as the Viscount as official liquidator. In both cases the creditor's claim must be for liquidated sum (ie, a debt to which there is no reasonably arguable defence), being not less than a prescribed amount, which is currently GBP3,000.
Creditor-Initiated Creditors' Winding-Up
Using this route, the creditor must (unless the company consents to the application) show that the company is unable to pay its debts or provide other evidence of the company's insolvency. The company is deemed to be unable to pay its debts if it fails to pay the debt within 21 days of personal service by the creditor of a statutory demand in prescribed form or to dispute the debt to the reasonable satisfaction of the creditor within that time period. The process has similarities with the service of a statutory demand and winding-up petition under the UK Insolvency Act 1986 and it will therefore be not unfamiliar to lawyers in England and Wales. Except in exceptional circumstances, the creditor must give the company at least 48 hours' notice that the application is being made. The application itself is made in a prescribed form and must be supported by affidavit. The procedure is not available if the creditor has agreed not to apply and in cases where the claim is only for repossession of goods.
The court has power to appoint a provisional liquidator and upon granting an application will appoint either the liquidator nominated by the creditor or one selected by the court. The liquidator must be on the newly created Register of Approved Liquidators which is administered by the Viscount.
If it turns out that the company was not insolvent at the time of the creditors' application for a creditors' winding-up the company has a right of action against the creditor for loss sustained, unless the creditor acted reasonably and in good faith in making the application. A claim by the company in this respect must be brought within 12 months of the date of the application.
As in the case of a debtor application for a désastre (see 2.3 Obligation to Commence Formal Insolvency Proceedings), a creditor wishing to apply must give at least 48 hours' notice to the Viscount. The application to court is usually made ex parte and must be supported by a statutory statement and affidavit. The test of insolvency is a cash-flow test – inability to pay debts as they fall due.
A creditor making an application should also note that it is customary for the Viscount to seek an indemnity in respect of the Viscount's costs and the court has power to order that such indemnity be given.
As in the case of a creditor-initiated creditors' winding-up, it is incumbent on the applicant to act reasonably and in good faith. The company may later challenge the declaration, by way of an inter partes application to recall the désastre. If that application is successful, and it turns out that it was not insolvent at the time of the application, the company has a right of action under the Désastre Law against the applicant to recover damages unless the applicant was acting reasonably and in good faith. The claim must be brought within 12 months of the declaration. A similar right, subject however to a three-year limitation period, also exists under the customary law.
In the case of a creditor-initiated creditors' winding-up, the most likely route for showing the court that the company is unable to pay its debts will be the service of a statutory demand. The company is deemed to be unable to pay its debts if it fails to meet the statutory demand or dispute the debt to the reasonable satisfaction of the creditor within 21 days of service of the demand.
The company may apply for the termination of a creditors' winding-up at any time during its course. If the company is not balance-sheet solvent, the court will refuse. Otherwise, the court has a discretion to terminate the winding-up. In exercising this discretion, it must have regard to the interests of creditors and the company.
In the case of an application for a declaration of désastre, whether voluntary or involuntary, cash flow insolvency is also a pre-requisite. This is reflected by the evidential and procedural requirements.
If the debtor seeks a recall of the declaration, the court will then consider a balance sheet test of insolvency. However, even if the company is solvent on a balance sheet basis, the désastre may still be maintained if, balancing the interests of debtor and creditors, maintenance of the désastre appears just, having regard to the likelihood of continuing cash flow problems (in the matter of the Désastre of La Sergenté Farm Limited 2002 JLR Note 2). Balance sheet solvency is therefore relevant at this stage but not decisive.
It is not necessary to establish that the company is insolvent in order for the court to make an order for the just and equitable winding up of a company under Article 155 of the Companies Law. The procedure is not, however, available to creditors. A just and equitable winding-up may be applied for by the company, or a director or shareholder of the company and certain official bodies.
There are no specific regimes for banks, insurance companies or other regulated entitles in Jersey. However, in the case of a regulated entity providing financial services, one of the reasons why the court might be amenable to ordering a just and equitable winding-up, in preference to expecting the company to enter into a creditors' winding-up, is that the liquidator in the case of a just and equitable winding-up is appointed by and answerable only to the court (in the matter of Belgravia Financial Services Group Ltd 2008 JLR Note 36).
There are also special provisions in the Banking Business (Jersey) Law 1991 and the Insurance Business (Jersey) Law 1996, allowing the court to approve the transfer of deposit-taking business and a long-term insurance business respectively. These provisions are often used in solvent group restructurings.
Out-of-court restructurings and consensual workouts involving Jersey companies will typically occur in cases where the lenders and other creditors are based outside Jersey, typically the UK. The relevant loan and security documentation will also generally be governed by non-Jersey law, albeit that Jersey law security will be used to create security over Jersey-situate collateral. In addition, the financial problems faced by a Jersey company may be reflective of wider group distress involving entities based in other jurisdictions.
In these scenarios, attitudes to informal out-of-court restructurings, and to corporate financial difficulty generally, will depend on prevailing market practice in the relevant territory of the primary lenders, including recognition of established frameworks such as the INSOL principles.
There is no requirement for consensual restructuring negotiations to take place before commencement of statutory process for the approval of a scheme of arrangement under Article 125 of the Companies Law or before the invoking of any voluntary insolvency procedure by the company.
Especially where there are protracted negotiations for restructuring company debt, directors of distressed Jersey companies need to keep under review whether they are continuing to meet their duties to creditors and continuing to avoid any potential liability for wrongful trading referred to in 2.3 Obligation to Commence Formal Insolvency Proceedings. A point may be reached where a formal insolvent winding-up of one form or another is going to be in the best interests of creditors.
As noted in 3.1 Consensual and Other Out-of-Court Workouts and Restructurings, the negotiation and implementation of consensual restructuring and workout processes will, in practice, follow market processes and mechanisms in the relevant jurisdiction outside Jersey and this will typically be a UK jurisdiction.
There is no typical approach to the injection of new money. The position is likely to be governed in the first instance by the existing financing and security documents which may not be governed by Jersey law.
Article 34 of the Security Interests (Jersey) Law 2012 (the Security Interests Law) gives a purchase money security interest (as defined in that Law) priority over other security interests in the intangible movable collateral, provided that the security interest is perfected not later than 30 days after the day on which it attached.
The Jersey courts have not yet had an opportunity to consider the duties of creditors in negotiations for a restructuring. In the context of the restructuring of debt of a Jersey company which conducts business with lenders and creditors outside Jersey, those duties would be likely to arise under the foreign (ie, non-Jersey) law which typically governs the loan and security documents and/or the place of negotiations, rather than under Jersey law.
To the extent that, in a particular case, Jersey law applies to workout negotiations, informal restructuring or the exercise of voting powers under syndicated loan arrangements, it is likely that the Jersey courts would follow English case law on the extent of creditor duties. In the absence of express agreement, it is anticipated that creditors engaged in a restructuring would owe only limited duties to each other. The tort of negligent misstatement is recognised in Jersey following principles of English common law, as is the tort of fraud or deceit.
Subject to Article 167 of the Companies Law, in the absence of contractual provision, there is no out-of-court process that will bind or cram down dissenting creditors. A scheme of arrangement is required in order to achieve that.
Article 167 of the Companies Law provides for a more informal type of scheme of arrangement entered into between a company and its creditors immediately preceding the commencement of, or in the course of, a creditors’ winding up, and it is (subject to a right of appeal) binding:
An objecting creditor or contributory of the company may, within three weeks from the completion of the arrangement, appeal to the court against it. There is no case law in Jersey on this provision. Whilst such an arrangement would bind a dissenting creditor who omits to appeal in time, the effect of a timely appeal will be to put the terms of arrangement to the discretion of the court.
Where security is taken under Jersey law, in most cases the collateral will comprise intangible movable property situated in or closely connected with Jersey, such as shares in a Jersey company, debt owed by a Jersey company or money in a Jersey bank account. Such security is taken under the Security Interests Law. The Security Interests Law adopts a PPSA approach. It is drawn, with significant adaptations, from Canadian and New Zealand legislation and indirectly from Article 9 of the US Uniform Commercial Code.
Security over Jersey immovable property is taken by way of a judicial or conventional hypothec, which is registered in court records or the Jersey land registry respectively.
There are plans to extend the Security Interests Law so as to cover the creation of security in tangible moveable property, but at present the Security Interests Law is restricted to intangible property. For the time being, security over a tangible movable may only be created by way of a possessory pledge under the customary law.
Position before an Insolvency Process
Subject to any contractual restrictions between creditors, a secured party may enforce a security interest created under the Security Interests Law, provided that there has been an event of default (being an event of a type specified as such by the security agreement) and written notice is given to the grantor specifying the event of default. As well as the original collateral, the security interest will extend to the identifiable or traceable proceeds as defined in the Security Interests Law.
Part 7 of the Security Interests Law gives secured party wide powers of enforcement by:
The Law also provides that an additional notice has to be given to the grantor and other interested parties not less than 14 days before any actual appropriation or sale. The grantor can waive its own right to receive notice in the security agreement.
The secured party may effect a sale of the collateral by auction, public tender, private sale or another method. The sale would usually be to a third party but does not have to be; the secured party may purchase the collateral itself. If the collateral is sold, the secured party must take all commercially reasonable steps to obtain fair market value for the collateral as at the time of the sale, act in other respects in a commercially reasonable manner in relation to the sale and enter any agreement for or in relation to the sale only on commercially reasonable terms.
If the collateral is appropriated, the secured party must take all commercially reasonable steps to determine the fair market value of the collateral as at the time of the appropriation and act in other respects in a commercially reasonable manner in relation to the appropriation.
Position after the Commencement of an Insolvency Process
The effect of a declaration of désastre is, in accordance with Article 8 of the Désastre Law, to vest all the debtor's property in the Viscount. Such vesting is, however, subject to the rights of secured creditors.
Whilst Article 10(1) of the Désastre Law has the general effect of prohibiting other creditor remedies after a declaration of désastre, Article 10(5) specifically confirms that a secured party under the Security Interests Law may continue to exercise its usual powers of enforcement under Part 7 of that Law, without needing to obtain the consent of either the Viscount or the court. Article 56 of the Security Interests Law is to the same effect.
Article 32 of the Désastre Law sets out mandatory waterfall provisions for the distribution of the insolvent estate amongst creditors who have proved in the désastre. These provisions apply in respect of “the money the Viscount receives by the realisation of the property of a debtor”. In the event that the Viscount does realise the collateral, Article 32(7) of the Désastre Law provides that the proceeds of realisation must be dealt with by the Viscount in accordance with Part 7 of the Security Interests Law. Thus, the secured party's rights of priority in the proceeds of sale continue to be recognised, but in this event after deduction of the Viscount's costs.
If the grantor company is being wound up in a creditors' winding-up under the Companies Law rather than a désastre, the position is similar. The effect of Article 56 of the Security Interests is that the holder of a security interest under the Security Interests Law may continue to exercise its powers of enforcement under Part 7 of the Law, notwithstanding the commencement of a creditors' winding-up.
Enforcement of a Security Interest
There is no impediment in principle to the enforcement of a security interest obtained under the Security Interests Law in the event of the company or another person instigating proceedings for the approval of a scheme of arrangement.
Secured creditors do not have the right, simply by being secured creditors, to disrupt or block formal voluntary or involuntary insolvency processes.
The ability to enforce a security interest, and the ranking of, and any dealing with, proceeds of sale, may, as a matter of contract, still be affected by inter-creditor covenants to which the secured party has agreed. The Bankruptcy (Netting, Contractual Subordination and Non-Petition Provisions) (Jersey) Law 2005 also makes certain netting, contractual subordination and non-petition provisions enforceable notwithstanding bankruptcy.
As mentioned in 4.2 Rights and Remedies, the right of a secured creditor to enforce its security continues notwithstanding a declaration of désastre or the commencement of a creditors' winding-up.
There are no special procedural protections or rights applying to secured creditors in a scheme of arrangement. Secured creditors may, however, be treated as a separate class or classes for the purposes of voting on the scheme.
Priority between unsecured creditors in the event of insolvency in Jersey is governed by the waterfall provisions in Article 32 of the Désastre Law, which are set in 5.5 Priority Claims in Restructuring and Insolvency Proceedings. Subject to certain exceptions mentioned in Article 32, a pari passu principle applies.
Subject to certain exceptions mentioned in Article 32, a pari passu principle applies.
Subject to certain exceptions mentioned in Article 32, a pari passu principle applies.
Unsecured creditors may not, simply by being creditors, disrupt a formal voluntary or involuntary process. Indeed, upon commencement of a court ordered liquidation, a moratorium begins prohibiting any suit, action or other proceeding from being commenced or continued with or against the company without the leave of the Royal Court.
Prior to this, unsecured creditors may sue the debtor for recovery of the debt. In addition, they may also have a lien on goods in possession or the benefit of a retention of title clause in a contract for the supply of goods.
A judgment debt may be enforced against the assets of the company in Jersey. Enforcement in other jurisdictions will depend on whether that jurisdiction has reciprocal enforcement legislation with Jersey (as the UK and several other jurisdictions have) or, if not, its rules of private international law.
Unsecured creditors may also apply for a declaration of désastre in respect of the company, the effect of which, if granted, is to force the company into an insolvent winding-up by the Viscount. The procedure and requirements for this are summarised in 2.4 Commencing Involuntary Proceedings.
In practice, the most likely form of interlocutory injunction is a freezing order (formerly known, as in England and Wales, as a Mareva injunction) in order to prevent the dissipation of assets prior to any judgment being awarded in the applicant's favour. To obtain a freezing order, the plaintiff must show a good, arguable case in respect of the substantive claim and that there is a real risk of dissipation of assets which would defeat a judgment.
The usefulness of a Jersey freezing order is not restricted to Jersey proceedings. It was established by the Jersey Court of Appeal that the order may be obtained on a free-standing basis in support of foreign proceedings (Solvalub Ltd v Match Investments 1996 JLR 361). It may also be brought in support of arbitral proceedings (Goldtron Ltd v Most Investments Ltd 2002 JLR 424).
A freezing order is not designed to secure priority for the plaintiff’s claim over the defendant’s other creditors, punish the defendant in advance of judgment or exert pressure to settle. If it has been sought for any of these purposes, it is liable to be construed as an abuse of process and be discharged.
The application for a freezing order is made ex parte. Amongst other requirements, the applicant has strict duty to make full and frank disclosure of all facts and matters that are material for the judge to know.
The freezing order must follow a standard form of wording issued by the court (Practice Direction RC 20/12), unless the court can be persuaded that there is good reason to depart from it.
In a désastre, moneys recovered by the Viscount from the realisation of the debtor's property are paid in the order set out in Article 32 of the Désastre Law. Priority is given to the Viscount’s fees and costs and then to certain other claims including certain arrears of salary due to employees, local social security payments and unpaid Jersey taxes. Other than these priority claims, all other debts proved in the désastre are paid on a pari passu basis.
As noted in 4.2 Rights and Remedies, the vesting of the debtor's property in the Viscount is subject to the rights of secured creditors. If the collateral is sold by the Viscount under Article 32(7) of the Désastre Law, the proceeds are dealt with in accordance with the priority rules set out in Part 7 of the Security Interests Law 2012. Similarly, where a hypothec has been obtained over Jersey immovable property and this is sold by the Viscount, Article 32 provides that hypothecary creditors are (subject to payment of the Viscount's costs of sale) entitled to preference in the order of the date of creation of their respective hypothecs out of the proceeds of sale.
In the case of a creditors' winding-up, all costs, charges and expenses properly incurred by the liquidator, including the remuneration of the liquidator (and certain other debts), are payable out of the company’s assets in priority to all other claims. Apart from that, and the corresponding absence of any role for or costs incurred by the Viscount, Article 166 of the Companies Law provides that creditors are paid in the same order as in the case of a désastre.
There are no special priority rules for a scheme of arrangement with creditors. However, negotiations for such a scheme, and the court's ultimate approval of it, would need to take place against the background of the order in which claims would be paid in the event of a désastre or a creditors' winding-up, as well as the rights of secured creditors.
There is no equivalent in Jersey to the English Creditors' Voluntary Arrangement.
There are, however, provisions in Part 18A of the Companies Law for court-sanctioned schemes of compromise or arrangement between a company and its creditors and/or its shareholders. These provisions are largely based on those contained in the Companies Act 1985 (which are similar to those now in the UK Companies Act 2006) and accordingly the court regards English judgments in this area as highly persuasive, if not strictly binding.
Most of the published Jersey judgments on such applications have concerned schemes of arrangement with shareholders; a minority of judgments have concerned schemes with creditors. However, a number of principles set out in the shareholder cases are also applicable to creditor schemes.
Stages in a Scheme of Arrangement Application
In common with the UK and other jurisdictions that have adopted similar provisions, there are three stages in a scheme of arrangement application.
Sanctioning a Scheme
A scheme that has been approved by the requisite majority should not be frustrated or delayed solely because those who voted against it disagree with the views of those who voted in favour. Following UK jurisprudence, in order to sanction the scheme, the court must conclude:
Mention has been made in 3.5 Out-of-Court Financial Restructuring or Workout of the more informal process for achieving a cram-down under Article 167 of the Companies Law and in particular its drawback in potentially putting the scheme at large in the discretion of the court.
The commencement of an application for the court's sanction of a scheme of arrangement does not result in any moratorium or automatic stay on the claims of creditors. The company will continue to operate its business during the procedure under the management of its directors.
Whether or not the scheme is itself an arrangement with a class of creditors, the court considers whether separate class meetings of the affected creditors should be held. The court has drawn on English case law for this purpose, mostly in connection with schemes with shareholders.
Meetings of separate classes are required where the affected creditors or shareholders have such dissimilar rights against the company that it is impossible for them to consult together with a view to a common interest.
Creditors have the right to challenge the scheme including the composition of classes.
Provided that the scheme is approved at the creditors' meeting or class meetings by the requisite statutory majorities and is sanctioned by the court, it will be binding on dissenting scheme creditors.
There is no restriction, in principle, on the trading of claims (not being subject to litigation) against the company during the process of a scheme of arrangement, subject to formalities required for assignment.
Article 127 of the Companies Law gives the court additional powers where the compromise or arrangement has been proposed for the purposes of, or in connection with, a scheme for the reconstruction of a company or companies, or the amalgamation of two or more companies, and under the scheme all or part of the undertaking or the property of a company concerned in the scheme is to be transferred to another company. These provisions are based on similar provisions in the UK Companies Acts, and similar principles apply.
Merger of companies and continuance in and out of Jersey is also possible under Parts 18A and 18C of the Companies Law.
The company continues to be managed by its directors during a scheme process. Assets may be used and disposed of by the company, subject to any existing contractual commitments. However, the court retains discretion whether or not to sanction the scheme and any substantial change in the company's position after the scheme has been put to creditors would be likely to be taken into account by the court.
The directors remain in control of the management of the company during proceedings for a scheme.
Where the court's additional powers are engaged under Article 127 of the Companies Law, the court may order that property to be transferred under the scheme vests in the transferee, free from any hypothec, security interest or other charge which, by virtue of the scheme, is to cease to have effect.
Security may be released consensually or pursuant to the scheme for a reconstruction or amalgamation.
New money could be given priority by the company granting security to the lender or subordinating scheme creditors by the terms of the scheme.
There are no statutory provisions regarding how the claims of creditors are to be valued for this purpose. The valuation methodology should be set out in the explanatory statement. If the company is proposing contentious or discriminatory valuations, the scheme will be open to objection and the court may decline to sanction it.
The approval of the scheme is subject to the overall discretion of the court. The manner in which the court exercises its discretion to sanction a scheme of arrangement is referred to in 6.1 Statutory Process for a Financial Restructuring/Reorganisation. Creditors should vote bona fide and not be seen as coercing the minority in order to promote interests adverse to those of the class they purport to represent. The court must also be satisfied that the scheme is such that an intelligent and honest person, being a member of the class concerned and acting in respect of their interests, might reasonably approve.
In principle, non-debtor parties may be released from liabilities if they are bound by the scheme.
There are no statutory rights of set off or netting applicable to claims in a scheme with creditors. However, the court would be likely to take any such existing rights, and those which would be expected to apply in an insolvency process, into account when assessing the overall effect of the scheme.
Failure by the company to observe the terms of a scheme would expose the company to legal action in the normal way. If the failure relates to procedural requirements and occurs prior to court's sanction, the court might not sanction the scheme. Failure by a creditor to observe the terms of scheme would similarly render it liable for its breach and potential injunctive relief.
In a scheme of arrangement with creditors, the proprietary interests of shareholders in the company would not be affected.
Where the courts additional powers are engaged under Article 127 of the Companies Law in connection with a scheme for the reconstruction or amalgamation, a transferee company may receive assets of the company. The transferee company could be its parent.
The three forms of insolvent winding-up of Jersey companies and their procedural requirements are referred to in 2.2 Types of Voluntary and Involuntary Restructurings, Reorganisations, Insolvencies and Receivership, 2.3 Obligation to Commence Formal Insolvency Proceedings and 2.4 Commencing Involuntary Proceedings: désastre, creditors' winding-up and a just and equitable winding-up.
The effect of declaration of désastre is that creditors with provable claims no longer have any other remedy against the property or person of the debtor in respect of the debt, may not commence any action or legal proceedings to recover the debt, or, except with the consent of the Viscount or by order of the court, continue any action or legal proceedings to recover the debt. If the debtor is a company, a transfer of shares in the debtor that is not either a transfer to the Viscount or a transfer sanctioned by the Viscount, or an alteration in the status of the company’s members, made after the declaration is void. However, as noted in 4.2 Rights and Remedies, although in a désastre the debtor's property vests in the Viscount, this is subject to the rights of secured creditors.
In a creditors' winding-up, the company's property does not vest in the liquidator (it remains vested in the company). Article 159 of the Companies Law provides that the corporate state and capacity of the company continue until the company is dissolved. After the commencement of the winding-up, no action may be taken or proceeded with against the company except by leave of the court and subject to such terms as the court may impose. A transfer of shares in the company, not being a transfer made to or with the sanction of the liquidator, and an alteration in the status of the company’s members made after the commencement of the winding up, is also void. As noted in 4.2 Rights and Remedies, express provision allows the holder of a security interest under the Security Interests Law to enforce its security notwithstanding the commencement of a creditors' winding-up or a désastre.
Creditors' claims are filed and open to inspection and objection by the debtor and other creditors subject to statutory time periods. In the case of unresolved objection, determination may then be made by the court
In both a désastre and a creditors' winding-up, the powers of the directors are effectively superseded by those of the Viscount or liquidator respectively. The goal of both proceedings is not the rescue of the company but its orderly winding up and dissolution. Although the Viscount and a liquidator have limited powers to carry on the company's business, this is only in so far as is beneficial for the purpose of its winding up.
Amongst their other powers, the Viscount or liquidator may disclaim onerous property.
Mandatory insolvency set off applies in a désastre and in a creditors' winding-up in respect of mutual credits, mutual debts or other mutual dealings between the debtor and a creditor. In addition, the Bankruptcy (Netting, Contractual Subordination and Non-Petition Provisions) (Jersey) Law 2005 also makes certain netting, contractual subordination and non-petition provisions enforceable notwithstanding formal insolvency processes.
In a désastre, after the Viscount has realised all the debtor's property, or as much as can be realised without needlessly protracting the désastre, the Viscount supplies creditors with a report and accounts and pays the final dividend. If the debtor is a Jersey company (or a foundation or incorporated limited partnership), the Viscount then notifies the registrar of companies in writing of the date of final payment. Jersey companies en désastre (and those other entities) are dissolved with effect from the date on which registrar receives the notice (save where the registrar has received notice from the Attorney General that criminal proceedings have been instituted or are pending).
Meeting of creditors
As part of the requirements for commencing a creditors' winding-up, the company is obliged to convene a meeting of creditors to be held in Jersey on the same day as, and immediately following, the shareholders' meeting at which the special resolution for the winding-up is proposed. During the period before the creditors' meeting, the company must furnish creditors free of charge with such information concerning the company's affairs as they reasonably require. At the creditors' meeting, the directors lay a statement of affairs of the company, verified by affidavit, before the meeting and a director must be present at and preside over the creditors' meeting. As mentioned in 2.4 Commencing Involuntary Proceedings, the company and the creditors may each nominate their own liquidator (subject to that liquidator having the appropriate qualifications) and the creditors' choice will prevail unless the Royal Court determines otherwise.
Account of the winding-up
As soon as the affairs of the company have been fully wound up, the liquidator must make up an account of the winding-up, showing how it has been conducted and how the company’s property has been disposed of, and then call a meeting of the company's shareholders and of the creditors for the purpose of laying the account and giving an explanation of it. The liquidator makes a return of the registrar of companies of the meetings and their dates (and, in the case of a public company, a copy of the account). This is registered by the registrar, and three months after the registration, the company is deemed to be dissolved (subject to the power of the court to defer dissolution on the application of the liquidator or any other interested person).
The relative advantages of a désastre and a creditors' winding-up depend on the particular circumstances. For creditors, as well as the company itself, both options are now available. It is possible that winding-up will be cheaper and quicker if conducted by a liquidator under a creditors' winding-up, especially in a case where the Viscount in a désastre may need to instruct further or consult outside advisers.
The indebted company can choose whether to proceed by way of a désastre, creditors' winding-up or a just and equitable winding up. Where a désastre is proposed, the Viscount can sometimes use their jurisdiction to promote a voluntary scheme with creditors in order to avoid insolvency. The court may also seek to assist in order to avoid a désastre and has power to adjourn an application on terms. Generally, however, the company may prefer the degree of control it has in nominating a preferred liquidator through a creditors' winding-up, at least in the first instance. As noted in 2.2 Types of Voluntary and Involuntary Restructurings, Reorganisations, Insolvencies and Receivership, an application for a just and equitable winding-up can be the preferable choice where action must be taken swiftly or if it is important that the business of the debtor be permitted to continue in the interests of stakeholders.
In cases where there are assets and creditors in the UK, the interests of the creditors and the company may be better served by a UK administration. As noted in 2.2 Types of Voluntary and Involuntary Restructurings, Reorganisations, Insolvencies and Receivership, where the UK court does not have direct jurisdiction to do this, an administration of a Jersey company may indirectly be achieved through a letter of request for assistance under Section 426 of the UK Insolvency Act 1986.
The Viscount in a désastre or liquidator in a creditors' winding up will be responsible for negotiating and executing contracts of sale of the company's assets. The purchaser will acquire title which is free of secured claims against the company. There is no statutory restriction on creditors bidding for the company's assets or acting as a stalking horse in a sale process.
Sales may take place on a pre-negotiated or pre-pack basis. In the matter of Collections Group Ltd (2013) JRC 096, the Jersey court approved a pre-pack sale by liquidators appointed in a just and equitable winding up of an insolvent Jersey company. The court noted that, whilst such a sale may in some circumstances be in the best interests of creditors, there was potential for abuse, and for this reason the Joint Insolvency Committee in England and Wales had issued a Statement of Insolvency Practice (SIP16) setting out guidance for insolvency practitioners in connection with pre-packaged sales in administrations. The Statement is not directly applicable in Jersey, but the court took account of it, emphasising that “there are risks involved in any form of pre-packaged agreement, particularly where the directors or shareholders of the company being placed in liquidation have an interest in the purchasing company and liquidators must therefore pay careful attention to the guidance given in SIP16”.
Article 162 of the Companies Law allows a creditors' meeting in a creditors' winding-up to appoint a liquidation committee consisting of not more than five persons. The company may also appoint up to five persons, subject to objection by creditors and ultimate decision by the court. The liquidation committee undertakes the functions of a creditors' meeting in relatively limited respects, such as the approval of the remuneration of the liquidator and approving the liquidator in paying a class of creditors in full or in compromising a claim by or against the company. The expenses of a liquidation committee are likely to be an expense of the winding up.
Article 49 of the Désastre Law provides that the court may give assistance to other courts of certain prescribed jurisdictions in all matters relating to insolvency. In doing so it may have regard, to the extent it considers appropriate, to the provisions of any model law on cross-border insolvency prepared by the United Nations Commission on International Trade Law. The prescribed jurisdictions are currently Australia, Finland, Guernsey, the Isle of Man, the United Kingdom, and the Republic of Ireland. A letter of request must be made by the foreign court to the Jersey court.
In respect of other territories, the Jersey court has also readily given similar assistance under its inherent jurisdiction to insolvency officials who have been appointed in other jurisdictions. Such assistance will be forthcoming, especially if reciprocity is shown and the assistance is not contrary to the relevant foreign law or contrary to Jersey public policy.
In exercising its discretion, whether under Article 49 or under inherent jurisdiction, the court has regard to principles of private international law. The court will not directly or indirectly enforce the penal or revenue laws of another state, but it has been held that this restriction does not apply merely because a foreign tax authority is one (and even vastly the most substantial) of a number of major creditors (in re Bomford, 2002 JLR N34; in re Williams (Royal Ct), 2009 JLR N16).
In relation to applications under Article 49 of the Désastre Law, the court is expressly empowered to exercise any jurisdiction which it or the requesting court could exercise. Therefore, although in a domestic case the Jersey court could not authorise a creditor to sell a debtor’s immovable property, the court may do so in an appropriate case where the requesting court would have power to take such action (in re Estates & General Developments Ltd 2013 (1) JLR 145).
There are no express statutory provisions for insolvency protocols between the Jersey courts and foreign courts. The courts are, however, mindful of the principles of comity and co-operation between courts.
See 8.2 Co-ordination in Cross-Border Cases.
Foreign creditors in a Jersey insolvency process are treated the same as local creditors.
Foreign money judgments emanating from certain jurisdictions are (subject to certain conditions) recognised and enforceable through a process of registration in Jersey under the Judgments (Reciprocal Enforcement) (Jersey) Law 1960. The 1960 Law applies to judgments of listed superior courts of England and Wales, Scotland, Northern Ireland, the Isle of Man and Guernsey.
In respect of other jurisdictions, the claim may be enforced by obtaining a fresh judgment in Jersey on the basis of the foreign judgment, with the foreign judgment being (subject to certain conditions) regarded at common law as conclusive on the merits and subject only to a limited number of possible defences.
Broadly similar conditions apply to registration under the 1960 Law and enforcement at common law. These conditions are much the same as those applying under similar legislation in England and Wales and under the common law applied there. Thus, amongst other requirements, the judgment must be for a sum of money, it must be final and conclusive and it must not be in respect of taxes or like charges or a fine or other penalty; the judgment and its registration can also be contested on the basis, amongst other grounds, that the foreign court lacked jurisdiction or the judgment debtor did not receive notice of the foreign proceedings. There is Jersey authority that, under the common law route, the court can (unlike the position under English common law) “enforce” a non-monetary foreign judgment. However, the same result can be reached by the Jersey court recognising the foreign judgment as res judicata and then fashioning a remedy under its own jurisdiction.
The firewall provisions under Article 9 of the Trusts (Jersey) Law 1984 operate to prevent the enforcement or recognition in Jersey of a foreign judgment on such matters as the validity of a Jersey trust or a transfer of assets into the trust. These are matters in respect of which the Jersey court alone has jurisdiction. Enforcement of foreign judgments for multiple damages is prohibited by the UK's Protection of Trading Interests Act 1980, extended to Jersey.
Sometimes all that is needed is recognition of the foreign judgment in Jersey, without enforcement, so that it can, for example, be relied upon by a defendant in Jersey proceedings by way of res judicata, cause of action estoppel or issue estoppel. Where recognition alone is needed, the position is governed by similar common law principles to those applying to the enforcement of a foreign judgment. It has also been held that, as a matter of Jersey common law, the doctrine of merger of a judgment with the underlying cause of action applies as much to a foreign judgment as it does to a domestic one, notwithstanding the absence in Jersey of an equivalent to Section 34 of the UK's Civil Jurisdiction and Judgments Act 1982: see Energy Investments Global Limited v Albion Energy Limited  JCA 258.
In a désastre, the insolvent winding-up of the company is carried out by an official of the Jersey court known as the Viscount. The Viscount is the Executive Officer of the Royal Court.
In a creditors' winding-up of a Jersey company, the winding-up is carried out by a liquidator from one of a number of prescribed professional bodies.
In a just and equitable winding-up ordered by the court, it is common to appoint a liquidator or liquidators with the qualifications required of a liquidator in a creditors' winding-up.
The Viscount's role has been described by the court as to “get in and liquidate (the debtor's property) for the benefit of the creditors who prove their claims” (Re Overseas Ins Brokers Ltd 1966 JJ 547). As an officer of the court, the Viscount is accountable to the court as well as to creditors.
A liquidator has similar responsibilities to the Viscount in a désastre, although, unlike the position in relation to a désastre, the property of the company does not vest in the liquidator. A liquidator is accountable to creditors and to the court in a just and equitable winding-up.
The Viscount is a standing official of the Jersey court appointed by the Bailiff (chief judge). The Viscount is entitled by virtue of office to be the liquidator of a Jersey company. Ordinarily, however, the creditors will wish to nominate a professional liquidator from outside the judicial system. Other than the Viscount, a liquidator in a creditors' winding-up must be an approved liquidator who is registered on a Register of Approved Liquidators kept by the Viscount. A person is not entitled to the registered as an approved liquidator unless that person fulfils the following criteria:
In order to be an approved liquidator, the person concerned must also have in place a general bond of GBP250,000 plus a specific bond of between GBP5,000 and GBP5,000,000 for each appointment.
An individual who is not ordinarily resident in Jersey but is otherwise qualified in accordance with the above may, together with an individual who is registered as an approved liquidator and entered in the Register of Approved Liquidators be appointed as a liquidator of a company, and be registered the individual as a non-Jersey liquidator in the Register of Approved Liquidators.
In a creditors' winding-up the company and the creditors may each nominate a person to be the liquidator. If different persons are nominated, a director, shareholder or creditor of the company may, within seven days after the date on which the nomination was made by the creditors, apply to the court for an order either directing that the person nominated as liquidator by the company shall be liquidator instead of or jointly with the person nominated by the creditors or appointing some other person to be liquidator instead of the person nominated by the creditors.
In both a désastre and a creditors' winding-up, the powers of the directors of the company are effectively superseded by those of the Viscount or liquidator.
The general duties of directors of Jersey companies are set out in Article 74 of the Companies Law. Directors must act honestly and in good faith with a view to the best interests of the company and exercise the care, diligence and skill that a reasonably prudent person would exercise in comparable circumstances.
A director will not be in breach of these duties if all of the shareholders of the company authorise or ratify the act or omission concerned and after the act or omission the company will be able to discharge its liabilities as they fall due. There is also provision for authorisation or ratification by less than all the shareholders disregarding the director and any shareholder connected with the director. Where the company is in a financially troubled state, such authorisation or ratification will not be possible due to the inability to say that it will be able to discharge its liabilities as they fall due.
Where the company is insolvent or near-insolvent, the interests of the company can no longer be equated with those of its membership. Rather, they are now those of its creditors, since creditors have claims ahead of shareholders in a winding-up. Directors therefore have a duty to take into account the interests of creditors. In BT 2014 LLC v Sequna SA & Ors (2022) UKSC 25, the UK Supreme Court held that, in order for this duty to be engaged, it is not sufficient that there is a real and “not remote” risk of insolvency. The company must be insolvent or bordering on insolvency. When the duty is engaged, the greater the company’s financial difficulties, the more the directors should prioritise the interests of creditors. If the company is insolvent, or bordering on insolvency, but is nevertheless not faced with an inevitable insolvent liquidation, the directors should consider the interests of creditors, balancing them against the interests of shareholders in the event of conflict. However, where an insolvent liquidation has become inevitable, the interests of creditors have to be the directors' paramount consideration. The view of the UK Supreme Court in this case is likely to be followed in Jersey.
Creditors' claims against directors would typically be asserted by the liquidator on behalf of the company in a creditors' winding-up or by the Viscount in a désastre.
A transaction at an undervalue may be set aside by the court in either a désastre or a creditors' winding-up on the application of the Viscount or liquidator respectively. Under identical definitions in the Désastre Law and the Companies Law, a company enters into a transaction with a person at an undervalue if:
This is similar to the definition of a “transaction at an undervalue” in Section 238 of the UK Insolvency Act 1986. Although there is this technical distinction between consideration in English law and “cause” in Jersey law, this appears to make no difference in practice to the requirements.
The court will make an order if it is satisfied that the company entered into the transaction in good faith for the purpose of carrying on its business and that, at the time it entered into the transaction, there were reasonable grounds for believing that the transaction would be of benefit to the company. Similarly, both statutes provide for the setting aside of preferences. A company gives a preference to a person if:
The court will not make an order unless the company, when giving the preference, was influenced in deciding to give the preference by a desire to put the person into a position which, in the event of the winding-up of the company, would be better than the position in which the person would be if the preference had not been given.
There is no statutory equivalent to the action to set aside a transaction to defraud creditors under Section 423 of the UK Insolvency Act 1986. However, at customary law, the Pauline action has a similar purpose. A transfer undertaken in fraud of creditors may be set aside if the creditor proves that the intention of the debtor was to defeat their creditors and resulted in their actual defeat, because the debtor was either insolvent as a result of the transfer or already insolvent.
Unless the transfer is gratuitous or substantially less value is received by the company than the market value of the property transferred, the transferee must be shown to be privy to the real nature of the transaction (in the matter of the Esteem Settlement 2002 JLR 53).
The Viscount or liquidator may also apply to the court for an order setting aside certain extortionate credit transactions, including interest rates.
The hardening periods in Jersey are different to those that apply under the UK Insolvency Act 1986.
Under the Jersey legislation, a transaction at an undervalue may be set aside by the court if entered into within five years immediately preceding a désastre being declared or a creditors' winding up being commenced. The company must also have been either insolvent at the time of the transaction or rendered insolvent as a result of it. Where the transaction was entered into with a connected person or associate of the company, a person seeking to uphold the transaction has the burden of proof in so far as they must show that the company was neither insolvent at the time of the transaction nor rendered insolvent as a result of it.
A preference may be set aside by the court if given within 12 months immediately preceding a declaration of désastre or the commencement of a creditors' winding up. Similarly, the company must also have been either insolvent at the time of the preference or rendered insolvent as a result of it. Where the preference was given to a connected person or associate of the company, a person seeking to uphold the preference has the burden of proof in showing that the company was neither insolvent at the time of the transaction nor rendered insolvent as a result of it.
The time limit for bringing a Pauline action (which is a customary law action for the purposes of setting aside a transaction undertaken to defraud creditors where the debtor was insolvent at the time or as a result of the transaction), under and subject to the general law regarding prescription (limitation) of actions, is ten years (in the matter of the Esteem Settlement 2002 JLR 53).
A claim to set aside a transaction at an undervalue or preference is made by the Viscount in a désastre and the liquidator in a creditors' winding-up.
In the case of a Pauline action, the proceedings may be brought by the prejudiced creditor.