ITEM NO______
MINISTER FOR ECONOMIC DEVELOPMENT
Companies (Amendment No. 1) Regulations 200- (the “Regulations”)
1. Introduction
1.1 The Minister is asked to approve the attached Regulations and to take the Regulations to the States for approval with a view to bringing the Regulations into force on 1 February 2006. It should be noted that this will require the States to decide that the Regulations are a matter of urgency under Article 26(7) of the Standing Orders and that therefore the usual six week lodging time in respect of the Regulations should be shortened.
2. Discussion
2.1 After significant delays, the Companies (Amendment No.8) (Jersey) Law (the “Amendment”) was approved by the States in July 2005. An appointed day act has been lodged for debate on 31 January and the Amendment is expected to come into force on1 February 2006.
2.2 The States approved in October 2005 the Bankruptcy (Désastre) (Amendment No.5) (Jersey) Law 200- (the “Bankruptcy Amendment”) and this matter is now awaiting Privy Council sanction. It is likely that the Bankruptcy Amendment will come into force in April or May of this year.
2.3 The Bankruptcy Amendment will confirm that the creditors of a cell of a cell company may bring an application to have that cell declared en désastre. However, until such time as the Bankruptcy Amendment comes into force the creditors of a cell have no such remedy.
2.4 While it is almost inconceivable that a cell company could be created and a cell of such a company become insolvent in the period before the Bankruptcy Amendment comes into force, the lack of remedies for a creditor is likely to seriously affect the attractiveness of cell companies to those who would otherwise seek to invest in or transact with cell companies.
2.5 The Regulations, which are made under a power included in the Amendment precisely so that any “teething issues” surrounding the introduction of cell companies could be addressed, will give creditors of a cell of a cell company the right to bring an application to have a cell declared en désastre. This will address the concern outlined in the previous paragraph. The Regulations will cease to have effect when the Bankruptcy Amendment comes into force and gives creditors identical rights on a more permanent basis.
2.6 Under Article 26(7) of the States’ Standing Orders, the States may reduce the lodging periods for any matter if they
“
2.7 The Companies (Jersey) Law is a flagship piece of legislation for the finance industry, and it is vital to take all steps necessary to ensure that the Amendment is launched successfully, and that the publicity surrounding the launch of the cell company product is positive. The Regulations are in no way contentious. The only alternative would be to either delay the introduction of the Amendment yet again, something that would damage the Island’s credibility greatly, or to introduce the Amendment without the Regulation, which would greatly limit the likely popularity of cell companies until such time as the mischief which the Regulations seek to address was addressed, whether by the delayed introduction of the Regulations or by the introduction of the Bankruptcy Amendment.
3. Recommendation
3.1 It is recommended that the Regulations be approved and lodged au greffe at the earliest opportunity, and that this matter be brought to the States for debate on 31 January 2006.
PAUL DE GRUCHY
Finance Industry Executive
Annex
Companies (Amendment No. 1) Regulations 200- (the “Regulations”)