Daniel Walker was part of Voisin’s corporate team that advised on the first ever court application in Jersey ratifying an unlawful distribution by a Jersey Company.
There may be situations where a company has made a distribution in breach of the Companies (Jersey) Law 1991 (the ‘Law’). For example, the directors of a company may have paid an interim dividend without making a solvency statement.
The Companies (Amendment No. 11) (Jersey) Law 2014 (‘Amendment No. 11’) which came into force on 1 August 2014, introduced a new statutory procedure which enables a company to ratify a dividend or other distribution made by the company in contravention of the Law.
Prior to Amendment No. 11, there was no ability under the Law to ratify such a distribution (even if the failure to make the solvency statement was an oversight on the part of the directors and the company was solvent at the time that it made the distribution) and Amendment No.11 has helped clarify the Law by introducing a procedure by which an unlawful distribution can be ratified.
The statutory procedure requires an application to be made to the Royal Court supported by a solvency statement provided by the directors at the time of the application. The Royal Court shall then make an order that the distribution is to be treated for all purposes as if it had been made in accordance with the Law provided that the Royal Court considers that certain solvency conditions are satisfied and that it would not be contrary to the interests of justice to do so (it is difficult to easily identify circumstances where this proviso would be engaged). No shareholder vote is required and creditors need not be notified (unless the Court otherwise directs).
Voisin’s corporate team, led by Daniel Walker and assisted by Stephanie Sanderson advised on all aspects of the application, with the court application being presented by Voisin Litigation partner Ashley Hoy.
