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In this article, consultant John Greenfield, partner David Jones
and associate Steven Balmer, examine innovative mechanisms by which
creditors may seek to investigate secure assets held in Guernsey
structures. In the second part of the article, the authors look
particularly at companies and how the traditional insolvency
regimes may be employed in aid of creditors but also at how the use
of share security may unlock certain doors. However, in the
offshore world it is often the case that the creditor is required
to do some “trust busting” because the structure to be
enforced against will involve a trust holding ownership/control of
a holding company which in turn will control and own underlying
companies/assets. The paper starts, therefore, with a real life
example of how innovative advice helped protect creditors in such a

Receivership Orders as an aid in asset recovery against trust

The problem to be resolved here is that the Guernsey trust is a
legal entity in its own right and the shares of any company or
other asset in the trust will be owned legally by the trustee. It
is first essential to understand where the creditor fits in with
what can be a complex structure and in particular with what parts
of that structure has the creditor a legal relationship to enable
it to enforce payment of the debt. More often than not, the debtor
will be the settlor and/or the principal beneficiary of the trust
and not the trustee. This creates a problem for the creditor who
may not have a direct relationship – contractual or otherwise
– with the trustee which actually is the owner of the assets
to be recovered. In this situation, Guernsey law has a common law
remedy (very similar to the statutory regime in the United Kingdom)
which will come to the rescue, providing the necessary
circumstances exist. Essentially, it is necessary that the trust
funds were placed in the trust when the settlor had good reason to
believe that he would not be able to pay all his debts as they fell
due. In this situation the Court will order the assets to become
available for enforcement removing the legal ownership by the
trustee even though the trustee was not the actual debtor.

Case Study

In the case where the trustee is actually the debtor in its
capacity as trustee of a particular settlement different issues can
arise. In the fairly unusual (and factually very complex) case of
Glenalla & Others v. Investec Trust Company Limited &
[2018] UKPC 7, a settlement created for a Robert
Tchenguiz and his family, different but urgent remedies were needed
to protect the position of a creditor (the liquidators of the
claimant companies – Grant Thornton) where the validity of
the debt was in dispute. In other words, the creditor was not yet
at the stage of being able to take any formal legal action to
recover assets for payment of the debt but was still categorised as
a “contingent creditor” until able to obtain a final
undisputed Court judgment. In fact, it took over seven years and a
hearing before the Privy Council in London before the creditors in
this case became undisputed judgment creditors for a sum in excess
of £200 million including interest.

The trust assets contained an eclectic range of investments and
assets from Mr Tchenguiz’s personal family home to highly
geared derivative investments and credit default swaps. Many were
highly sophisticated investments which needed very regular and
frequent management and investment decisions during that seven year
period. To further complicate matters, the settlor (Mr Tchenguiz)
hired and fired the trustees on a number of occasions during the
seven year period and the claimant creditors were not content to
let investment decisions be taken by trustees seen to be firmly in
the camp of the ultimate debtor. The claimant creditor needed to be
able to exercise control over the investments whether that was to
include sale, lease, further acquisitions, etc. The Guernsey Court,
and ultimately the Privy Council, were faced with an extremely
interesting challenge in finding the right balance between the
interests of the beneficiaries of the trust (should the
claimant’s action ultimately fail) and the interest of the

The Guernsey Court determined that the answer lay in applying a
type of Receivership regime which bore certain similarities to that
found in relation to companies. From late 2012 until the Privy
Council hearing in 2018, Carey Olsen succeeded in obtaining and
holding Court Orders whereby all but the Tchenguiz family home was
transferred into the legal ownership and control of a professional
receiver/insolvency practitioner nominated by the creditors (and
therefore removed from the control of the trustees). This was an
extremely important and innovative approach by the Guernsey Courts
and gave the creditors considerable comfort that the assets upon
which they were wishing to enforce once judgment had been confirmed
would still have the value that they could reasonably expect.

This is a classic example of the Courts applying a flexible
solution to aid the creditors up to the time of enforcement when
other normal remedies would then come into play. We now turn to
look at Guernsey’s statutory insolvency regime as part of the
recovery toolkit and the proposed changes to it.

The Guernsey Insolvency Regime as an aid to asset recovery -

The key to a successful fraud investigation and subsequent
recoveries is often the speed with which control can be asserted
over companies, their management, assets and records. The Guernsey
insolvency regime, if utilised correctly, offers
effective tools in that control-taking process.

Overview of available procedures

Guernsey’s corporate insolvency regime is contained within
the Companies (Guernsey) Law 2008, as amended (the Companies Law).
The Companies Law provides for three insolvency processes, namely:
administration, voluntary liquidation and compulsory liquidation.
The regimes will be broadly similar to those familiar with the
English insolvency regime save for a number of fundamental
differences that may offer assistance in fraud
investigations or with asset recoveries.


A company may be put into administration at the request of the
company, the directors of the company, any member of the company,
any creditor of the company (including contingent or prospective
creditors), and the Guernsey Financial Services Commission.
Guernsey statutory administration provisions are contained at Part
XXI, ss.374 to 390 of the 2008 Law. The Royal Court has
jurisdiction to make an administration order if satisfied

  • the company concerned “does not
    satisfy or is likely to become unable to satisfy the solvency
    test” [see s.374(1)(a)]; and

  • the “…making of an order under
    this section may achieve one or more of the purposes set out in
    subsection (3)” [see s.374(1)(b)].

The “purposes” which an administration order seeks to
achieve under s.374(3)(a) and (b) are:

  • the “survival of the company and
    the whole or any part of its undertaking, as a going concern”,

  • a “more advantageous realisation
    of the company’s assets than would be effected on a
    winding up”.

The main effect of an application for an administration
order would be the implementation of a court sanctioned moratorium
against resolutions for the winding up of the company, and on the
commencement or continuance of proceedings against the company
concerned (without leave of the court) during the period between
the presentation of the application and the making of the actual
administration order. The granting of the administration order
itself would provide the company with the continued benefit
of this moratorium (save with the consent of the administrator or
leave of the court). Critically, however the moratorium does not
affect a secured creditor’s right to enforce its

Compulsory Winding Up/Liquidation

The main grounds for the compulsorily winding up of a company
are that inter alia:

  • the company is unable to pay its
    debts within the meaning given in s.407 of the Companies Law or
    otherwise fails the ‘solvency test’; or

  • the court is of the opinion that it
    is “just and equitable” that the company be wound

An application for the compulsory winding-up of a company may be
made to the Court by the company, any director, member, creditor or
any other “interested party”. There is no need for a
detailed analysis of the liquidation regime for the purposes of
this article given its effect will be familiar to most, i.e.
it triggers a starting gun for a realisation of assets and payments
in accordance with the statutory order of priorities. It does,
however, hand control of the company to a third party liquidator
who will be afforded investigatory powers (as to which see
later) and certain statutory remedies with regard to antecedent
transactions and delinquent conduct of directors.

Voluntary Winding Up

A Guernsey company may be voluntarily wound up by means of a
special resolution of its shareholders (passed by a majority of
75%). A copy of the special resolution must be filed at the
Guernsey Companies Registry within 30 days who will publish notice
on its website. The process can be utilised in respect of insolvent
companies albeit it is purely shareholder-driven and does not
involve any Court supervision. The process is very light-touch in
terms of creditor and member engagement, and is designed to serve
as a simple mechanism for finalising a company’s

The company must appoint a liquidator by ordinary resolution
(passed by a majority of 50% plus 1) to wind up the affairs
of the company and fix his remuneration. This can be done in
the same special resolution resolving to wind up. The liquidator
need not be a qualified insolvency practitioner nor resident
in Guernsey. In fact it can be any legal person and there is
currently no need for independence. Whilst there is obvious risk of
abuse of the regime in those circumstances, it also offer a
route into a Guernsey company for an overseas insolvency
practitioner who may be appointed in another jurisdiction to an
overseas parent or may be engaged by a concerned creditor holding
security over the Guernsey company’s shares.

Incoming changes to the Guernsey insolvency regime

In January 2020, the States of Guernsey approved the Companies
(Guernsey) Law, 2008 (Insolvency) (Amendment) Ordinance, 2020
(‘the Ordinance’). The Ordinance was designed to further
enhance Guernsey’s reputation as a robust jurisdiction for
restructuring and insolvency. Among the many key changes being
introduced is the introduction of new powers for liquidators who
will be able to compel the production of documents from directors
and officers and to appoint an Inspector of the Court to
examine directors and company officers. The proposed changes
presented a significant “beefing up” of the
statutory investigatory powers available to insolvency office
holders in Guernsey bringing them broadly in line with those
available under the section 235 and 236 of the English Insolvency
Act 1986. This ability to compel the production of information and
documentation will prove a vital tool in any investigation of
wrongdoing and subsequent recovery action.

A further important change will be the introduction of a formal
statutory remedy by which office holders will now be able to
pursue recovery of transactions at an undervalue and extortionate
credit transactions – a power notable by its absence in the current

Another important change is the ability to wind up a
non-Guernsey company. Under the existing regime, there is no
ability for the Royal Court to wind up a non-Guernsey registered
company. In light of Guernsey’s modern status as an
international finance centre providing administration and
asset management services to many foreign companies, this was a
lacuna in the law which has now been filled. This change
brings Guernsey in line with other major jurisdictions and will
allow the Royal Court to apply the Guernsey regime to foreign
companies where they have a sufficient connection to the
jurisdiction. It provides comfort to those doing business with
entities operating or with assets in Guernsey but not registered
here, that they will have access to the jurisdiction’s
insolvency regime if necessary.

Finally, we examine an often overlooked tool in terms of
securing control in the form of enforcing share security.

Using Share Security to Take Control

Security over shares in a Guernsey company must be created by a
security interest agreement that complies with the Securities
Interests (Guernsey) Law, 1993 (the ‘Securities Law’).
Typically, the security will involve possession of the share
certificates and an assignment of the voting rights. In the
event of a default in the lending sufficient to crystallise
enforcement remedies, the Securities Law only specifies a
power of sale or application as the only available method of
enforcement. There is no concept of receivership in Guernsey in
this context. As such, the security holder will have the right to
take possession of the shares in discharge of a debt or with a view
to a sale of them Guernsey’s statute is express in not
requiring Court approval for the exercise of the statutory powers
of sale or application.

In a normal enforcement scenario in default of a debt, the
security holder may look to sell shares to pay down debt or may
consider applying the shares by housing them in some other vehicle
to enable it to realise value whilst preserving the group
structure. However, where there are concerns about the activities
of management and potential fraud, share security may also
offer a quick and effective route to denude delinquent
directors of control but also to secure information for
investigative purposes. Ultimately, the liquidator may also be
afforded statutory causes of action to recover assets
otherwise unavailable to a shareholder.

One way in would, of course, be for a security holder to take
possession of shares and “perfect” its security by
demanding that it be placed onto the shareholder register pursuant
to its possessory rights. In that way, the security holder would
become the shareholder of record and would be able to exercise all
voting rights attaching to the shares accordingly. However, taking
this step may present its own challenges in terms of ensuring
compliance by the company or its corporate administrator and in
terms of the security holder having the appetite for taking
ownership of shares. For example, it is unlikely that a retail bank
will acquiesce to becoming the owner of shares in an offshore

Whilst there are ways around the ownership conundrum, about
which we could write a separate paper, there is another potential
option. The security documents themselves will provide a host of
powers for the lender to assist it in the enforcement of the
security. Those powers will often include the right to direct the
borrower to vote the shares in a particular way and an
acknowledgment from the company itself that it will comply with
that direction. The documents may also give a power of attorney to
the security holder to exercise its rights without recourse to the

As a result, the holder of the security may be able to exercise
the voting rights which in turn may permit it (dependent on the
percentage shareholding it controls) to:

  • replace a board or appoint a
    director; or

  • commence a voluntary liquidation
    process and appoint a liquidator to take control of the

As set out above, this is particularly useful in Guernsey where
the voluntary winding up process can be used without a declaration
of solvency, i.e. for an insolvent company in terms of giving
control and access to records. The remedy is also instant in that
the appointment will commence the moment the resolution is passed
and as such circumvents the time involved in the Court process. The
option always remains to convert a voluntary liquidation to a
compulsory at a later date by application to the Court.

This method has been successfully used for Guernsey entities
that own UK real estate where there is a default in the lending
that has led to the appointment of a LPA receiver a UK real estate
asset but gaining control of the holding company is important for
information gathering or to prevent the incumbent directors from
undermining the receivership.

There are, of course, issues to be considered in advance of
using the security powers not least, the statutory requirements
that may go along with a change of shareholder. For example, The
Beneficial Ownership of Legal Persons (Guernsey) Law 2017
requires the resident agent of a company to take reasonable steps
to ascertain the identity of the beneficial owners of a
company and keep records of them. Security holders have to be
prepared to provide CDD information this CDD information if they
are to be entered onto the share register. However, utilising share
security is an often overlooked tool in the box that can be very


Guernsey has pursued a policy over many years now to be user
friendly to creditors seeking to recover the debt owed to them by
entities subject to Guernsey Court jurisdiction, whether companies
or trusts. The creditor has an array of weapons in his armoury and
should not be afraid to use them.

This article was originally published in the ICC FraudNet Commercial Crime Services Global
Report 2021.

Originally Published by Carey Olsen, February 2021

The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.

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