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The Reading Room

Representation of Aguidilla Investments Limited and Others: [2024] JRC 179

December 12, 2024

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The Representor is a regulated trust company which administered the 12 companies subject to the application.The Royal Court had previously addressed certain unlawful distributions that were made by the Representor in In Re Crystal Lake Investments [2021] JRC 104 (Crystal Lake). The reason the distributions were unlawful, was because they failed to comply with the requirements under Article 115 of the Companies (Jersey) Law 1991 (the Companies Law) that the directors can only authorise a distribution if contemporaneously a Statement of Solvency is made.Article 115ZA of the Companies Law provides a mechanism for the Royal Court to retrospectively treat distributions as compliant under the Companies Law if certain conditions are met, namely:

  • The company could discharge its liabilities as they fell due at the time of the distribution.
  • The company can discharge its liabilities at the date of the application; and
  • The company will be able to discharge its liabilities for a period of 12 months from the date of the application.

In Crystal Lake, the Court accepted that whilst solvency had been considered by the directors, no formal statement of solvency was issued as required under the Companies Law.The Court categorised the companies subject to the application into three groups:

  • Simple Category: There were nine companies with no balance sheet or solvency issues, and the minutes that approved the distributions were available. The Court found in this case that the conditions under Article 115ZA had been met.
  • Discrepancy Category: In this category, there was one company where minutes for one of the three distributions could not be found, but other evidence could be produced that confirmed the distribution. The Court accepted that the distribution process followed the same steps as others, and since the solvency requirements were met, the distribution was ratified.
  • Balance Sheet Insolvent Category: There were two companies that fell into this category. These companies were found to be balance sheet insolvent at the time of the distributions due to shareholder loans. They were, however, cash-flow solvent (i.e. able to pay debts as they fell due). The Court accepted that solvency on a cash-flow basis met the requirements under Article 115ZA.

An authorised signatory of the Representor provided affidavits confirming the companies’ solvency at the relevant times. An independent accountant supported these assertions with financial reviews. The affidavits explained that the Representor reliance on a piece of software to process the distributions which contributed the failure to issue the statements of solvency, an issue that has now been addressed to avoid future non-compliance.

The Representor is a regulated trust company which administered the 12 companies subject to the application.The Royal Court had previously addressed certain unlawful distributions that were made by the Representor in In Re Crystal Lake Investments [2021] JRC 104 (Crystal Lake). The reason the distributions were unlawful, was because they failed to comply with the requirements under Article 115 of the Companies (Jersey) Law 1991 (the Companies Law) that the directors can only authorise a distribution if contemporaneously a Statement of Solvency is made.Article 115ZA of the Companies Law provides a mechanism for the Royal Court to retrospectively treat distributions as compliant under the Companies Law if certain conditions are met, namely:

  • The company could discharge its liabilities as they fell due at the time of the distribution.
  • The company can discharge its liabilities at the date of the application; and
  • The company will be able to discharge its liabilities for a period of 12 months from the date of the application.

In Crystal Lake, the Court accepted that whilst solvency had been considered by the directors, no formal statement of solvency was issued as required under the Companies Law.The Court categorised the companies subject to the application into three groups:

  • Simple Category: There were nine companies with no balance sheet or solvency issues, and the minutes that approved the distributions were available. The Court found in this case that the conditions under Article 115ZA had been met.
  • Discrepancy Category: In this category, there was one company where minutes for one of the three distributions could not be found, but other evidence could be produced that confirmed the distribution. The Court accepted that the distribution process followed the same steps as others, and since the solvency requirements were met, the distribution was ratified.
  • Balance Sheet Insolvent Category: There were two companies that fell into this category. These companies were found to be balance sheet insolvent at the time of the distributions due to shareholder loans. They were, however, cash-flow solvent (i.e. able to pay debts as they fell due). The Court accepted that solvency on a cash-flow basis met the requirements under Article 115ZA.

An authorised signatory of the Representor provided affidavits confirming the companies’ solvency at the relevant times. An independent accountant supported these assertions with financial reviews. The affidavits explained that the Representor reliance on a piece of software to process the distributions which contributed the failure to issue the statements of solvency, an issue that has now been addressed to avoid future non-compliance.

The Representor is a regulated trust company which administered the 12 companies subject to the application.The Royal Court had previously addressed certain unlawful distributions that were made by the Representor in In Re Crystal Lake Investments [2021] JRC 104 (Crystal Lake). The reason the distributions were unlawful, was because they failed to comply with the requirements under Article 115 of the Companies (Jersey) Law 1991 (the Companies Law) that the directors can only authorise a distribution if contemporaneously a Statement of Solvency is made.Article 115ZA of the Companies Law provides a mechanism for the Royal Court to retrospectively treat distributions as compliant under the Companies Law if certain conditions are met, namely:

  • The company could discharge its liabilities as they fell due at the time of the distribution.
  • The company can discharge its liabilities at the date of the application; and
  • The company will be able to discharge its liabilities for a period of 12 months from the date of the application.

In Crystal Lake, the Court accepted that whilst solvency had been considered by the directors, no formal statement of solvency was issued as required under the Companies Law.The Court categorised the companies subject to the application into three groups:

  • Simple Category: There were nine companies with no balance sheet or solvency issues, and the minutes that approved the distributions were available. The Court found in this case that the conditions under Article 115ZA had been met.
  • Discrepancy Category: In this category, there was one company where minutes for one of the three distributions could not be found, but other evidence could be produced that confirmed the distribution. The Court accepted that the distribution process followed the same steps as others, and since the solvency requirements were met, the distribution was ratified.
  • Balance Sheet Insolvent Category: There were two companies that fell into this category. These companies were found to be balance sheet insolvent at the time of the distributions due to shareholder loans. They were, however, cash-flow solvent (i.e. able to pay debts as they fell due). The Court accepted that solvency on a cash-flow basis met the requirements under Article 115ZA.

An authorised signatory of the Representor provided affidavits confirming the companies’ solvency at the relevant times. An independent accountant supported these assertions with financial reviews. The affidavits explained that the Representor reliance on a piece of software to process the distributions which contributed the failure to issue the statements of solvency, an issue that has now been addressed to avoid future non-compliance.

The Representor is a regulated trust company which administered the 12 companies subject to the application.The Royal Court had previously addressed certain unlawful distributions that were made by the Representor in In Re Crystal Lake Investments [2021] JRC 104 (Crystal Lake). The reason the distributions were unlawful, was because they failed to comply with the requirements under Article 115 of the Companies (Jersey) Law 1991 (the Companies Law) that the directors can only authorise a distribution if contemporaneously a Statement of Solvency is made.Article 115ZA of the Companies Law provides a mechanism for the Royal Court to retrospectively treat distributions as compliant under the Companies Law if certain conditions are met, namely:

  • The company could discharge its liabilities as they fell due at the time of the distribution.
  • The company can discharge its liabilities at the date of the application; and
  • The company will be able to discharge its liabilities for a period of 12 months from the date of the application.

In Crystal Lake, the Court accepted that whilst solvency had been considered by the directors, no formal statement of solvency was issued as required under the Companies Law.The Court categorised the companies subject to the application into three groups:

  • Simple Category: There were nine companies with no balance sheet or solvency issues, and the minutes that approved the distributions were available. The Court found in this case that the conditions under Article 115ZA had been met.
  • Discrepancy Category: In this category, there was one company where minutes for one of the three distributions could not be found, but other evidence could be produced that confirmed the distribution. The Court accepted that the distribution process followed the same steps as others, and since the solvency requirements were met, the distribution was ratified.
  • Balance Sheet Insolvent Category: There were two companies that fell into this category. These companies were found to be balance sheet insolvent at the time of the distributions due to shareholder loans. They were, however, cash-flow solvent (i.e. able to pay debts as they fell due). The Court accepted that solvency on a cash-flow basis met the requirements under Article 115ZA.

An authorised signatory of the Representor provided affidavits confirming the companies’ solvency at the relevant times. An independent accountant supported these assertions with financial reviews. The affidavits explained that the Representor reliance on a piece of software to process the distributions which contributed the failure to issue the statements of solvency, an issue that has now been addressed to avoid future non-compliance.