Guernsey’s first court order under Section 380A: Distributions to unsecured creditors explained

What section 380A means for administrators

We recently achieved a significant milestone by obtaining permission from the Royal Court of Guernsey for Joint Administrators to make a distribution to unsecured creditors during an administration. This marks the first order granted under section 380A of the Companies (Guernsey) Law, 2008.

Historically, administrators in Guernsey had no power to make distributions to creditors during administration. Section 380A, introduced on 1 January 2023, changed this by permitting distributions where they assist the statutory purposes of administration:

• The survival of the company or part of its undertaking as a going concern
• A more advantageous realisation of assets than in a winding up

Key considerations for court approval

The Law does not specify what factors the Court should consider when granting permission. In this case, we referred to the English decision in Re MG Rover Belux SA/NV (In Administration), where His Honour Judge Norris outlined considerations such as:

• Whether the distribution supports the objectives of administration
• The interests of creditors as a whole
• Alternatives to the proposed distribution
• The conduct of the administration to date
• Impact on any proposed exit route
  

How English case law influenced the Royal Court’s decision

The Royal Court adopted a flexible approach, drawing on these principles while recognising that each administration involves unique circumstances.

Why this ruling matters for future administrations

Section 380A now offers administrators a valuable tool to make payments to unsecured creditors where appropriate. This decision provides clarity and sets a precedent for future applications.

If you have any queries about this decision or its implications, please contact Adam Cole or Alison Antill, who acted on this matter, or any of the other contacts listed on this page.