Page 28 - GIF

Regulation
What will a new insolvency regime mean for Gibraltar?
By Grant Jones, Simmons Gainsford (Gibraltar) LLP
Gibraltar’s new insolvency regime reflects UK/EU-centricism and internationalism, having Worldwide
a 3-level application. Level 1 - the Commonwealth. Gibraltar,
as a UK Insolvency Act 1986 (UKIA) ‘designated territory’, has it's insolvency proceedings automatically UK-recognised and elsewhere within the Commonwealth. Neither Cyprus nor Malta, Gibraltar’s competing Commonwealth cousins have ‘designated territory’ status.
Level 2 - the EU. Gibraltar, under the ‘EC Insolvency Regulation’ has it’s insolvency proceedings automatically EU-wide recognised.
Level 3 - ‘the rest of the World’. Gibraltar, a UN Cross-Border Insolvency Model Law (Model Law) adopter, has it’s insolvency proceedings automatically recognised amongst the 40 Model Law states, e.g. Japan, the US, etc. Not all EU states
(i.e. Spain, Cyprus and Malta) are Model Law adopters.
The new regime introduces two UKIA- modelled concepts: regulated insolvency practitioners (IPs) and director disqualifica- tion. Gibraltar’s competitors often lack a” “regulated IP cadre and an ability to prevent serial directorial defaulting. Quality improves, but regulatory costs increase. High- volume, low-margin, letter-box, multiple directorships become too risky. Contrariwise, major international Gibraltar-based holding feel comfortable.
Insolvency jurisdictions are pro-creditor (seeking immediate creditor returns) or pro- debtor (emphasising corporate rehabilitation). Like the UK, Gibraltar was traditionally pro-creditor, but the UK moved, via UKIA to a mildly pro-debtor stance. Gibraltar’s UKIA-modelled new regime followed suit, introducing UKIA-copied Administration Orders (Admins) and Company Voluntary Arrangements (CVAs).
Admins are like the rehabilitative US Chapter 11, but less costly and without the
directors remaining in company control, that function being taken by the Gibraltarian IP. A CVA is amazingly flexible. It's anything the creditors agree; a delayed payment, a
write-down or a debt-equity swap, etc. So is Gibraltar now a mildly pro- creditor UK clone? No. The UKIA mainly abandoned the very pro-creditor insolvency ‘administrative receiverships’ procedure, which gave secured creditors (i.e. banks) a privileged position. Gibraltar has substantially maintained ‘administrative receiverships’. So Gibraltar has both a pro-creditor and a pro-debtor toolbox. Having pro-bank procedures, combined with an internationally recognised insolvency platform, should enhance Gibraltar's position as an international banking centre. Banks should feel very comfortable lending to Gibraltar companies, sitting within international groups. The new regime provides for a world class regime, that should
only enhance Gibraltar's worldwide position.
www.sgllp.co.uk/locations/gibraltar.htm
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Gibraltar International
www.gibraltarinternational.com