Jersey schemes of arrangement have become a procedure of choice for complex and ultra-high-value cross-border M&A deals, say Ogier Partners Simon Dinning and Nick Williams, and Managing Associate James Angus
One of the most marked developments in offshore corporate restructuring in recent years has been the upsurge in the use of Jersey schemes of arrangement.
Jersey schemes have become a procedure of choice for complex and ultra-high-value cross-border M&A deals and there is every indication that this popularity will continue.
In the past two years, we have seen the highest value mergers by schemes of arrangement in Jersey’s history take place – Shire’s merger with Takeda Pharmaceutical, and Randgold Resources’ merger with Barrick Gold Corporation.
Jersey schemes have much to recommend them to complex cross-border deals: a defined structure, a set timetable and a methodology for the swift, effective and fair gathering of shareholder consensus.
Under the provisions of Article 125 and 126 of Jersey’s Companies Law, the Royal Court can sanction a compromise or arrangement between a company and its creditors or members. The scheme must have been approved by a majority in number representing three quarters in value of the creditors or three quarters of the voting members at a specific meeting convened for the purpose.
The threshold is seen as a commercially viable route to progressing a transaction that has significant shareholder support. The final seal of approval by the Royal Court ensures scrutiny to all shareholders.
Jersey is an increasingly attractive restructuring jurisdiction, particularly as regards schemes, and is competing with other offshore jurisdictions more traditionally associated with restructuring and insolvency. Crucial to this is the strength, reputation and accessibility of the Royal Court.
The proponent of a scheme must demonstrate to the Royal Court that a meeting should be called and, at the end of the process, the Court will consider whether the scheme is a proper one for sanction and that the proposals are in the best interest of members or creditors. Where members or creditors object, the application can be fully argued.
Getting a scheme through to completion is a joint effort. The legal team will comprise corporate and dispute resolution specialists. The corporate lawyers will have particular expertise on the technical aspects of the deal itself and the litigators will take responsibility for the Court-facing aspects.
As litigators regularly presenting schemes to the Royal Court, we receive consistent feedback from clients (large onshore law firms and the businesses they advise) that the dependability of the scheme process in Jersey is seen as key. Jersey is very much viewed as a safe, reliable, well-regulated jurisdiction to do business in.
The island’s compendious scheme jurisprudence and the rigorous approach of the Royal Court are major advantages. The presiding judges are commercially experienced and provide reasoned judgments of the relevant principles to be addressed.
With Jersey’s company law heavily based on English principles, if there is any issue that has not yet been determined in previous Jersey case law, English jurisprudence on the point will be highly persuasive.
From the client perspective, this established jurisprudence and robust court structure, combined with the time zone and location, make Jersey as sure and reliable a scheme jurisdiction as England and Wales.
• This advertising feature was first published in the February/March edition of Businesslife magazine