Security Interests (Jersey) Law 201- Draft

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A decision made 28 April 2011:

Decision Reference: MD-E-2011-0064

Decision Summary Title :

Response to consultation on draft Security Interests (Jersey) law 201-

Date of Decision Summary:

March 2011

Decision Summary Author:

Director, Finance Industry Development

Decision Summary:

Public or Exempt?

Public

Type of Report:

Oral or Written?

Written

Person Giving

Oral Report:

n/a

Written Report

Title :

Response to consultation on draft Security Interests (Jersey) Law 201-

Date of Written Report:

March 2011

Written Report Author:

Director, Finance Industry Development

Written Report :

Public or Exempt?

Public

Subject:

The issue of a response to the consultation on the draft Security Interests (Jersey) Law 201-

Decision(s):

The Minister approved the issue of a response to the consultation on the draft Security Interests (Jersey) Law 201-

Reason(s) for Decision:

Following revisions made to the draft Security Interests (Jersey) law as a consequence of responses to the consultation, the Economic Development Department is issuing a summary of the responses and associated amendments to the draft Law.

Resource Implications:

There are no cost or manpower implications for the States.

Action required:

The Economic Development Department are to take such steps as are necessary for the response to the consultation to be published on the States of Jersey website (www.gov.je).

Signature:

Senator AJ Maclean

Position:

Minister for Economic Development

Date Signed:

Date of Decision (If different from Date Signed):

Security Interests (Jersey) Law 201- Draft - Consultation Responses

MINISTER FOR ECONOMIC DEVELOPMENT

SUMMARY OF RESPONSES TO THE CONSULTATION ON THE DRAFT SECURITY INTERESTS (JERSEY) LAW 201-

1. Issue and recommendation

1.1 A public consultation was carried out in June and July 2009 inviting comments on the draft Security Interests (Jersey) Law 201- (the “draft Law”) which would replace the existing Security Interests (Jersey) Law 1983 (the “1983 Law”).

1.2 The aim of the draft Law is to provide Jersey with a simplified, modern, efficient legal regime for the creation, perfection, priority and enforcement of consensual security interests in intangible movables and their proceeds. It is designed to give Jersey one of the most up-to-date legal regimes in this field and thereby to enhance Jersey’s attractiveness both to local and to foreign investors.

1.3. There was a significant response to the consultation which has resulted in some substantial changes to the draft law. There have also been additional changes for the purpose of technical improvements to simplify and clarify the text. The Summary of Responses sets out the comments made by respondents as well as the changes that have been made to the draft Law.

1.4. It is recommended that the Minister approves the Summary of Responses that this should be published on the States website alongside a copy of the final draft of the Law.

1.5. There are no manpower or cost implications for the States.

2. Background

2.1 Intangible property in general and investment securities in particular are of huge importance as collateral in modern financing. However, the 1983 Law, which provides the only means of creating security over intangible movable property in Jersey, has remained relatively undeveloped.

2.2 The draft Law that would replace the 1983 Law would make a number of significant improvements upon both the existing law and the position in the UK. It follows the recommendations of one of the leading authorities in this field, Professor Sir Roy Goode QC. It is based largely on elements of the latest security laws worldwide which are regarded as providing a successful and tested modern framework in this complex area, and have also been the subject of numerous judgments and substantial commentary.

2.3. The consultation on the draft Law generated a significant response. This included valuable feedback from both the Jersey Law Society and the Banking Lawyers sub-group. In response to the various submissions received, a number of modifications have been made. Some of the changes are significant whilst others are for the purposes of clarity and technical improvements.

2.4. The main changes made in light of comments received are:

The deletion of provisions relating to the transfer by a debtor of their interest in collateral;

Amendments to the sphere of application, including specification of application depending on the nature of collateral and allowing the Law to apply to security interests over intellectual property;

Removing the article relating to floating charges;

Extending the priority rules to cover security accounts;

A substantial revision to Part 7 regarding remedies, including changes to provide more clarity, provisions to allow parties to agree to dispense with normal notice requirements for the appropriation or sale of collateral and with regard to court orders, providing for the remedy of appropriation;

A clarification of the requirements in the event of bankruptcy;

Limiting the provisions relating to supply of information to supply of information to the grantor rather than including other parties; and

Changes to transitional provisions, including a revision to confine the new law to security interests created after the new Law comes into force and to continuing security interests which are amended in a specified way.

2.5 The Summary of Responses covers these points in more detail and references the comments made by respondents that have lead to these amendments.

2.6 It should be noted that the draft law forms phase 1 of the changes to the legislation regarding security interests. A consultation on legislation regarding tangible movable property will be issued shortly.

Recommendation

3.1 It is recommended that the Minister approves the response to the consultation paper and that the response should be published on the States website alongside a copy of the final draft of the law.

Director, Finance Industry Development

28 March 2011

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