The Companies (Demerger) (Jersey) Regulations 2018 (the “Regulations”) came into force on 1 September 2018 and have been introduced in Jersey to facilitate alternative corporate restructuring.  It completes the company law changes that commenced with the creation of a merger regime in 2011

The demerger regime only applies to a Jersey company wishing to demerge into two or more Jersey companies. When demerging one of the companies will be a “survivor company” or there is no surviving company and the result is that company “A” ceases and new companies are formed.

There is no requirement for court approval meaning that the new demerger regime could result in significant cost and time savings for those looking to divide the undertaking, property, rights and/or liabilities of a company among two or more companies.

Under the new regime the following companies will not be able to demerge or become a demerged company:

  • any Jersey company that is a cell company or a cell;

  • any Jersey company that has unlimited shares or guarantor shareholders;

  • any Jersey company that is registered under the Banking Business (Jersey) Law 1991;

  • any Jersey company that is a permit holder under the Insurance Business (Jersey) Law 1996; and

  • any Jersey company that is under investigation in relation to an offence or has been charged with an offence and against which there is a criminal prosecution pending.

The new regime is also not currently available to Jersey companies that are liable to pay tax in Jersey at the company or shareholder level. However, over time we would expect the regime to broaden in its availability.

Demerger process

The demerging company must apply to the registrar of companies in Jersey (the “Registrar”) in order to complete the demerger.

The primary document that gives effect to a demerger is a demerger instrument which must include prescribed information.

The demerging company may, with restrictions, determine the destination of the assets and liabilities. This must be provided for in the demerger instrument. It is currently envisaged that assets omitted from the demerger instrument will be held jointly in common in equal parts between the demerged companies and the omitted liabilities would be apportioned jointly and severally equally between the demerged companies. This is unappealing in most cases and it is important that the instrument is drafted carefully to avoid such occurring.

Director resolutions

Before notice is given of a shareholders’ meeting to approve the demerger instrument, the directors of the demerging company must pass a resolution that, in their opinion voting for the resolution, the demerger is in the best interests of the demerging company. The Regulations envisage that the directors will either sign a solvency statement that the demerging company is and will remain able to pay its debts as they fall due or (if they are unable to sign a solvency statement) they will seek the permission of the court to the demerger. This follows the widespread adoption of the solvency statement in Jersey for a variety of purposes as an important safeguard.

Shareholders and Creditors

The directors of the demerging company must submit the demerger instrument for approval by a special resolution of the shareholders of that demerging company and, where there is more than one class of shareholders, for approval by a special resolution of a separate meeting of each class.

Any creditor known to have a claim of over £5,000 are entitled to at least 21 days’ notice of the demerger and they and shareholders are entitled to inspect the demerger instrument and the proposed memorandum and articles of each demerged company. Consequently, a creditor may wish to include terms in their loan agreement stating that a demerger may not occur without their prior consent.

Shareholders who did not vote in favour of the demerger and creditors have a statutory right to object to the demerger, and a right to apply to the court to seek relief. That right must be exercised by notice to the company served:

  • in the case of shareholders, within 21 days after the date on which all special resolutions approving the demerger are passed; and

  • in the case of creditors, within 21 days after the date on which the creditor notice is published.

If the court is satisfied that the demerger would unfairly prejudice the rights of the shareholder or creditor it has the power to make any order it thinks fit.


The demerging company must give written notice of the proposed demerger to each of its employees within 21 days of shareholder approval and make the demerger instrument available for inspection.

Contracts of employment will automatically transfer to the relevant demerged company with no change in their terms and conditions, unless (i) otherwise stated in the demerger instrument; or (ii) an employee objects to a transfer of their rights and/or liabilities under an employment contract and gives notice of objection before the completion date of the demerger.

The effect of this objection is that the rights and liabilities of the employee are not transferred by the demerger and the employee’s employment by the demerging company is terminated on completion of the demerger.

Documents to be filed

To complete the demerger the following documents must be filed with the Registrar:

  • a copy of the demerger instrument;

  • any proposed amendments to the memorandum and articles of association of the survivor company;

  • proposed memorandum and articles of association of a new company;

  • statement of solvency or a court order (as applicable);

  • proof of the notice of the shareholders meeting to approve the demerger;

  • special resolutions;

  • declaration (certificate with lodgement number) made to the Comptroller of Taxes;

  • certificate containing either a statement of solvency or a statement that the director is satisfied on reasonable grounds that there is a reasonable prospect of obtaining the permission of the court; and

  • a new company must submit a completed C2A or C2B form (as applicable).

Registration cannot be completed until all shareholder applications objecting to the demerger have been disposed of and all creditor objections and objection application periods have expired.

The Regulations provide an alternative to other procedures such as a scheme of arrangement and is thought to provide a more flexible and streamlined approach to those using Jersey companies.