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CERTAIN INSOLVENCY LAW AND LOCAL LAW LIMITATIONS ON GUARANTEES
Set out below is a summary of certain limitations on the enforceability of the Note Guarantees in each of the
jurisdictions in which Note Guarantees are being provided. It is a summary only, and bankruptcy or insolvency
proceedings or a similar event could be initiated in any of these jurisdictions and in the jurisdiction of organization of a
future guarantor of the Notes. The application of these various laws in multiple jurisdictions could trigger disputes over
which jurisdiction’s law should apply and could adversely affect your ability to enforce your rights and to collect
payment in full under the Notes and the Note Guarantees. Also set forth below is a brief description of certain aspects of
insolvency law in Jersey, the British Virgin Islands, Kuwait and Egypt.
Jersey
Insolvency
The Issuer and certain of the Guarantors are incorporated under the laws of Jersey. Consequently, in the event of an
insolvency of the Issuer or of any such Guarantors, insolvency proceedings may be initiated in Jersey. There are two
principal regimes for corporate insolvency in Jersey:
désastre
and a "creditors’ winding-up". The principal type of
insolvency procedure available to creditors under Royal Court of Jersey is the application for an Act of the Jersey courts
under the Bankruptcy (
Désastre
) (Jersey) Law 1990, as amended (the “
Jersey Bankruptcy Law
”) declaring the property
of a debtor to be “
en désastre
” (a “declaration”).
Immediately upon a declaration of
en désastre
, the property and powers of the debtor (excluding property held on trust
and certain pension rights) vest automatically in the Viscount, an official of the Royal Court (the “
Viscount
”). With
effect from the date of the declaration, a creditor has no remedy against the property or person of the debtor in respect of
the debt other than the remedy afforded by any right to prove in respect of the debt in the
désastre,
and may not
commence, or except with the consent of the Viscount or the Royal Court, continue any legal proceedings to recover the
debt.
Additionally, the shareholders of a Jersey company (but not its creditors) can instigate a winding-up of an insolvent
company, which is known as a “creditors’ winding-up” pursuant to Chapter 4 of Part 21 of the Jersey Companies Law. A
creditors' winding up is not possible if the company's property is the subject of a declaration of
en désastre
. On a
creditors’ winding- up, a liquidator is appointed, usually by the creditors. The liquidator administer the winding-up,
gather assets, make appropriate disposals of assets, settle claims and distribute assets as appropriate. After the
commencement of the winding-up, no action can be taken or proceeded with against the company except with the leave
of court and subject to such terms as the ersey court may impose. The corporate state and capacity of the company
continues until the end of the winding-up procedure, when the company is dissolved. The Jersey Companies Law
requires a creditor of a company (subject to appeal) to be bound by an arrangement entered into by the company and its
creditors immediately before or in the course of its winding-up if (
inter alia
) three quarters in number and value of the
creditors acceded to the arrangement. If a declaration of
désastre
is made in respect of a company that is in a creditors’
winding-up, the winding-up is automatically terminated.
Transactions at an Undervalue
Under Article 17 of the Jersey Bankruptcy Law and Article 176 of the Jersey Companies Law, the Jersey court may, on
the application of the Viscount (in the case of a company whose property has been declared “
en désastre
”) or liquidator
(in the case of a creditors’ winding-up, a procedure which is instigated by shareholders not creditors), make a broad
range of orders, including to set aside a transaction (including any guarantee or security interest) entered into by a
company with any person (the “other party”) at an undervalue. There is a five-year look-back period from the date of
commencement of the winding-up or declaration of
en désastre
during which transactions are susceptible to examination
pursuant to this rule (the “relevant time period”). The Jersey Bankruptcy Law and Jersey Companies Law contain
detailed provisions on transactions at an undervalue, including (without limitation) those that define what constitutes a
transaction at an undervalue, the determination of the relevant time period and the effect of entering into such a
transaction with a person connected with the company or with an associate of the company.
Guarantee Waivers
If the Jersey courts were asked to enforce a guarantee against a Jersey company, the Jersey company might be able to
claim certain rights under Jersey law, known as the
droit de division
and the
droit de discussion
, being respectively
essentially a right to require that any liability of that company under a guarantee be divided or apportioned with another
person or persons and a right to require that the assets of the principal obligor or any other person be exhausted before
any claim under the guarantee is enforced against the Jersey company. These guarantor rights can be waived by contract,
as is the case under the Note Guarantees.
