A Construction Of “Reconstruction”: Article 127 Of The Companies (Jersey) Law 1991

Under art 127 of the Companies (Jersey) Law 1991 the Royal Court has a broad range of powers which can be utilised by a company seeking approval for a scheme of arrangement. For those powers to be engaged, the court must be satisfied that what is proposed amounts to a reconstruction of the company. In English case law considering equivalent provisions, the meaning of “reconstruction” has been strictly interpreted to mean that the shareholders in the old and new companies are substantially the same. In In re LXB Retail Properties plc, the Royal Court decided not follow the narrow construction of the word “reconstruction” in English case law, opting instead for a wider and more pragmatic meaning in the commercial context. This decision opens the way to a broader range of corporate reconstructions in the context of a scheme of arrangement.