Insolvency – administrators seeking declaration of COMI – rebutting the presumption of place of incorporation
The 8 companies comprised a group structure operating tanker ships: two of the companies were holding companies; the remaining 6 SPVs held the vessels. Each was incorporated in Cyprus. The group was insolvent, being heavily indebted to a syndicate of banks. Administrators were appointed for all the companies out of court on an urgent basis, because of concerns about one of the group’s ship’s imminent move into waters in and around the USA.
Once appointed, the administrators applied under paragraph 68(2) of Schedule B1 to the Insolvency Act 1986 for urgent declarations that the companies’ centres of main interest (“COMI”) were England and Wales, so as to enable the swift “exporting” of the administrations to other jurisdictions.
The court granted the declarations: there was sufficient evidence to rebut the presumption that the companies’ COMI was Cyprus (their place of incorporation).
COMI has an autonomous meaning under European Community law and the judge held, following the Court of Justice of the European Union’s decisions in Re Eurofood IFSC Ltd (case C-341/04) and Interedil SRL v Fallimento Interedil (case C-396/09), that it was important to focus on “criteria that are both objective and ascertainable by third parties”. Given the international nature of their business the operating companies were linked with a number of jurisdictions; however the only realistic COMI jurisdictions were Cyprus or England. In the event, the balance came down in favour of England.
The companies’ management was devolved to MCL, an English-incorporated London shipping agent with which the relevant London-based beneficial owners of the companies were closely connected. MCL’s involvement was “critical” to the companies’ operations, at least so far as third parties were concerned: for example, it arranged the ships’ charterparties, and dealt with port fees etc. Moreover, the banks were “by far” the companies’ largest creditors, and all the relevant facilities were governed by English law and subject to exclusive English jurisdiction clauses.
Although the holding companies did not share the same links with MCL, the balance there favoured England also: since they had no operational function as such, the only relevant COMI factors were those relating to the banks.
An interesting example of the court departing from the place of incorporation presumption in the context of a very international business, and re-affirming the primacy of objective factors ascertainable to third parties when considering COMI.
