Can debtors incorporated elsewhere enter into restructuring or insolvency proceedings in the jurisdiction?
Restructuring & Insolvency
Under the Insolvency Regulation, where the debtor's COMI is situated within a Member State, the courts of another Member State have jurisdiction to open (secondary) insolvency proceedings against that debtor. The secondary proceedings are restricted to the assets situated in that member state only.
If the debtor's centre of main interests is outside the EU, section 9 of the IBL applies. In substance, the rule states that the insolvent debtor can be adjudicated in bankruptcy in Italy even if bankruptcy proceedings have already been opened abroad (typically in the country where the debtor has its main seat). However, according to the Italian courts, there must be a relevant connecting factor to warrant the exercise of bankruptcy jurisdiction in Italy.
When the parent company has its COMI and its registered offices in Italy and Italy is deemed to be sufficiently restructuring-friendly by comparison with other jurisdictions potentially available, it is common practice to run to the court of the place of registered offices of the parent company so as to attempt to induce that court to make a finding that the COMI of all, or substantially all, companies of the group is in Italy.
This use of the COMI in the group context (i) makes it possible to open in Italy a plurality of parallel main proceedings affecting foreign subsidiaries, (ii) brings such subsidiaries within the scope of the Italian rules and, therefore, (iii) certainly facilitates the task of either the governmental commissioners in dealing with the multinational group insolvencies on a joint basis (or at least in a co-ordinated manner) or the planning, implementation and financing of joint group reorganizations through an In-court Settlement.
The Spanish courts’ jurisdiction to deal with an insolvency or restructuring proceeding (having in mind homologation as foreseen under the Fourth Additional Provision) is not determined by the place where a company is incorporated but by the place where the company has its center of main interest (COMI).
If that can be defined as somewhere in Spain, this country will have full jurisdiction over the proceeding.
Even if a company is not only incorporated elsewhere but also has its COMI abroad, it can be declared insolvent by a Spanish court, regardless of whether it as an establishment in Spain. If that is the case, the proceeding will be territorial, and its effects will only be limited to the debtor’s assets located in Spain. However, article 36 of the Regulation 2015/848 provides the possibility to avoid the opening of secondary insolvency proceedings in case the insolvency administrator of the main insolvency proceedings “may give a unilateral undertaking (the ‘undertaking’) in respect of the assets located in the Member State in which secondary insolvency proceedings could be opened, that when distributing those assets or the proceeds received as a result of their realisation, it will comply with the distribution and priority rights under national law that creditors would have if secondary insolvency proceedings were opened in that Member State”.
As long as it has an office or asset in Japan, a debtor incorporated outside Japan can enter into restructuring or insolvency proceedings in Japan.
If the debtor’s business activities are carried out outside Denmark, insolvency proceedings may only be commenced against the debtor if the debtor’s local court is in Denmark.
If the debtor’s local court is not in Denmark, but the debtor carries out the business activities through a subsidiary in Denmark, insolvency proceedings may be commenced in Denmark against the subsidiary in question. This will most likely apply to branches if the branch is registered as having a share capital and limited liability.
Please note that if the debtor is subject to restructuring proceedings, insolvency proceeding may be commenced against the debtor in Denmark at the conclusion of the restructuring proceedings even though the debtor no longer carries on a business in Denmark or the debtor’s local court is no longer in Denmark.
Companies registered as foreign corporates in Australia could have receivers, administrators or liquidators appointed to them, but it is rare for this to occur. We are not aware of any foreign corporations having initiated a scheme of arrangement.
Yes. A foreign company may be the subject of a scheme of arrangement in the Cayman Islands or be wound up here in the event that it has property located in, or has been carrying on business in, the jurisdiction, acts as a general partner of an ordinary or exempted Cayman Islands limited partnership, or is registered as a foreign company under the Companies Law.
Main Swiss restructuring or insolvency proceedings would not be available to a debtor incorporated elsewhere. Where a foreign debtor is undergoing restructuring or insolvency proceedings outside of Switzerland, a foreign insolvency official would not be authorized to take possession of, or otherwise seek enforcement in, any Swiss assets of the debtor. Rather, Swiss ancillary proceedings will have to be applied for with respect to such assets which leads to a parallel proceeding for Swiss located assets pursuant to the rules for Swiss insolvency proceedings. Requirements for recognition in Switzerland are fairly strict and include, in particular, the requirement that the main proceeding has been initiated at the registered seat of the corporate (rather than its centre of main interests) and the requirement of reciprocity. These rules are currently proposed of being amended. In particular, it is proposed to abolish the requirement of reciprocity, to allow recognition of proceedings which have been initiated at the centre of main interests (rather than the registered seat) and to waive the requirement of ancillary proceedings under certain circumstances. The proposed amendments would align the general regime to the special provisions which are already in force for banks and other financial institutions.
The courts of the EU Member State within the territory of which the centre of the debtor's main interests (COMI) is situated have jurisdiction to open (main) insolvency proceedings (Article 3(1) EU Regulation 2015/848).
Consequently, a debtor incorporated in another EU Member State may enter into insolvency proceedings in Germany, if its COMI is in, or has been moved to, Germany. The COMI is the place where the debtor conducts the administration of its interests on a regular basis and which is ascertainable by third parties. In case of a company, the place of the registered office is presumed to be the COMI in the absence of proof to the contrary, unless the registered office has been moved to another Member State within the 3-month period prior to the insolvency petition.
Similarly, German courts have jurisdiction to open insolvency proceedings in respect of a debtor incorporated outside the EU if its COMI is in Germany (Sec. 3 Insolvency Act).
However, German courts do not look favorably on forum shopping. Therefore, they tend in such a case to scrutinize whether the COMI is actually in Germany.
Yes, provided that such foreign entity complies with the provisions or Title XII of the Insolvency Law.
British Virgin Islands
Section 163 IA gives the court power to appoint a liquidator over an insolvent company that is not incorporated in the BVI, but only if that company has a connection to the BVI. Such a connection will exist if the company has or appears to have assets in the BVI, if it is carrying on or has carried on business in the BVI, or if there is a reasonable prospect that the appointment of a liquidator in the BVI will benefit the creditors of the company. This gives the court a broad discretion to exercise jurisdiction over a foreign company, and it may also appoint provisional liquidators.
Schemes, plans, and creditors’ arrangements are not available in relation to foreign companies. It is possible, however, to migrate a foreign company to the BVI for the purpose of making use of the BVI’s restructuring options.
No. It was held by the Privy Council in PricewaterhouseCoopers v. Saad investments Company Limited  UKPC 35 that the Bermuda court’s jurisdiction to wind up companies is wholly statutory in nature and the provisions of the Companies Act 1981 do not extend to a foreign company unless it has been granted a permit by the Minister of Finance to carry on business in Bermuda.