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.
Debtors having the center of their main interests in other EU member states can enter into territorial insolvency proceedings in Greece pursuant to Regulation 1346/2000 or, as the case may be, Regulation 2015/848, if (among other conditions) they have an establishment in Greece. To the contrary, directives 2001/17 and 2001/24 do not allow secondary proceedings in relation to insurance undertakings, credit institutions and certain investment firms having their registered seat in other EU member states.
Debtors having the center of their main interests outside the EU may become subject to insolvency proceedings in Greece, if they have assets in Greece.
The Companies Act provides that a foreign company may only be wound up by the Court and that it cannot be voluntarily wound up by members or creditors in Singapore. The court can exercise its discretion to wind up a foreign company if it considers the company has a sufficient connection with Singapore. The company may be deemed to have sufficient connection if it has a registered or branch office, carries on business or has assets in Singapore and there is a reasonable possibility of benefit accruing to the creditors from the winding up.
Foreign companies are able to propose and implement schemes of arrangement. A foreign company may choose to do this in conjunction with concurrent restructuring proceedings taking place in its place of incorporation. A foreign company which intends to propose a scheme of arrangement in Singapore must first show that the Court has the jurisdiction to make a winding up order against that foreign company. Such jurisdiction to wind up a foreign company will only exist where it has assets in Singapore or has sufficient nexus or connection with Singapore.
It should also be noted that the judicial management regime is currently not available to foreign companies. However, once the 2017 amendments to the CA take effect, foreign debtors may apply for judicial management.
Under the EU Insolvency Regulation, a debtor may enter into a restructuring process in another Member State to its incorporation if it has its COMI or it has an establishment in that Member State. This allows non-English companies to utilise CVAs and other insolvency processes. If neither of these criteria is met, that jurisdiction should refuse to open proceedings.
English courts have been willing to recognise the COMI of a debtor as being in England even where it has recently been moved to benefit from an English insolvency procedure such as an administration. A debtor’s COMI (i.e. centre of main interests) is defined as the place where the debtor conducts the administration of its interests on a regular basis and is therefore ascertainable by third parties. Shifting COMI to England would typically involve a change of registered office, the migration of its assets and liabilities and communications to stakeholders to ensure that the new headquarters is ascertainable by third parties.
Further, a debtor may use a scheme of arrangement to implement a variety of restructurings such as: an ‘amend and extend’, cram-down or standstill. In order to do this, the court must be satisfied that the debtor has a sufficient connection to the jurisdiction. This is a fact-specific analysis but a sufficient connection can be shown if the underlying credit agreements are English law governed or the debtor’s COMI is in England. Recent decisions have also suggested that changing the governing law and jurisdiction clause of the credit agreements to English law can help in demonstrating a sufficient connection to the English jurisdiction. This area has been the subject of much innovation in recent years which the judiciary are now taking a more rigorous line on in order to curb “bad” forum shopping.
The Bankruptcy Law is silent on this matter. However, we note a case in 2013, in which an Indonesian company filed a petition for a delay of payment against a foreign debtor. If the Court accepted this petition, we are not sure whether the Indonesian company can enforce it outside Indonesia because Indonesia does not have any bilateral agreement with any nations in relation to the enforcement of foreign court ruling.
- Companies incorporated in a EU member state
As stated above, a company incorporated in another Member State could enter into insolvency proceedings if its COMI is in France.
However, if such debtor has only an “establishment” in another EU Member State, the courts of that State only have jurisdiction to open “secondary proceedings”, restricted to the debtor’s assets located in that state.
- Companies incorporated outside an EU Member State
When a company has a mere branch or establishment in France (which is not necessarily the COMI), French courts have jurisdiction insolvency proceedings to its benefit.
French courts even have jurisdiction when the company has business relationships in France or of a “real commercial presence” in France.
Recovery and liquidation proceedings may be commenced for companies that have assets in Israel, even if they are not registered (organized) in Israel (Article 380, Companies Ordinance).
Only in case their centre of main interest (COMI) is in the Netherlands.
Luxembourg courts generally hold that courts in the jurisdiction of the principal establishment of the company have jurisdiction to decide on matters of insolvency regarding that company. In Luxembourg, there is no recognition of jurisdiction based on the localisation of assets or any other connection with a jurisdiction.
Insolvency Regulation, a foreign debtor whose COMI is located in Luxembourg, may enter into restructuring or insolvency proceedings in Luxembourg.
The courts of a Member State where the debtor has its COMI (or an establishment) may open main (territorial) insolvency proceedings, regardless of the place of incorporation. In the case of legal persons, the COMI is presumed to be the place of the registered office, in the absence of proof to the contrary (Regulation 1346/2000).
With respect to debtors that have their COMI located outside the EU, Belgian courts will have jurisdiction to open (i) principal proceedings, if the main establishment or the statutory seat of the debtor is located in Belgium, and (ii) territorial proceedings, if the debtor has an establishment in Belgium.
As mentioned in the previous question, insolvency proceedings started abroad allow local creditors and the debtor to file for local insolvency proceedings too.
However, it seems that having local proceedings in these cases makes sense if the debtor has assets or activity in our jurisdiction.
If that is the case, the company must be registered and duly incorporated locally as a subsidiary or a branch of the foreign company.
A debtor incorporated elsewhere may enter into a United States restructuring proceeding pursuant to section 109(a) of the U.S. Bankruptcy Code if the debtor either resides or has a domicile, place of business, or property in the United States. A filing party only needs to meet one of these requirements to be eligible to be a debtor under the U.S. Bankruptcy Code. For a foreign corporation to be eligible for bankruptcy relief on the grounds that it has a place of business in the United States the debtor need only have a place of business, it does not need its primary location to be in the United States.
The most relevant inquiry for a foreign debtor is what constitutes the possession of property within the United States for the purposes of Bankruptcy relief. The property requirement has been construed very broadly and almost any form of property will grant eligibility. The possession of property determination is made with regard to the time of filing.