Can debtors incorporated elsewhere enter into restructuring or insolvency proceedings in the jurisdiction?
Restructuring & Insolvency (2nd Edition)
IBL provides that the Commercial Court that is authorized to render bankruptcy / PKPU declaration over a debtor that does not reside in the Indonesian territory but runs its professions or business in the Indonesian territory, shall be the Commercial Court having the jurisdiction over the domicile or headquarter of such debtor running its professions or business in the Indonesian territory. Therefore, it is possible for a debtor incorporated elsewhere enter into restructuring or insolvency proceedings in Indonesia, to the extent that such a debtor fulfills the requirement (i.e.: running its professions or business in the Indonesian territory).
In practice, there have been small number of cases where the Commercial Court granted PKPU and declared bankrupt a debtor incorporated elsewhere which is deemed as running its business in Indonesian territory.
The place of incorporation is essentially irrelevant to the determination of whether a corporation may commence restructuring or insolvency proceedings under the BIA and the CCAA.
Under the BIA, the appropriate condition is whether the corporation “resides” in Canada (i.e. when the corporation has its head office in Canada) or whether the corporation carries on business or has property in Canada. The place of incorporation may be a criterion considered for the purpose of determining the place of residence of the debtor or in the analysis as to whether the corporation conducts business in Canada. Overall, this is a low threshold. In most cases, having a bank account or having its head office or residence (e.g. for tax purposes) in Canada is sufficient, absent factors to the contrary, to confer standing upon a debtor to seek BIA protection.
The CCAA is even broader with respect to providing jurisdiction for companies that are seeking protection from their creditors under the CCAA. It is sufficient that the debtor company be bankrupt or insolvent and have claims against it in excess of CAD$5,000,000.
Pursuant to Article 3 of the European Insolvency Regulation 2015/848, the courts of the EU member state in the territory where the center of the debtor’s main interests (COMI) is situated shall have jurisdiction to open insolvency proceedings. Thus, a debtor incorporated in another EU member state can file for the opening of insolvency proceedings in 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 the case of a company or legal person, the place of the registered office shall be presumed to be the COMI in the absence of proof to the contrary, unless the registered office was moved to another EU member state during the preceding three months.
Pursuant to Sec. 3 Insolvency Code (analogue application), German jurisdiction also applies to a foreign debtor that is not incorporated in another EU member state but has its COMI in Germany.
Please note that German courts tend to be critical regarding forum shopping and assuming their own jurisdiction. Thus, an insolvency filing of a foreign debtor in Germany must be well prepared and should provide detailed information/reasoning regarding the German COMI / jurisdiction.
No, as the laws applicable to foreign debtors are the laws of the jurisdiction in which they are incorporated and registered.
As previously mentioned, the BRBL adopts the territoriality principle, meaning that the court of the place of the principal establishment of the debtor or the Brazilian branch of a company headquartered outside Brazil is the one competent to ratify out-of-court plans, grant judicial reorganizations or decree insolvency.
Despite the lack of legal provision on the matter, there are several Brazilian precedents in which foreign companies were included in restructuring or insolvency proceedings in Brazil under the argument that the “COMI” (center of main interest) of such companies is in Brazil and, therefore, the proceeding should be submit to Brazilian jurisdiction.
In this regard, according to BRBL the sole court with jurisdiction to (i) declare a company insolvency/liquidation, (ii) ratify out-of-court reorganization plans or (iii) grant judicial reorganization is the court of the debtor’s COMI. However, in most of the cases such foreign companies were considered financial vehicles to fund the Brazilian companies.
The EC Regulation on Insolvency Proceedings applies in the Czech Republic (including the provisions relating to the opening of the proceedings) applies to companies from other EU member states in the Czech Republic.
In the case of companies from non-EU member states, questions relating to the opening of insolvency proceedings in the Czech Republic are subject to the relevant international treaties.
Yes. A foreign company may be the subject of a Cayman Islands scheme of arrangement or be wound up in the jurisdiction in the event that it has property located in, or has been carrying on business in the Cayman Islands, 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.
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.
The insolvency laws of Israel will apply, mutatis mutandis, to foreign companies, which have assets in Israel, whether registered in Israel, or not.
In the recent Israeli case law of Civil Appeal 2706/11 Sybil Germany Public Co. Limited v. Hermetic Trust (1975) Ltd., the Israeli Supreme Court expanded the tests for application of Israeli insolvency law, by determining that it will apply also to companies raising funds in Israel (thereby creating an "asset" in Israel).
The Securities Law was amended recently, such that foreign companies issuing securities in the Israeli market are subjected (inter alia) to the Israeli law regarding recovery and arrangements, unless the Israeli Securities Authority exempts a company from such laws if it is assured that the foreign law grants sufficient protection to the Israeli investors.
In practice, even prior to the amendment of the Securities Law, most of the foreign companies raising bonds in the Israeli Stock Exchange, voluntarily undertook not to object to the application of the Israeli law regarding arrangement, recovery and insolvency and to such proceedings taking place in the Israeli court.
A foreign company with a “substantial connection” to Singapore may apply for a scheme, judicial management, or be wound up by the Court. In determining whether a company has a “substantial connection” the Court will look at various factors, including whether a company (i) has it centre of main interests in Singapore; (ii) caries on business in Singapore; (iii) has substantial assets in Singapore; (iv) has chosen Singapore law to govern a transaction; or (v) has submitted to the jurisdiction of the Court.
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 sufficient 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. Even if such a connection is established, the BVI court retains discretion regarding whether or not to appoint a liquidator. The court may appoint provisional liquidators to protect and preserve the assets of foreign companies; however, schemes, plans, and creditors’ arrangements are not available, though it is possible to migrate a foreign company to the BVI for the purpose of making use of the various restructuring procedures.
In KMG International NV v DP Holding SA BVIHC (COM) 144 of 2016, unreported (10 May 2017), the BVI court considered the question whether or not a liquidator appointed by a Swiss Court over a Swiss company that had a number of subsidiaries incorporated in the BVI could take control of and liquidate assets held by BVI companies merely by changing their boards and without the assistance of the BVI court. The creditor, KMG, had applied for the appointment of a liquidator over DP Holding in the BVI, but DP Holding had applied to stay the proceedings on forum grounds, stating that although the BVI court had a power to appoint a liquidator over an insolvent company, it should not do so in the circumstances, as Switzerland was clearly the most appropriate forum for the liquidation.
KMG said that the BVI was the appropriate forum because the Swiss liquidator could not exercise DP Holding’s property rights without the assistance of the BVI court, and dealing with DP Holding’s shares in its subsidiaries, including by exercising voting rights in relation to those shares, constituted dealing with DP Holding’s property situated in the BVI. KMG also argued that what the Swiss liquidator would seek to do would be to bring about the liquidation of the BVI companies, in relation to which the Swiss liquidator would need the assistance of the BVI court.
DP Holding said that if a liquidator were to be appointed in Switzerland, its authority would displace the authority of DP Holding’s directors, and there would be no impediment on the exercise of DP Holding’s voting rights in relation to its subsidiaries. It would not be the liquidator exercising DP Holding’s voting rights, but the company exercising its own voting rights, through the agency of the liquidator as its representative. There was no statutory or common-law rule that prohibited any foreign liquidator from exercising voting rights that attached to shares belonging to a company in liquidation. The company’s constitutional documents established that the question whether or not a Swiss liquidator was properly appointed to represent the voting rights at the meetings of the members of the subsidiaries would be determined by the law under which that person was constituted, in this case, the law of Switzerland. Additionally, there was no reason to suppose that the BVI subsidiaries would need to be liquidated in the BVI. Their assets could be realised, their creditors paid, and the net proceeds distributed to DPH. The companies could then be left as empty shells or put into voluntary solvent liquidation and dissolved administratively without the involvement of the court.
Giving the judgment of the BVI Commercial Court, Wallbank J stated that although there might be situations in which a foreign liquidator would find it desirable to obtain the BVI court’s assistance, there is no requirement on him to do so. A foreign liquidator who causes the company of which he is liquidator to exercise its voting rights in BVI companies does not seek to exercise his statutory remit in a jurisdiction to which it does not extend. The judge also held that even if the BVI subsidiaries needed to be liquidated, it would not be the Swiss liquidator qua liquidator who would be doing this. Accordingly, KMG had not succeeded in showing that the BVI was clearly or distinctly the appropriate forum by raising the possibility that a foreign liquidator might in some circumstances need or want to obtain the BVI court’s recognition.
An appeal from this decision was heard by the Eastern Caribbean Court of Appeal in 2017, and the decision is pending. If the Court of Appeal upholds the decision of Wallbank J, this decision is likely to be important for foreign appointees who prefer not to seek recognition in the BVI, and instead exercise voting rights attached to shares over which their office gives them control; however, it might still be open to an applicant to seek to restrain an office-holder whose office or appointment offends public policy. An example of such a situation arises from the line of authorities from a variety of jurisdictions to the effect that a court cannot allow the claims of a foreign office holder who is effectively acting for the sole benefit of a revenue or penal authority of another state, because to do so would be to facilitate or permit the indirect enforcement of a foreign penalty or revenue claim: see, eg, Peter Buchanan Ld and another v McVey  AC 516 (Note), in which this principle defeated a clear claim for fraud brought in the name of a company in liquidation, Government of India, Ministry of Finance (Revenue Division) v Taylor  AC 491, QRS 1 ApS and others v Frandsen  1 WLR 2169, and Relfo Ltd (in liquidation) v Varsani  4 SLR 657,  SGHC 105 (High Court of Singapore). Although the exercise of the company’s voting rights in respect of its shares in subsidiaries would not involve the court entertaining a claim that was an indirect enforcement of a foreign revenue or penal action, the decision of Wallbank J may indicate a route by which such claims can be satisfied away from the court’s supervision and public-policy concerns circumvented.
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.
No, they cannot. According to China’s General Principles of Civil Law regarding enterprise legal persons, an enterprise legal person must have a capital prescribed by Chinese law, have its own articles of association, organizational structure and premises, be able to bear civil liability independently, and have been approved by and registered with China’s competent authorities. Enterprise legal persons also include Sino-foreign equity joint ventures, Sino-foreign contractual joint ventures and wholly foreign-owned enterprises which are established in China, meet all the qualification requirements for a Chinese enterprise legal person and have been approved by and registered with the Chinese authority in charge of industrial and commercial affairs. In sum, an enterprise legal person here means a Chinese enterprise legal person.
The Enterprise Bankruptcy Law applies to enterprise legal persons. Without anything expressly providing otherwise under Chinese bankruptcy law, the enterprise legal persons here refer to Chinese legal persons as well.
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.
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.
Only in case their centre of main interest (COMI) is in the Netherlands.
The only requirement for a foreign corporation to enter into insolvency proceedings in the United States is that the corporation has a domicile, place of business or property in the United States.
With regards to the possession of property requirement, courts have interpreted it quite broadly, with most any property located in the United States at the time of filing the petition qualifying.
- Companies incorporated in a EU member state
- Companies incorporated outside an EU Member State
- UNCITRAL Model Law on Cross Border Insolvency
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.
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.
The UNCITRAL Model Law on Cross Border Insolvency has not been adopted in France.
Luxembourg courts generally hold that courts in the (non-EU) 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.
Pursuant to the Insolvency Regulation, an EU debtor whose COMI is located in Luxembourg, may enter into restructuring or insolvency proceedings in Luxembourg.
Section 342 of the Companies Act provides for overseas companies (being a body corporate incorporated outside New Zealand) to be put into liquidation under New Zealand law by the Court. An administrator may be appointed to an overseas company, and a receiver may be appointed under a security agreement, in respect of the assets of an overseas company.
Companies may resort to the insolvency procedures regulated in Romania, but only if they have their headquarters here. If otherwise, the insolvency procedure opened in Romania will be subordinated to the insolvency procedure opened in the state where their headquarters are.
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.
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.
Examinership is available in principle to any company having its centre of main interests in Ireland, including non-Irish incorporated companies.
Under the Insolvency Regulations, the Irish High Court has jurisdiction to wind up a company that is incorporated under the laws of another EU jurisdiction where that company has its centre of main interests (or COMI) in Ireland. The Irish High Court also has jurisdiction to open secondary proceedings in respect of a company that is incorporated under the laws of another EU jurisdiction where main insolvency proceedings have been opened in another EU member state provided that the relevant company has an establishment in Ireland.
The Irish High Court also has jurisdiction to wind-up companies that are registered in jurisdictions outside the EU where (a) there is a substantive connection with Ireland, (b) there is a reasonable possibility, if a winding-up order is made, of such order benefitting those applying and (c) the Court has jurisdiction over one or more persons that are interested in the distribution of assets of the company.
A receiver can be appointed to assets held by a foreign-incorporated company in Ireland, provided that the terms of the relevant document allow for this.
Under the Insolvency Regulation recast, 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 is defined as the place in which the debtor conducts the administration of its interests on a regular basis and is ascertainable as such 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.
Foreign debtors often seek to use the scheme of arrangement to implement a variety of restructurings. 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.
Yes, provided that such foreign entity complies with the provisions or Title XII of the Insolvency Law.
Foreign debtors could apply for the DIP or a restructuring proceeding in another Member State, if they demonstrate that the interest center’s debtor is situated within the territory of a given Member State. The courts of another Member State shall have jurisdiction to open insolvency proceedings against that debtor only if it possesses an establishment within the territory of that other Member State, according to article 3.2 of RIP. This proceeding will be considered as a secondary insolvency proceeding (art. 34 and sequence of RIP).
On the other hand, foreign debtors could be recognized in a restructuring or insolvency proceedings as a credit claim in favor of the insolvency company. In this case, IA will have to execute all the necessary action in order to recover this credit.
Yes. Debtors incorporate elsewhere but which have their center of main interests (COMI) in Portugal can initiate insolvency proceedings in our jurisdiction.
According to Regulation (EU) 2015/848, the center of main interests shall be the place where the debtor conducts the administration of its interests on a regular basis and which is ascertainable by third parties. In the case of a company or legal person, the place of the registered office shall be presumed to be the center of its main interests in the absence of proof to the contrary and unless it has been moved to another Member State within the 3-month period prior to the request for the opening of insolvency proceedings.
Under Portuguese law, which is applicable to cross-border situations not involving EU states, the concept of center of main interests has the same definition as in the Regulation.