FREP (Knowle) Limited, FREP (Ellesmere Port) Limited and FREP (Belle Vale) Limited (together the Frogmore Companies) specialised in real estate investment and management in the United Kingdom and owned shopping centres in Cheshire, Liverpool and Bristol. The Frogmore Companies failed to repay their outstanding loans by the due date. The group’s largest creditor, Nationwide Building Society (Nationwide) accordingly sought to enforce its security as the holder of a qualifying floating charge by appointing Moorfields Corporate Recovery Limited as its administrators (the Administrators).
The Administrators sought a declaration as to the location of each of the Frogmore Companies’ centre of main interests (COMI) to determine the validity of their appointments. This prompted the sole shareholder and directors of the Frogmore Companies to seek a declaration that each of the Frogmore Companies’ COMI was in Jersey and so the appointment of the administrators was invalid. An order was also sought under paragraph 81 of the Insolvency Act 1986, to terminate the Administrators’ appointment on the basis of improper motive. The shareholder and directors claimed that the appointment was intended to ‘stifle’ the litigation commenced by the Frogmore Companies two years earlier.
Each Frogmore Company:
- was a special purpose vehicle registered as a ‘non-resident landlord’ with HM Revenue and Customs
- had its registered office in Jersey
- had its bank accounts in Jersey
- did not carry on any trading operations in Jersey
- had no employees
- had all its principal assets situated in England.
The sole shareholder appointed Frogmore Real Estate Investment Managers Limited (an English incorporated company) as its investment and asset adviser (the Agent).
The rebuttable presumption
In order for the administrators to have been validly appointed under the Insolvency Act 1986, the COMI of each of the Frogmore Companies had to be England and Wales. The High Court reasserted the rebuttable presumption that the place of a company’s registered office is its centre of main interests (as per Article 3(1) of EC Regulation 1346/2000) i.e. Jersey. However, the High Court explored what factors should be considered to rebut this presumption.
The High Court considered the European Court of Justice decisions in Re Eurofood IFSC Ltd as followed in Interedil Srl v Fallimento Interedil Srl. In the former, the European Court of Justice concluded that the presumption can be rebutted if there were factors which “are both objective and ascertainable by third parties” establishing that a company’s COMI is elsewhere.
Relevant factors for determining the COMI of a company included the country in which the company pursued economic activities and the country where its assets were held.
By way of further example, the following factors might clearly be perceived by third parties:
- the location of a company’s immovable property in respect of which the company had concluded lease agreements; and
- the location where contracts with a financial institution had been concluded.
The High Court emphasised that there must be a “comprehensive assessment of all relevant factors” and so the fact that a company has its assets and contracts in a member state other than its registered office is not in itself sufficient to rebut the presumption.
The High Court went on to cite first instance decisions which although fact-specific, help to illustrate the significance of certain factors when determining COMI. In Mackellar v Griffin  EWHC 2644 (Ch) Mann J confirmed that having agents operating in a country and managing head office matters could, in the specific circumstances, lead to inferring that the COMI presumption be rebutted.
Birss J in Re Northies Base Investments Ltd  1 BCLC 539 highlighted the importance of considering the point of view of the company’s largest creditors and where they would consider the company’s COMI was located, which follows the approach taken by the European Court of Justice in Interedil Srl. He also commented that the location of a company’s board meetings was not in itself a factor which could rebut the COMI presumption, as this was not the type of information which would ordinarily be in the public domain. The conclusion was reaffirmed by the Court of Appeal in Re Stanford International Bank Ltd  BPIR 1157.
The Court summarised again that in considering where a company’s office functions were carried out, it was essential that the details of such office functions must both be (i) objective; (ii) ascertainable by third parties; and (iii) of a type carried out by head office.
The Court’s Decision
The High Court concluded that each Frogmore Company’s COMI was located in England & Wales on the basis of the following:
- the day-to-day conduct of the Frogmore Companies’ business and activities was conducted by the Agent in England
- the overarching agreements were governed by English law
- the Agent discharged functions from London which you would expect a head office to discharge
- the day-to-day dealings between the Frogmore Companies and third parties was carried out from the London offices (and evidenced by the fact that the London address was included on VAT returns and invoices)
- the Nationwide facility agreement was governed by English law
- there were a number of evidential clauses in the Frogmore Companies’ contracts such as exclusive jurisdiction clauses, a process agent clause and a clause relating to the appointment of administrators under the Insolvency Act 1986 Act.
In relation to improper motive, the Court considered that the proper test was whether the statutory purpose of the administration could be achieved, irrespective of motive. On the facts, the Court decided that it could. In any case, the evidence did not support a finding of improper motive.
Recent case law has not given much guidance as to the determination of a company’s COMI. In a climate where economic times are turbulent and companies are seeking to take advantage of forum shopping, this High Court judgment serves as a useful guidance note for companies seeking to restructure or move their COMI.
The High Court has now left a resounding message that the factors which may rebut the well-known presumption that a company’s COMI is the place of its registered office, must be both objective and ascertainable by third parties. Simply evidencing that a company has assets in a particular jurisdiction will not be sufficient. The various additional factors must be in the public domain and be readily ascertainable by the company’s largest creditors.
Frogmore Real Estate Partners GP 1 Limited et al v Nationwide Building Society et al  EWHC 25 (Ch)