Use the Lexology Navigator tool to compare the answers in this article with those from other jurisdictions.

Cross-border insolvency

Recognition of foreign proceedings

Under what circumstances will the courts in your jurisdiction recognise the validity of foreign insolvency proceedings?

Chapter 15 of the Bankruptcy Code allows for a foreign representative to seek US recognition of a foreign proceeding. Recognition of a foreign proceeding is defined in the Bankruptcy Code as the entry of an order recognising a foreign main proceeding or a foreign non-main proceeding (depending on the location of the foreign debtor’s center of main interests). Recognition of a foreign proceeding is considered ancillary relief that allows the US Bankruptcy Court to enforce orders of foreign courts.

Winding up foreign companies

What is the extent of the courts’ powers to order the winding up of foreign companies doing business in your jurisdiction?

A foreign company is eligible for relief under the Bankruptcy Code if it has either a place of business or property in the United States. Such requirements apply to both plenary Chapter 11 and ancillary Chapter 15 relief. A foreign company is considered to have a place of business in the United States if it maintains a physical location in the United States where it conducts business. The property requirement may be met by having any property in the United States. As is the case for obtaining Chapter 11 jurisdiction, the test for having assets located in the United States for purposes of Chapter 15 relief is a relatively low bar, and can be found in the form of accounts (including retainers paid to professionals in which the company retains an interest) and stock. At least one court has found that an interest in a New York law-governed indenture is a sufficient property interest for purposes of Chapter 15 jurisdiction.

Centre of main interests

How is the centre of main interests determined in your jurisdiction?

The term ‘centre of main interests’ is not specifically defined in the Bankruptcy Code. However, it is an essential component of determining whether a bankruptcy court will view a foreign proceeding as a foreign main proceeding or a foreign non-main proceeding, which determination affects the type of relief available to a foreign representative. There is a statutory presumption that if there is no evidence to the contrary, the debtor’s registered office is its centre of main interests. However, courts will review many factors to determine the centre of main interests of a debtor, including which jurisdiction’s laws would apply to most disputes, as well as the locations of the debtor’s headquarters, management, primary assets and creditors.

Cross-border cooperation

What is the general approach of the courts in your jurisdiction to cooperating with foreign courts in managing cross-border insolvencies?

In a Chapter 15 case, the Bankruptcy Code mandates that courts, trustees and other persons authorised by a court cooperate to the maximum extent possible with foreign courts and foreign representatives. A protocol in a cross-border case or dual proceeding (typically when there is a Chapter 11 case and a foreign plenary proceeding) is an arrangement that provides for the cooperation of courts in different countries and the coordination of their respective proceedings by describing how matters will be handled between the courts. Among other things, a protocol allows courts to coordinate schedules and hearings and avoid inconsistent rulings. Chapter 15 of the Bankruptcy Code also instructs courts to cooperate and communicate with foreign courts and foreign representatives subject to interested parties’ rights to notice of and participation in any communication.

Click here to view the full article.