Regulation (EU) 2015/848 (the “Insolvency Regulation”) states at Recital 23 of its preamble that main insolvency proceedings can be opened in a Member State where a debtor has its centre of main interests (“COMI”). It goes on to state that those proceedings have universal scope and are aimed at encompassing all of the debtor’s assets. The Insolvency Regulation further details at Article 3(1) that a debtor’s COMI is where the debtor conducts the administration of its interests on a regular basis which is ascertainable by third parties. The presumption for a company, therefore, is that the place where its registered office is situated determines the COMI, subject to it not having been moved within the three months prior to insolvency.
Whilst the Insolvency Regulation provides that the presumption under Article 3(1) can be rebutted by “…a comprehensive assessment of all the relevant factors…” (Recital 30) the question arises as to what factors can be considered to displace the presumption under Article 3(1)?
This question will be assessed in the context of the following scenario.
A company (D) which was incorporated in England and Wales and had its registered office in England was placed into administration. D had a subsidiary company, G, which was incorporated in Germany and had its registered office in Germany. As D was in administration, it was decided that G should also be placed into administration as it had effectively ceased to trade.
As G was incorporated in Germany, its internal accounting and banking facilities were situated in Germany and the contracts entered into by G with suppliers and customers were all governed by German Law; strengthening the presumption under Article 3(1). It was further strengthened by the fact that the employees for G were all German. The facts that countered Germany being G’s COMI were that the sole director of G was a UK national and resident in the UK, G was controlled from the UK by the director and the main supplier to G was D.
The further question that comes out of this is that the arguments in favour of Germany being G’s COMI were outward facing, whilst the arguments in favour of the UK being G’s COMI were inward facing. This creates a further issue: how can it be shown that those transacting with G would be able to ascertain that its COMI was in the UK? To answer this question it is necessary to look at G’s filings in the German equivalent of Companies House. In these filings it was found that the address listed for the director was their residential address in the UK. These filings also listed D as the sole shareholder and confirmed that D’s registered office was in the UK.
In the application for an administration order in respect of G, factors outlined above were relied on as well as the fact that G’s website made reference to it being a subsidiary of D and that the branding used by G was a replica of D’s.
The applicant primarily relied on two Judgments in support of their application: Re Eurofood IFSC Ltd.  Ch. 508 and Interdil Srl v. Fallimento Interdil Srl and Intesa Gestione Crediti SpA  BCC 851.
In the Judgment given by the European Court of Justice (“ECJ”) in Eurofood, the court considered the COMI test and stressed that in order to determine a company’s COMI it was necessary to use objective factors which are ascertainable by third parties so that they themselves can determine whether a company is not ‘based’ for the purposes of COMI in the Member State where it has its registered office. Whilst Eurofood was decided under the predecessor to the Insolvency Regulation it is still good law.
The Judgment given by the ECJ in Interdil, further supplements the decision in Eurofood. In Interdil the court went further to state that it is necessary to determine the company’s actual centre of management and supervision in order to judge a company’s COMI. As noted above, the director of G was a UK national and resident in the UK and the majority of G’s stock came from D.
The court considered the evidence that had been produced along with the case law which was relied upon and considered that, in the circumstances, G’s COMI was in the UK and as such G could be put into administration in the UK. The court granted the administration order accordingly.
This is useful to show that there is not a definitive list of factors that the court will consider when determining COMI. To put it as one question: in objective terms, would a third party consider a company to be a foreign company on a reasonable inspection of the company’s information? If so, then the court may be more inclined to agree that the presumption is rebutted and a company’s COMI is located in a Member State other than where its registered office is situated.