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Recognition of foreign proceedings
Under what circumstances will the courts in your jurisdiction recognise the validity of foreign insolvency proceedings?
Insolvency procedures commenced elsewhere may be recognised (and/or other relief or assistance provided) in a number of ways. The key routes are as follows:
- EU Insolvency Regulation – this applies to all collective insolvency proceedings and some restructuring proceedings relating to a company with its centre of main interests (COMI) in the European Union. The EU Insolvency Regulation provides for automatic recognition in England and Wales; and
- The United Nations Commission on International Trade Law (UNCITRAL) Model Law on Cross-Border Insolvency Proceedings – where proceedings are commenced outside the European Union, it may be possible for the insolvency officeholder to apply for recognition in England and Wales under the UNCITRAL Model Law on Cross-Border Insolvency Proceedings if the proceedings are main insolvency proceedings (defined by reference to a concept of COMI, which is similar to that found in the EU Insolvency Regulation).
Other forms of assistance may be granted under domestic legislation and common law (see below in relation to cross-border cooperation).
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?
Companies incorporated elsewhere commonly seek to restructure in England and Wales, particularly in order to use a scheme or pre-pack.
Administration and liquidation Administration and liquidation proceedings fall within the scope of the EU Insolvency Regulation. So-called ’main’ insolvency proceedings can be opened only in the member state where a debtor has its COMI. This means that any company which has its COMI in England and Wales, even if it is incorporated elsewhere, can enter into liquidation or administration. A number of companies have moved their COMI for this purpose, particularly to use the pre-pack procedure. Companies whose COMI is located outside the European Union can enter into administration only if they are incorporated in a European Economic Area state. Such companies may enter liquidation regardless of their place of incorporation, as long as they meet certain criteria, including a “sufficient connection” to England and Wales.
Schemes Schemes remain outside the scope of the EU Insolvency Regulation and therefore a company need not have its COMI in England and Wales to take advantage of this procedure. A modified version of the ‘sufficient connection’ test provides the jurisdictional threshold. In recent years, this has commonly been achieved through the inclusion of an English governing law and jurisdiction clause in the relevant finance documents, but the presence of assets or operations may also suffice.
Centre of main interests
How is the centre of main interests determined in your jurisdiction?
A company’s COMI is presumed to be the location of its registered office, unless proof can be shown to the contrary. In showing proof, the courts will look closely at what third parties would consider to be the place where the company conducts the administration of its interests on a regular basis. One specific factor that may have a bearing on this is the address from which the company negotiates and corresponds with its creditors.
What is the general approach of the courts in your jurisdiction to cooperating with foreign courts in managing cross-border insolvencies?
The recast EU Insolvency Regulation provides for the coordination of insolvency proceedings concerning different members of the same group by obliging the liquidators and the courts involved in the different main proceedings to cooperate and communicate with each other. In addition, it gives the liquidators involved in such proceedings the procedural tools to request a stay of the various other proceedings and to propose a rescue plan for the members of the group that is subject to insolvency proceedings.
Under the Insolvency Act 1986, insolvency officeholders in a limited number of designated jurisdictions (mainly Commonwealth countries) may apply to the courts of England and Wales for certain relief and assistance. In circumstances where the EU Insolvency Regulation, the UNCITRAL Model Law and national legislation are not applicable, the insolvency officeholder may still apply for relief in England and Wales on the basis of common law principles developed by the courts.
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