With judgment No. 5945 of 11 March 2013, the Italian Supreme Court of Cassation addressed a key issue under EC Regulation No. 1346/2000: the location of the center of main interests(COMI) of the company according to factors recognizable by third parties.

The Case

An Italian limited liability company (società a responsabilità limitata), which was declared bankrupt by the Court of Udine, filed an appeal challenging the jurisdiction of the Italian Court, as the company had previously transferred its registered office outside of Italy.

The Issues

The issue of determination of a company’s COMI for the purposes of insolvency proceedings had been previously raised before the European Court of Justice (ECJ), and has seen a change of the prior trend in the case law of the ECJ, which had follow-on effects at the national level in the case law of Italian Courts.

The matter arises in the context of the application of EC Regulation No. 1346/2000 of 29 May 2000 on insolvency proceedings (the Regulation). Article 3 of the Regulation grants jurisdiction for the purpose of commencement of insolvency proceedings to the court of the Member State in which the COMI of the debtor is located and, further establishes a rebuttable presumption for corporate and legal entities that such COMI will be deemed to be in the Member State in which its registered office is located.

The issue therefore presented before the ECJ, at the European level, and the Supreme Court of Cassation at the domestic Italian level, relates to the definition of the test to overcome the presumption set forth in Article 3 of the Regulation.

The Court Ruling

The Italian Supreme Court of Cassation takes an important stand relating to proof of the location of the COMI. In this respect, three factors were noted that should be taken into consideration by the relevant Court when determining the Courts of which Member State have jurisdiction to commence insolvency proceedings.

First, the COMI is identified giving precedence to the place of primary administration of the company, as determined based on factors which are objective and ascertainable by third parties. Therefore, if the managing and controlling bodies of a company are not based at its registered offices, the existence of management activities as well as decision- making in another Member State, in a manner ascertainable by third parties, is sufficient to overcome the presumption of Article 3 of the Regulation, and thereby provide grounds for a finding that jurisdiction to commence insolvency proceedings lies with the Courts of the place in which the administration and control activities of the company are exercised, even if different from the State in which its registered office is located.

Second, while the burden is not on the company to demonstrate that its COMI coincides with the location of its registered office, however, an Italian Court may, pursuant to a general rule set forth by Article 116 of the Italian Code of Civil Procedure, consider as concurring evidence the conduct of a party that, faced with the showing of elements supporting a finding that its COMI is located in Italy, does not offer any arguments to the contrary.

Third, where a company’s cancellation from the relevant domestic companies’ registry results from a transfer of the registered office of such company outside of Italy, continuing, however, its business activities albeit from another State, Article 10 of the Italian Bankruptcy Law (which prohibits a declaration of bankruptcy with respect to a company which has been cancelled from the business registry from more than one year) is not applicable if the company continues to conduct its activities in another State, such that its legal continuity was not affected.

Commentary

Initially, the trend in the case-law of the ECJ, which first dealt with this issue in the Eurofood case1, allowed overcoming the registered office presumption only in the case of a “letter box company”, that is, a company that does not conduct any business activities within the Member State in which its registered office is located. However, the principle stated in the Eurofood case was generally not followed by Italian domestic Courts.

Several years later, the ECJ introduced another approach in the Interedil case2, in which it held that the registered office presumption could be overcome also upon a finding, based on factors which are ascertainable by third parties, that the actual management or control of the debtor was actually performed in a Member State other than that of its registered office.

In the case at hand, the Italian Supreme Court concluded indeed (in line with this approach) that the above-referenced presumption pursuant to Article 3 could be overcome when it is apparent to third parties that the decisions regarding the administration and control of a Company continue to be made in Italy, even if the registered office of is located in another Member State.