19 Entertainment Ltd, Re

Recognition of foreign main proceedings under the Cross-Border Insolvency Regulations 2006 is mandatory where the statutory conditions are met. A company’s registered office does not determine its centre of main interests (COMI) where objective and ascertainable factors show that it is a letterbox company conducting its business elsewhere. Recognition of Chapter 11 proceedings may attract both the automatic stay and additional relief comparable to an English administration moratorium. The purpose is to place the company in England on a footing comparable to that produced by the foreign proceedings, rather than to import foreign insolvency law.

19 Entertainment Limited and its directors applied for recognition of Chapter 11 proceedings commenced in the United States as foreign main proceedings. They also sought discretionary relief, substantially equivalent to a moratorium under paragraph 43 of Schedule B1 to the Insolvency Act 1986, because a creditor was threatening to present a winding-up petition.

The court had to determine the company’s COMI, whether the Chapter 11 case was a foreign proceeding, whether the applicants were foreign representatives, whether the evidential and forum requirements were satisfied, and whether additional relief should be granted.

The applications were granted.

1. COMI. The registered-office presumption was rebutted. Applying Stanford International Bank Limited [2011] 1 Ch 33 and the test in Eurofood IFSC Limited [2006] Ch 508, objective and ascertainable factors showed that the company’s COMI was in the United States. Its business, management, directors, board meetings, creditors, banking and operations were there, while its London office had closed.
2. Recognition. The Chapter 11 proceedings were collective proceedings under insolvency law in which the debtor’s assets and affairs were subject to foreign court supervision for reorganisation or liquidation. They therefore satisfied the definition of foreign proceedings. The applicants were foreign representatives because, on the evidence, they were authorised to administer or represent the proceedings. The evidential and jurisdictional requirements were also satisfied. Recognition under Article 17 was consequently mandatory.
3. Relief. Article 20 imposed an automatic stay on individual creditor actions following recognition. Article 21 permitted additional relief, including relief available to a British insolvency office-holder and relief under paragraph 43 of Schedule B1 to the Insolvency Act 1986. A moratorium preventing presentation of a winding-up petition and an application for administration was consistent with the policy of the Model Law.
4. Form of order. The court adopted the single-code approach used by Norris J in Pan Oceanic Maritime Incorporated [2010] EWHC 1734 (Comm), so that the order stated the combined effect of automatic and discretionary relief.