Bailey & Anor (As Foreign Representatives of Sturgeon Central Asia Balanced Fund Ltd), Re

Recognition under the Cross-Border Insolvency Regulations 2006 does not require proof that the debtor is insolvent or in severe financial distress. The relevant question is whether the proceeding satisfies the statutory definition of a foreign proceeding, including that it is collective, judicial or administrative, brought under a law relating to insolvency, subject to foreign court control or supervision, and directed to reorganisation or liquidation. A court-ordered winding up on just and equitable grounds may qualify even where the company is indisputably solvent and the purpose is not creditor-related. The statutory text prevails over inconsistent guidance suggesting that recognition is confined to insolvent or severely distressed entities.

Provisional liquidators of a solvent Bermudian investment company applied for recognition in Great Britain of its court-ordered winding up as a foreign main proceeding under the Cross-Border Insolvency Regulations 2006. The winding up had been ordered in Bermuda on just and equitable grounds after participating shareholders lost a fundamental right to procure a winding up.

The central issue was whether a solvent winding up under section 161(g) of the Bermuda Companies Act 1981, based on legislation derived from the Companies Act 1948, was a foreign proceeding under the Model Law. The court also had to determine whether Bermuda was the company’s centre of main interests and whether the other recognition requirements were satisfied.

1. Recognition granted. The Bermudian winding up was recognised as a foreign main proceeding.

2. The expression “pursuant to a law relating to insolvency” requires identification of the law under which the proceeding was brought and consideration of whether that law relates to insolvency. It does not require the recognising court to determine afresh whether the debtor is insolvent. Section 161 of the Bermuda Companies Act 1981 qualified because it provides for court-ordered winding up on grounds including inability to pay debts and just and equitable grounds. The latter conventionally includes insolvency.

3. The other elements of “foreign proceeding” narrow the broad reference to a law relating to insolvency. The proceeding must be collective, judicial or administrative, subject to foreign court control or supervision, and for the purpose of reorganisation or liquidation. A court-ordered winding up satisfied those requirements.

4. The fact that the company was solvent, or that the particular winding up was sought to distribute surplus assets rather than realise assets for creditors, did not exclude recognition. Distinguishing between different statutory grounds or different reasons for a just and equitable winding up would impose the factual inquiry which the Model Law was intended to avoid.

5. The 2014 Guide to Enactment was approached with circumspection. Its references to insolvency or severe financial distress could not qualify the plain wording of the Model Law. Article 31 supported the conclusion because it contemplates recognition without an established finding of insolvency and creates only a rebuttable presumption for commencing proceedings under British insolvency law.

6. Bermuda was the company’s centre of main interests under Article 16(3). Its registered office was there, and no objective and ascertainable evidence rebutted the presumption. The formal requirements under Article 15 and Part 2 of Schedule 2 to the CBIR were also satisfied, so recognition was required under Article 17.