In some circumstances the court will consider it has jurisdiction to make an administration order for a company which is not registered in England and Wales.
To do so, the Court will need to be satisfied that the company's "centre of main interests" is in England and Wales, rather than the jurisdiction of its registered office. In this article, Martyn Kolankiewicz and Simon Banks consider when the court will make such a finding, by reference to a recent successful administration application issued by Trowers & Hamlins with jurisdictional issues in play.
Trowers & Hamlins recently acted for a lender in relation to the appointment of administrators over a borrower seeking to recover sums due pursuant to a loan facility for c£400m. The borrower was a property development company incorporated in Jersey but whose sole business was a building project in London ("Development"). The lender held a qualifying floating charge over the borrower's assets. The case provided an important clarification on the circumstances when the court will conclude that the Centre of Main Interests ("COMI") of a company which is subject to an administration application is not its registered office.
The jurisdictional requirements for making an administration order under para 12 Schedule B1 to the Insolvency Act 1986 ("IA 1986") were properly made, namely that:
- the Company is or is likely to become unable to pay its debts: para 11(a) Sch B1 IA 1986; and
- the administration order is reasonably likely to achieve the purpose of the administration: para 11(b) Sch B1 IA 1986.
The borrower was obviously insolvent and unable to carry on work on the Development and the purpose of administration order was to allow some time for the borrower's situation to be stabilised with a view either to rescuing it as a going concern or achieving a better outcome for the borrower's creditors than if the Development were to be sold from liquidation in its current state.
However, a key question for the court was whether it had jurisdiction to make an administration order on the basis the borrower's COMI was in England and Wales. The registered office of the Borrower was in Jersey, a separate jurisdiction for the purposes of IA 1986. So a presumption that the Company’s COMI was in Jersey, not England and Wales, existed.
Article 3(1) of Regulation (EU) 2015/848 of the European Parliament and Council on Insolvency Proceedings (recast) (the “EU Regulation”) provides that the Member State where the debtor’s COMI is situated has jurisdiction to open insolvency proceedings and defines COMI as “as the place where the debtor conducts the administration of its interests on a regular basis and which is ascertainable by third parties.” Article 3(1) of the EU Regulation also establishes a rebuttable presumption that, in the case of a company, the debtor’s COMI is the place of its registered office. The Lender therefore needed to rebut that presumption to successfully apply for an administration order.
In re Stanford International Bank Ltd [2011] Ch 33 the Court of Appeal considered the factors relevant to determining the COMI of a company. Sir Andrew Morritt C drew the following propositions in relation to COMI, applying In re Eurofood IFSC Ltd [2006] Ch 508:
- Each company or individual has its own COMI.
- The presumption (at Article 3(1) of the EU Regulation) can only be rebutted by factors that are objective and ascertainable.
- Factors ascertainable by third parties are limited to those in the public domain and those that a typical third party might learn on dealing with the company and does not extend to those that might be discovered only on enquiry.
The Court of Justice of the EU gave further consideration to the issue of COMI in Interedil Srl v Fallimento Interedil Srl [2012] BCC 851, holding (at [50]):
“It follows that, where the bodies responsible for the management and supervision of a company are in the same place as its registered office and the management decisions of the company are taken, in a manner that is ascertainable by third parties, in that place, the presumption in the second sentence of art.3(1) of the Regulation that the centre of the company’s main interests is located in that place is wholly applicable. In such a case, as the Advocate General observed at [69] of her opinion, it is not possible that the centre of the debtor company’s main interests is located elsewhere.”
The factors relevant to determining a company's COMI were considered again in Re Videology Ltd [2018] EWHC 2186 (Ch) in which the court held that there was a presumption that the COMI under the model law was a company's place of registered office, but the presumption can be rebutted. In that case the debtor's loan agreement contained an express warranty that the debtor's COMI was in England and it has no 'establishment' (for the purposes of the Council of the European Union Regulation No. 1346/2000) in any other jurisdiction. Although an attempt was made to rebut the presumption that the company's COMI was in England, Mr Justice Snowden was not persuaded by this given the Company's registered office, trading premises, staff, customer and creditor relationships, administration on a day to day basis and cash at bank were all in the UK. He also noted "the UK is also, importantly, where representations were made to the Company's main finance creditor that its COMI was situated."
In our case the Borrower had represented in the Facility Agreement that its COMI was in Jersey (indeed this was re-stated subsequently on numerous occasions), but unlike in Re Videology all other factors seemed to rebut the presumption that the COMI was in Jersey. Upon an examination of all the facts the Court concluded that the Company’s COMI was actually in the UK. The material factors were that:
- The borrower's sole business was the Development, situated in London.
- The borrower's administrative and accounting functions appeared to be carried out in the UK.
- The team managing the Development were all located in the UK.
- The borrower's board meetings took place in London.
- The Facility Agreement was governed by English law and was arranged at the lender's UK office.
- The borrowers' bank accounts were all situated in England.
- The borrower's trade creditors appeared to be located in England.
- The borrower had represented that from 30 November 2018 it will at all times be resident for tax purposes in the UK.
- The borrower did not appear have any material assets in any jurisdiction outside England and Wales.
The case illustrates that the Court will look at all the circumstances of the case and weigh up all relevant factors in respect of a company's business, when assessing whether its COMI, is in fact in another jurisdiction than its registered office. Notably, a warranty or representation by a borrower to a lender that the COMI is in a particular jurisdiction is not determinative. Such a warranty / representation can be wrong, and in lending documents it is normally for the lender's benefit anyway. Where the practical situation of a company's business evidences another jurisdiction is its COMI, the court will be satisfied that it has jurisdiction to make an administration order on this basis.
