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On the hearing of a winding up petition, the court held that the presumption that a company’s centre of main interests (COMI) was in the place of its registered office did not operate as a default. Even where it was difficult to ascertain the actual place of administration of the company’s interests, the court was obliged to conduct that inquiry.
Having determined that no relevant administration was undertaken in the place of the registered office, the court turned to establishing the physical location that represented the centre of its administration albeit that it was said to ‘trade in the ether’. While leaving open the question of whether, under the preamble to the Recast Regulation on Insolvency, the company could be ordered to submit additional evidence to support its assertion as to its COMI (in this case, the company made no positive case), the court was prepared to draw adverse inferences in favour of the petitioner from the company’s silence.
Written by Edward Knight, barrister at XXIV Old Buildings.
Re Melars Group Ltd  EWHC 2090 (Ch),  All ER (D) 18 (Aug)
The judgment demonstrates that the court will be astute to preventing a debtor from taking advantage of an evidential presumption by silence or obscurity and will ensure that a move of registered office reflects a real move of its interests.
Petitioning creditors, from whom the actual place of administration is being obscured in order to assist the debtor in forum shopping, should consider seeking disclosure and cross-examination or other orders in line with paragraph 32 of the preamble to the Recast Regulation on Insolvency, Regulation (EU) 848/2015 (the Recast Regulation on Insolvency).
Melars was originally registered in the British Virgin Islands (BVI).
The petitioner, East-West Logistics LLP, entered into a charterparty with Melars in 2011. East-West subsequently made claims for breach of the charterparty, first in arbitration proceedings in London and then in the BVI court.
In December 2015, two months after service of the BVI claim form and a month after acknowledging service, Melars moved its place of registration to Malta, though it did not inform its creditors and continued to correspond using its address in the BVI.
East-West obtained judgment in default in the BVI on 1 March 2016 and damages and costs were assessed on 13 June 2016 in the sum of $US 657,839, which founded the winding up petition in England, presented on 19 July 2016 (the petition was stayed for a prolonged period to permit Melars to apply to set aside judgment, which it failed to do).
The principal issue before the court was whether it had jurisdiction to wind up Melars on the grounds that the presumption that its COMI was in Malta could be rebutted and was, as a matter of fact, in England.
The difficulty faced by both East-West and the court was the paucity of evidence as to the place of administration of the company’s interests at the date of presentation, or any other time, though the company did not challenge the evidence that it had no administrative function conducted in Malta.
Following Shierson v Vlieland-Body  EWCA Civ 974,  All ER (D) 391 (Jul), the court accepted that a company was entitled to change its COMI even for self-serving reasons. However, in those circumstances, the court should scrutinise whether the change was one of substance or illusory. It was therefore necessary to undertake an inquiry as to the actual place of administration notwithstanding the existence of an evidential presumption under the Recast Regulation on Insolvency: Interedil Srl v Fallimento Iteredil Srl (2011) C-396/09,  All ER (D) 195 (Oct); Eurofood IFSC Ltd (2006) C-341/04,  All ER (D) 20 (May); Re Lennox Holdings Ltd  BCC 155, and Re Northsea Base Investment Ltd  EWHC 121 (Ch),  All ER (D) 202 (Jan).
The court found that Melars had moved its registration in order to make enforcement of the judgment more difficult, as it might otherwise be entitled to do, but was satisfied that the company conducted no relevant administration in Malta. Notwithstanding that the company’s business was said to be conducted ‘in the ether’, eg by email from unidentified locations, it did ‘in fact connect with planet earth’ and the only realistic place was either Switzerland or the UK. The court must therefore decide between those jurisdictions even if the evidence was unsatisfactory or obscure, and not simply fall back on the presumption as a default. Ascertainability was a natural consequence of the actual situation (Eurofood IFSC Ltd; Re Lennox Holdings) but contemporaneous ascertainment was not required.
The court disregarded the nationality and residence of directors (Re Videology Ltd  EWHC 2186 (Ch),  All ER (D) 149 (Aug)) and the use of English language in contracts but gave weight to the place of execution of contracts, to English jurisdiction clauses (disregarding the alleged reasons therefor), the location of active litigation (Irish Bank Resolution Corpn v Quinn  NICh 1) and the location of bank accounts. The court used evidence from before and after the date of presentation to elucidate the position at that date (Shierson).
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Stephen qualified as a solicitor in 2005 and joined the Restructuring and Insolvency team at Lexis®PSL in September 2014 from Shoosmiths LLP, where he was a senior associate in the restructuring and insolvency team.
Primarily focused on contentious and advisory corporate and personal insolvency work, Stephen’s experience includes acting for office-holders on a wide range of issues, including appointments, investigations and the recovery and realisation of assets (including antecedent transaction claims), and for creditors in respect of the impact on them of the insolvency of debtors and counterparties.
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