Clarity on cross-border conundrum (Re Toisa Limited)

Clarity on cross-border conundrum (Re Toisa Limited)

Charlotte Moller, Helena Clarke and Harry Rudkin of Reed Smith LLP and Adam Goodison at South Square (who acted for Toisa Limited) look at the groundbreaking case of Re Toisa Limited. In particular the case clarifies the time at which COMI should be determined under the Cross Border Insolvency Regulations 2006, SI 2006/1030 (CBIR).

It is well established that the type of recognition granted by the recognising court under the UNCITRAL Model Law will depend on whether the originating proceedings are ‘foreign main’ or ‘foreign non-main’ proceedings, which in turn hinges on the centre of main interests (COMI) of the insolvent entity.

In a ground-breaking case, the English court has followed the precedent set down by the US Bankruptcy Court in undertaking this COMI analysis at the date of the recognition petition, rather than the date that the insolvency proceedings were initiated. This has the scope to significantly simplify the recognition of cross-border insolvencies going forward, particularly in respect of Chapter 11 recognitions in the UK.

 The UNCITRAL Model Law

The Model Law has been enacted into the English statute book as the CBIR, which states (using the wording of the Model Law) that:

‘“foreign main proceeding” means a foreign proceeding taking place in the State where the debtor has the centre of its main interests,’ and

‘“foreign non-main proceeding” means a foreign proceeding, other than a foreign main proceeding, taking place in a State where the debtor has an establishment…’

COMI for these purposes has the same interpretation as under the Recast Regulation on Insolvency 2015/848, with the rebuttable presumption being that COMI will be in the jurisdiction of the debtor’s registered office. The analysis of whether or not that presumption can be rebutted is largely a fact-based one.

Recently, Reed Smith assisted Toisa Limited (Toisa), a debtor in a Chapter 11 case, in seeking recognition of those Chapter 11 proceedings before the English court under the CBIR. The application came before ICC Judge Burton on Friday, 29 March. Having been presented

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About the author:
Kathy specialises in restructuring and cross-border insolvency. She qualified as a solicitor in 1995 and has since worked for Weil Gotshal & Manges and Freshfields. Kathy has worked on some of the largest restructuring cases in the last decade, including Worldcom, Parmalat, Enron and Eurotunnel.