Does the EC Regulation on Insolvency apply to just and equitable winding-up?

Does the EC Regulation on Insolvency apply to just and equitable winding-up?
Can the EC Regulation on Insolvency Proceedings apply to a just and equitable winding-up, or must insolvency be proved?  The case of Re Arm Asset Backed Securities SA 

[2013] EWHC 3351 (Ch), [2013] All ER (D) 107 (Nov) looked at this.

The Court decided the UK court had jurisdiction under Council Regulation 1346/2000, both to wind up the company and, as was sought on the application, to appoint provisional liquidators. Further, on the evidence, a provisional liquidator would be better placed than the existing directors for an orderly realisation of the company's assets.

What did the court decide?

Mr Justice Richards decided that:

  1. it's arguable that the EC Regulation 1346/2000 on Insolvency Proceedings (the EC Regulation on Insolvency) doesn't apply to just and equitable winding up and insolvency must be proved
  2. the views of parties other than the creditors (eg agents and professional advisors) may be relevant to determining the centre of main interests (COMI)
  3. provisional liquidators may be appointed, even if the company's assets are not in jeopardy

How did the problem arise?

The company had its registered office in Luxembourg and its sole business was to issue bonds to investors and then invest those moneys by purchasing life insurance policies in the US, held through a US trust. The US trustee paid the premiums under the policies and collected the sums due under the policies, remitting the net proceeds to the company to enable it to service the bonds.

The company operated for several years without a license from the Luxembourg regulator, but it was later advised that it should apply for one. However, the Luxembourg regulator refused to grant a license and the business was paralysed as it was unable to issue any further bonds. At this point, the directors applied to wind up the company on the just and equitable ground.

Where is the COMI?

The following facts arose in this case:

Luxembourg UK
Location of registered office Residence of two of the three directors (the third being in the Republic of Ireland)
Some board meetings held here Agents operating in London run the day to day business of the company
License application made to Luxembourg Regulator, but refused
Ernst & Young (Luxembourg) appoin

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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.