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Nektan (Gibraltar) Limited was incorporated in Gibraltar. Its primary business was providing online gambling platforms to customers to businesses and individual players. These business activities led to tax liabilities to HMRC for remote gaming duty, which had increased from 15% to 21% on 1 April 2019, and the tax burden gave rise to a proposed restructuring involving an administration of the company.
Did a company incorporated in Gibraltar fall within the definition of ‘company’ in paragraph 111 of Schedule B1 to the Insolvency Act 1986 (IA 1986) such that the court has jurisdiction to make an administration order in England?
Falk J concluded that it did, and that it was appropriate to make an administration order on the basis that the centre of main interests (COMI) was in the UK, to the extent that was relevant, and found jurisdiction on that basis. Falk J added as obiter that the English court would still have had jurisdiction even if the COMI had been in Gibraltar.
Written by Robert Paterson, partner at Moon Beever LLP.
Re Nektan (Gibraltar) Ltd  EWHC 65 (Ch),  All ER (D) 53 (Jan)
The High Court’s ruling confirms for the first time that:
The Nektan case is therefore significant for two reasons:
The looming Brexit date of 31 January 2020 and finite transition period thereafter may well accelerate the resolution of any distressed situations.
This case raised a new question for the English courts: what is the precise status of Gibraltar in the context of EU insolvency law? Gibraltar is not expressly referred to in the Recast EU Insolvency Regulation (EU 2015/848) (the Recast Regulation on Insolvency). It is a territory of the EU to which the regulation applies, as the UK—which at the time of writing is still a member—includes Gibraltar. Gibraltar passed its own legislation stating that the regulation should apply as if Gibraltar and the UK were separate Member States (see Re Regent Centre Ltd  BPIR 730), but legislation passed within Gibraltar is not binding in England and has not led to any changes in the Recast Regulation on Insolvency.
EU case law states that Gibraltar is a European territory and that the UK was responsible for its external relations (Spain v United Kingdom Case C-145/04). That is not the same as Gibraltar itself being a Member State, it simply means that the regulation applies to Gibraltar as a territory of the UK.
Turning to domestic law, the court only has power to make an administration order in relation to a ‘company’ (IA 1986, Sch B1, para 111), and ‘company’ is defined as:
‘(a) a company registered under the Companies Act 2006 (CA 2006) in England and Wales or Scotland,(b) a company incorporated in an EEA State other than the United Kingdom, or(c) a company not incorporated in an EEA State but having its centre of main interests in a Member State other than Denmark.(1B) In sub-para (1A), in relation to a company, ‘centre of main interests’ has the same meaning as in Art 3 of the EU Regulation.’
‘(a) a company registered under the Companies Act 2006 (CA 2006) in England and Wales or Scotland,
(b) a company incorporated in an EEA State other than the United Kingdom, or
(c) a company not incorporated in an EEA State but having its centre of main interests in a Member State other than Denmark.
(1B) In sub-para (1A), in relation to a company, ‘centre of main interests’ has the same meaning as in Art 3 of the EU Regulation.’
Which limb applies? Not the first, because a Gibraltar company would obviously not be incorporated under CA 2006. The second limb doesn’t work, because Gibraltar isn’t an EEA State in its own right. Even the third limb is difficult, because the company isn’t ‘not incorporated’ in an EEA State. But we know from case law that provided the COMI is in the UK, the English courts can make an administration order in relation to English companies, companies incorporated in the EEA (for example Germany) and companies not incorporated in the EEA (Delaware for example: see Re BRAC Rent-a-Car International Inc  2 All ER 201). The ambit of the definition is now very wide: why would Parliament seek to exclude Gibraltar?
The court had no doubt that the company was insolvent on the evidence, and that an administration order would be reasonably likely to achieve the purpose of the administration. The conditions for an administration order as set out in IA 1986, Sch B1, para 11 had been met.
The court considered that ‘Member State’ in the third limb of the definition of ‘company’ should be read in the context of Art 3 of the Recast Regulation on Insolvency, referring to Gibraltar as a territory of the UK. Article 3 states: ‘The courts of the Member State within the territory of which the centre of the debtor's main interests is situated shall have jurisdiction to open insolvency proceedings (“main insolvency proceedings”)…’ (emphasis added).
The definition of ‘company’ in IA 1986, Sch B1, para 111 has been amended on a number of occasions, but the court noted that the definition had recently been broadened, rather than narrowed, and that it would be odd if the effect was that the court could no longer place a Gibraltar-incorporated company in administration unless its COMI were in the UK. Falk J therefore stated as obiter dicta that the English courts do have jurisdiction in relation to Gibraltar companies, even if the COMI is in Gibraltar rather than the UK (but not elsewhere).
On that basis, it did not matter whether the company’s COMI was in Gibraltar or the UK, but the court nonetheless went on to consider COMI in some detail. The registered office was in Gibraltar, and the regulation contains a rebuttable presumption that COMI is located in the same place. The court found on the evidence that COMI was in the UK. Falk J did not re-analyse the COMI requirements (which are now well known and well summarised by Snowden J in Re Videology Ltd  EWHC 2186 (Ch),  All ER (D) 149 (Aug)) but highlighted that:
Therefore, despite the company having no physical address in England, the court found that the COMI was in England because the sales, accounts, human resources and finance functions were located in England. That was ascertainable by third parties because they met with key personnel in England, and were supplied with a London telephone number. That outweighed the primarily ‘call-centre’ function of the Gibraltar office.
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