Q&As

Are COMI undertakings and representations still relevant if all borrowers and guarantors under a facility agreement are English companies?

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Published on LexisPSL on 30/08/2018

The following Banking & Finance Q&A provides comprehensive and up to date legal information covering:

  • Are COMI undertakings and representations still relevant if all borrowers and guarantors under a facility agreement are English companies?
  • Summary
  • Why is an obligor’s COMI important to a lender?
  • What is normally included about COMI in a facility agreement?
  • Why a lender should normally insist the COMI representations and undertakings remain
  • What could a lender do if the COMI moves in breach of a provision in a facility agreement?
  • Cases where the representations and undertaking might not be needed

Summary

A lender would be prudent to insist that representations and undertakings relating to obligors’ centre of main interest (COMI) remain in a finance document even where those obligors’ registered offices are all situate in England and Wales. The presumption that the COMI of a company is the state in which its registered office is located can be rebutted by evidence that its creditors perceive the business to be administered from another location. Additionally, it is possible for a COMI to be relocated through either design or inadvertence during the lifetime of a loan and these provisions offer valuable protection for a lender that finds itself in such a situation.

Why is an obligor’s COMI important to a lender?

Under the Recast Regulation on Insolvency, Regulation (EU) 848/2015 (Recast Regulation on Insolvency) jurisdiction to open main insolvency proceedings is granted to the courts of the Member State where the debtor has its COMI. The place of the registered office is presumed to be the COMI in the absence of proof to the contrary. That presumption will only apply if the registered office has not been moved to another Member State within the three-month period prior to the request to open the relevant main insolvency proceedings.

The presumption mentioned above can be rebutted by evidence showing that the administration of the relevant company’s affairs took place in a different

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