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18-08-2020

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The presumption that a company’s centre of main interests is the location in a member state of its registered office for the purpose of the Recast EU Insolvency Regulation may be displaced  (a) if it is shown, on a comprehensive assessment of all the relevant factors, that the company administers its interests in another member state such that that is ascertainable by third parties; or (b) if it has moved its registered office in the period of three months prior to the opening of proceedings. In most cases where the presumption is rebutted it is because the company has its head office in or administers its affairs from an office located in a member state other than the one in which its registered office is located; but problems arise when a company carries on its business without using an office, “in the ether,” as it was put in Re Melars Group Ltd [2020] EWHC 2090 (Ch).

Melars Group Ltd was incorporated in the British Virgin Islands. It traded, in oil and petroleum, apparently conducting its business primarily by email. It entered into a charterparty in 2011 to ship cargo from the Caspian to Turkmenistan. There was a breach which resulted in a judgment being taken against it in 2016 in the BVI court for  $657,000. In December 2015, however, the company had moved its registered office to Malta, about two months after service of the claim form.

In July 2016 the judgment creditor presented a winding up petition against the company. The petition was stayed in 2017 to enable the company to apply to set aside the BVI judgment, but the company failed to take the necessary steps; so the petition was restored for hearing. The company resisted the making of a winding up order on the basis that the English court had no jurisdiction to wind it up as its registered office was in Malta which was therefore presumed to be its centre of main interests.

Counsel for the petitioner submitted that the company’s move of its centre of main interest to Malta was illusory and that in fact its COMI was in the UK: the registered office was a letter box; nothing else happened there. He relied on a number of matters as indicating that the UK was the place where it carried out the administration of its interests on the most regular basis. The registered office presumption was therefore rebutted. Counsel for the company argued (a) that the registered office presumption applied; but also (b) that in the case of a small company that had no office but carried on its business electronically from nowhere in particular that could be established with any level of certainty (it traded “in the ether”) the registered office presumption operated by default.

In a reserved judgment the deputy ICC judge noted that both the petitioner and the company had engaged in forum shopping: the petitioner wanted the UK because it was difficult and costly to get a winding up order in Malta; the company appeared to contend for Malta for that very reason. He rejected the submission that the registered office presumption operated as a default finding where it was difficult to establish the true location of the company’s centre of main interests at the relevant time. With the provisions set out in the recitals to the recast Regulation and the need to conduct “a comprehensive review of all the facts” enunciated by Birss J in Re Northsea Base Investment Ltd in mind, he held that the court was under an obligation to examine the location of a company’s COMI (see recital 27).

After reviewing a number of the major authorities on corporate COMIs, the deputy judge observed that they were of limited help in a case where the company appeared to have no physical presence to assist the court’s inquiry. He was critical of the evidence on both sides and raised (without answering) the question whether the court, in such circumstances, “‘should [have] require[d] the debtor to submit additional evidence to support its assertions’ as to its centre of main interests being in Malta” (cf. recital 32 to the Regulation).

In the light of the evidential shortcomings, the deputy judge conducted his inquiry largely by reference to the documentary evidence (mostly contracts entered into by the company) and a limited number of unchallenged facts, notably as to the location of bank accounts and the conduct of litigation in the UK (as to the significance of which see Irish Bank Resolution Corporation Limited v Quinn). After reviewing the evidence, he concluded:

“…on the basis of the documentary material, the location of the company’s banking facilities from time to time, the location of its legal advisers, the location of at least one judgment creditor to which a debt was to be paid and the place where the company was involved in litigation that at the relevant time the company was administering its interests in both the UK and Switzerland so that both were centres of the company’s interests. I conclude, by a narrow margin and with misgivings, that on balance the greater use of English law for contracts, the greater use of London as a seat of arbitration, the actual recourse to or forced involvement in legal proceedings here and the consequential use of English lawyers makes the UK, on the balance of probabilities, the main centre of those interests. The company’s affairs seem to have been conducted in this country  more than in Switzerland, certainly as far as contractual and litigation interests were concerned, although it is, I accept, hard to be precise”.

The deputy judge acknowledged that there were problems of chronology:

“[…] As we have seen, the focus of attention must be on the position at or around the date of presentation of the petition, and some events (such as the setting up of the [UK banking] facility) postdate that period by some years. I believe, however, in the light of Chadwick LJ’s dictum in Shierson v Vlieland-Boddy, that the past must to some extent be viewed through the prism of subsequent events since those can, as I think they do in this case, throw light on what the position at the relevant time was most likely to have been. Thus, although the [UK banking] facility was only set up in 2018, some time after presentation of the petition, one must ask why the company chose to set it up in the UK and not in Malta where the registered office had been located for about two years. An obvious answer would be that it chose England because that was the place where it regarded itself as administering its interests as it had been for some time”.

He went on to wind up the company but gave permission to appeal.

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