Document Type
Research Memorandum
Publication Date
2020
Abstract
(Excerpt)
Under Chapter 15 of title 11 of the United States Code (the “Bankruptcy Code”), a bankruptcy court may grant recognition to a “foreign main proceeding.” A foreign main proceeding is “a foreign proceeding pending in the country where the debtor has the center of its main interests." The Bankruptcy Code offers little in the way of a definition of a foreign main proceeding, only that “the debtor’s registered office . . . is presumed to be the center of the debtor’s main interests.” Thus, chapter 15 provides a rebuttable presumption that a foreign debtor’s center of main interest is the location of that debtor’s registered office. “The party seeking recognition as a foreign main proceeding must prove by a preponderance of the evidence that the debtor's COMI is in the jurisdiction where the foreign main proceeding is pending [internal citation omitted], although, as noted, chapter 15 creates a rebuttable presumption that the debtor's registered office is its COMI.”
Following the commencement of a foreign bankruptcy proceeding, a foreign debtor may cease all activity in the jurisdiction of its registered office, and then locus of the debtor’s activity post the initiation of the foreign proceeding may be in a different nation. Under the current standard, it is possible that a debtor’s center of main interest can be found to be outside of the nation where the debtor was ascertainable by creditors due to litigation or other activity that occurred after the commencement of the foreign proceeding. Therefore, the application of the Fairfield Sentry approach to center of main interest temporality requires close examination of the debtor’s actions to ensure that the debtor did not manipulate their center of main interests in bad faith.
Chapter 15 does not provide the exact time that a foreign debtor’s center of main interest should be determined for the purpose of recognizing a foreign main proceeding. The majority approach to determining a foreign debtor’s center of main interest is outlined in In re Fairfield Sentry, 714 F.3d 127. In Fairfield Sentry, the United States Court of Appeals for the Second Circuit found that the appropriate time to determine a foreign debtor’s center of main interest was at the time of the filing of the chapter 15 petition. The minority approach provides that the appropriate time to determine a foreign debtor’s center of main interest is as of the date of commencement of the debtor’s foreign bankruptcy proceeding commenced.