Document Type
Research Memorandum
Publication Date
2018
Abstract
(Excerpt)
In general, Chapter 15 of title 11 of the United States Code (the “Bankruptcy Code”) provides a mechanism to recognize a “foreign proceeding.” Upon recognition of a foreign proceeding, the foreign representative will be allowed to sue and be sued in the United States. However, Chapter 15 distinguishes between “foreign main proceedings” and “foreign nonmain proceedings.” Upon recognition of a “foreign main proceeding” section 1520 of the Bankruptcy Code provides for certain automatic relief, including an automatic stay of proceedings against the debtor in the United States. There is no automatic relief conferred upon recognition of a foreign nonmain proceeding. Nevertheless, a court may grant substantially the same relief in connection with a foreign nonmain proceeding. However, recognition is not a “rubber stamp exercise” and the foreign representative bears the burden of proving the debtor meets the requirements for recognition under section 1517.
Under section 1517 of the Bankruptcy Code, a bankruptcy court must recognize a foreign proceeding if certain requirements are met. Section 1517(a) states that subject to the section 1506 public policy exception, a foreign proceeding shall be recognized if it meets three requirements: (1) the proceeding is a foreign main or nonmain proceeding within the meaning of section 1502, (2) the foreign representative applying for recognition is a person or body, and (3) the petition meets the requirements of section 1515. Section 1502(5) defines foreign nonmain proceeding as “a foreign proceeding, other than a foreign main proceeding, pending in a country where the debtor has an establishment.” Foreign main proceeding is defined as “a foreign proceeding pending in the country where the debtor has the center of its main interests.” Therefore, in order to gain recognition as a foreign main proceeding, a debtor must prove that its center of main interests (“COMI”) is the same place in which the proceeding is pending.
Thus, COMI is the essential element in determining whether a foreign proceeding is a foreign main proceeding. This memorandum discusses the way courts analyze a debtor’s COMI shift within recognition proceedings. Part I examines the factors a court will consider in determining a debtor’s COMI. Part II discusses recent cases in which the debtor shifted its COMI from its historical location to a new location on the eve of the Chapter 15 filing.