It is often critical in insolvency proceedings to locate a company's centre of main interests (COMI). As a High Court case strikingly showed, that can pose a major challenge in an online age where many businesses operate in the ether and shift from one registered office to another as convenience dictates.
A logistics company – the creditor – had contracted with an oil trading company – the debtor – to ship a cargo to Turkmenistan. The creditor claimed that the debtor had defaulted on its obligations and began an arbitration in London. It subsequently obtained a judgment for about $657,000 against the debtor in the British Virgin Islands, where the debtor was then registered.
With a view to enforcing payment of that debt, the creditor presented a winding up petition against the debtor in London. The debtor, which by then had moved its registered office to Malta, did not dispute the debt but argued that the English courts had no jurisdiction to present the petition because its COMI was not in the UK but in Malta.
Ruling on the matter, the Court noted that the case was really about forum shopping: the creditor was seeking a winding up order in England because it was easier, quicker and cheaper to do so here than it would be in Malta. The debtor had plainly moved its registered office to Malta because it wished to put off being wound up, even though it could not pay the undisputed judgment debt.
The Court noted that it is usually a straightforward matter to identify the COMI of traditional large companies with numerous employees, offices and factories. The debtor, however, had none of those characteristics and conducted its business virtually rather than physically. Its trading was in no way constrained by national boundaries and it was, so to speak, a citizen of nowhere.
The location of the debtor's banking facilities and legal advisers, however, indicated a greater link to the UK than any other country. Contracts that it entered into tended to be governed by English law and to contain London arbitration clauses. On the other hand, the Court acknowledged the legal presumption that a company's COMI is located in the same place as its registered office unless proved otherwise.
However, the Court was satisfied by a narrow margin, and with some misgivings, that that presumption had been overcome on the evidence and that the debtor's COMI was in the UK. After accepting jurisdiction, the Court made a compulsory winding up order against the debtor.
It is now, more than ever, important to be able to quickly and efficiently recover monies due to you or your business, for help and guidance in the recovery of debts please contact Leanne Schneider-Rose on 0808 166 8827 l.schneider-rose@sydneymitchell.co.uk
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