In this article, Jose Maurellet SC and Michael Lok consider a recent judgment by Aedit Abdullah J of the Singapore High Court exploring issues arising out of the Model Law, including how and when the presumptive COMI may be displaced and whether a publicly held real estate investment trust falls within the scope of COMI.
Key Background
In Re Tantleff Alan [2022] SGHC 147, the Applicant applied for the insolvency proceedings (the “Proceedings“) and orders for the Chapter 11 plan of liquidation (the “Orders“) in the United States (“US“) to be recognised by the Singapore High Court pursuant to the UNCITRAL Model Law on Cross-Border Insolvency (the “Model Law“), together with a number of additional reliefs.
Where is the COMI?
For two of the entities which fell within the Model Law, a question arose as to whether the Chapter 11 Proceedings should be recognised as foreign main proceedings where the presumptive centre of main interest (“COMI“) is in Singapore.
It was held that the presumptive COMI “may be displaced if the place of the company’s central administration and various factors which are objectively ascertainable by third parties, particularly creditors and potential creditors of the debtor company, point the COMI away from the place of registration to some other location” [37], some of the pertinent factors being that:-
- “What commercial activity there was appeared to be centred in the US” [38];
- The two entities were “not active, operational companies…they are part of [a larger group], which has its main business operations and assets based in the US”;
- “The location of [their] operations and substantial assets are therefore relevant indicators of their COMI being the US” [39];
- The two entities “did not have creditors in Singapore as of the date of their respective voluntary petitions for relief under Chapter 11” [40]; and
- “US law is the governing law of the various agreements between the [relevant] entities and their creditors” [42].
Accordingly, it was concluded that “given that the operations and assets of [the two entities] are in the US, that the larger creditors are located in the US, and that US law governs the various agreements…the presumption under Art 16(3) of the Model Law has been displaced and the COMI for both…is the US” [43].
The learned Judge went on to reject the contention that the “control and supervision of the US Bankruptcy Court, and the activities of the Applicant as the chief restructuring officer and subsequently as Liquidating Trustee, are relevant factors” in determining the COMI [44]. This is because the “jurisprudential basis of the COMI requirement is to determine the centre of gravity of the company’s commercial activity” i.e. when “it was alive and flourishing – in other words, a corporation’s real home. A hospital bed, or a crypt, does not count” [45].
The learned Judge held that equally irrelevant are the “foreign representative’s actions”, declining to follow the contrary US authorities, as such an approach “appears to be a form of bootstrapping and will allow the parties to choose their COMI (so to speak) in an artificial manner…it would be better to assess the COMI by looking at the activities of the company before the foreign restructuring takes place (even though the relevant date for determining the COMI is at the date of application for recognition)” [50].
Other Issues of Note under the Model Law
Whether the final of the trio of entities, a publicly held real estate investment trust in Singapore, fell within the Model Law: The learned Judge was doubtful about this trust coming within the scope of the Model Law as implemented in Singapore. In arriving at this view, the learned Judge did “not think that Rubin [2010] 1 All ER (Comm) 81 should be followed in Singapore” [30]. The learned judge also expressed doubts as to the standing of the applicant and considered that the relevant trustee should be the proper applicant in any fresh application to be brought under the common law.
Whether the Orders (arising out of the Chapter 11 Plan) should be recognised as foreign orders under Art 21(1)(g) of the Model Law, as opposed to “foreign proceeding” under Art 2(h): The learned Judge preferred the US approach and jurisprudence, in opting for Art 21(1)(g), over the UK position (as set out in the Supreme Court’s decision in Rubin v Eurofinance SA [2012] 3 WLR 1019).
Link to the Judgment: https://www.elitigation.sg/gd/s/2022_SGHC_147
Jose Maurellet SC and Michael Lok co-authored this article.
