Vol 2 (2005) - Issue 1

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Malcolm Brian Shierson (trustee in bankruptcy of Martin Vlieland-Boddy) v Clive Vlieland-Boddy - EC Regulation on Insolvency Proceedings - Shifting the COMI after Debts are Incurred - Bankruptcy Proceedings

Introduction

Since Council Regulation (EC) No 1346/2000 on Insolvency Proceedings (‘the Regulation’) came into force in the UK on 31 May 2002, the meaning of ‘centre of main interests’ (‘COMI’) has been frequently considered by the courts, as there is no definition of the term within the Regulation itself. The situation of the COMI is crucial in determining which EC country has jurisdiction to open main insolvency proceedings in cross-border disputes. In Malcom Brian Shierson (trustee in bankruptcy of Martin Vlieland-Boddy) v Clive Vlieland-Boddy (‘Vlieland-Boddy’), the issue of change of COMI in bankruptcy proceedings arose on appeal from the decision of the Registrar, who had accepted jurisdiction under the Regulation and had made a bankruptcy order against Mr Vlieland-Boddy (‘the Debtor’).
On appeal, Mr Justice Mann considered whether or not the COMI (or alternatively an establishment) of the Debtor could, or indeed should (as a matter of policy), remain situated in England or Wales or was now situated in Spain. There was significant evidence to suggest that the Debtor had intentionally severed almost all ties with England and Wales and had moved his home, business and life to Spain. The evidence concerned the period of time after the Debtor had incurred the bankruptcy petition debt, but before the petition was heard or any bankruptcy order had been made. The Debtor argued that not only is it possible for a debtor to move his or her COMI, but that he had actually achieved such a move.

The Regulation

There is no definition of COMI in the Regulation. References to the COMI are made primarily in Article 3:

3.1 the courts of the Member State within the territory of which the centre of a debtor’s main interests is situated shall have jurisdiction to open insolvency proceedings. In the case of a company or legal person, the place of the registered office shall be presumed to be the centre of its main interests in the absence of proof to the contrary.

3.2 where the centre of a debtor’s main interests is situated within the territory of a Member State, the courts of another Member State shall have jurisdiction to open insolvency proceedings against that debtor only if he possesses an establishment within the territory of that other Member State. The effects of those proceedings shall be restricted to the assets of the debtor situated in the territory of the latter Member State.

There is further reference to the COMI and the need to avoid forum shopping in the Recitals to the Regulation, see especially Recitals 4, 12 and 13.
An establishment is defined in Article 2(h) of the Regulation: ‘establishment shall mean any place of operations where the debtor carries out a non transitory economic activity with human means and goods’.

Relevant time

The Registrar had held that the relevant time for determining the COMI of a debtor was the date on which the debt had been incurred and that, consequent upon that finding, the COMI of the Debtor was in England and Wales at the date the petition debt had been incurred. Mr Justice Mann reversed this finding. He held that the relevant time for assessing the COMI of the debtor in accordance with the Regulation is the time of the opening of proceedings, which is the date on which the relevant order is made.