The recent case of Thomas & another v Frogmore Real Estate Partners & others  EWHC 25 (Ch) provides useful guidance for anyone analyzing the centre of main interests (“COMI”) of a company not registered in the UK or other EEA state for the purposes of assessing whether or not insolvency proceedings relating to the company can be instigated in the UK courts under the EC Regulation.
This case involved 3 companies: FREP (Knowle) Limited, FREP (Ellesmere Port) Limited and FREP (Belle Vale) Limited. They were all incorporated in and had their registered offices in Jersey. Jersey is not an EEA state. The Companies form part of Frogmore group (of which the ultimate parent is Frogmore Property Company Limited). The Frogmore group specialises in real estate investment and management in the United Kingdom and each of the Companies owns a shopping centre located at Ellesmere Port in Cheshire, Belle Vale in Liverpool and Knowle in Bristol respectively. Each of these shopping centres is managed by Frogmore Real Estate Investment Managers Limited, a company formed in England and Wales with its registered office and base for operations at 11-15 Wigmore Street, London.
Following default under the finance documents, the lenders appointed administrators by filing notices of appointment at the Court in England. The administrators applied to Court for a declaration on the COMI of the three companies and in doing so, confirmation of the validity of their appointment. The shareholder and directors made a cross-application claiming that the COMI of the companies was in Jersey and therefore that the appointment of the administrators in the UK was invalid.
Article 3(1) of the EC Regulation provides: “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”.
Given that none of the companies were incorporated in England and Wales or Scotland, and were not incorporated in another EEA state, the only route by which insolvency proceedings could be commenced in England would be if the companies’ COMIs were in the UK. However, paragraph 111(1B) of Schedule B1 Insolvency Act 1986 and Article 3 of the EC Regulation together create a rebuttable presumption that the location of the registered office of a company would be its COMI.
As such, prima facie, the companies COMI would ordinarily be considered to be in Jersey, where their registered offices were.
However, as was explained in Interdil Srl v Fallimento Interedil Srl (2012):
“The presumption in the second sentence of article 3(1) of the Regulation may be rebutted, however, where, from the viewpoint of third parties, the place in which a company’s central administration is located is not the same as that of its registered office.” This assessment was established in Eurofood where the European Court of Justice explained that the COMI must be identified by reference to criteria that are both objective and ascertainable by third parties.
In this instance, the Court reached the conclusion that the COMI of all three companies was based in England from the following facts:
- The day-to-day conduct of the business and activities of the companies had been in the hands of an agent appointed in England. The agent advisory agreement was governed by English law and had an exclusive English jurisdiction clause. The agent also discharged duties normally associated with a head office from their offices in London.
- Day to day dealings were conducted from the agent’s offices in London. The companies VAT returns stated that these same offices was the business address for the companies. The same address was also given as the address for invoices to be sent to for expenditure on behalf of the companies, e.g. insurance premium invoices were sent to the London address.
- The largest creditor, Nationwide, had a Facility Agreement and Debenture which were both governed by English law and their views as to COMI were important to the assessment. The Debenture also gives an exact reference to a power to appoint administrators under the Insolvency Act 1986. The relationship between the creditor and the companies was conducted via London and from the creditor’s point of view the companies were operating out of London.
- The fact that Board meetings were held in Jersey was irrelevant following the Northsea Base Investments Ltd case (see our earlier post The COMIngs and goings of COMI). A third party would not know where Board meetings are taking place and in this case, they would not have regarded the directors at the board meeting as of particular significance given that third parties dealt primarily with the agent.
- The main assets of the companies were large properties, all of which were based in England. Each property was a commercial shopping centre which transacted in England.
- The only non-agency director was resident in England.
As such, whilst COMI assessments should always start from the presumption that COMI is in the country of the company’s registered address, this will be rebutted where the factual position as can be ascertained by a third party dealing with the company would suggest that the COMI is in a country other than where the registered office is based.