On August 20, 2018, the National Bankruptcy Conference (the “NBC”), a group of bankruptcy judges, professors, and professionals that has consulted with Congress on the drafting of the U.S. Bankruptcy Code, sent a letter to Congress proposing a series of amendments to Chapter 15, which governs the process for obtaining recognition of a foreign insolvency or restructuring proceeding in the U.S. Most of the NBC’s proposed amendments are not controversial and are only intended to clarify certain ambiguities in Chapter 15. However, there is one proposed amendment that could have a significant and detrimental impact on financially distressed offshore companies. That is the NBC’s proposal to amend Chapter 15 to provide that a debtor’s center of main interests (“COMI”) should be determined as of the date of the commencement of the underlying foreign proceeding and not as of the date of the filing of the Chapter 15 petition, as the Second Circuit Court of Appeals in In re Fairfield Sentry Ltd. 714 F.3d 127 (2d Cir. 2013) and most other U.S. courts have held. This change would preclude many debtors, particularly debtors incorporated but not doing business in offshore jurisdictions, from obtaining recognition under Chapter 15.
In order to avoid this undesirable result and to advance the objective of assisting foreign debtors in order to maximize value for creditors, Norton Rose Fulbright US LLP, with the support of over a dozen signatories, including some of the leading cross-border insolvency practitioners and insolvency associations, sent a letter to Congress (the “NRF Letter”) advocating (1) against the adoption of the NBC’s proposed change to the timing of determining COMI, and (2) for an amendment of Chapter 15 to provide that COMI would be determined as of the filing of a Chapter 15 petition.
See a copy of the NRF Letter.