One concept—“center of main interests,” or COMI for short, one of the more significant elements borrowed from international law and incorporated into Chapter 15 of the Bankruptcy Code—sits at the heart of the latter, enacted in 2005 as the latest U.S. legislative attempt to handle cross-border insolvencies and international restructurings.

In spite of this notion’s importance, however, bankruptcy and appellate federal courts have long divided over a thresholder issue: as of which date should a foreign debtor’s COMI be determined?

On 22 February 2023, the English High Court sanctioned restructuring plans under Part 26A of the Companies Act 2006 (“CA 2006”) of seven English companies within the Lifeways Group – the largest provider of supported living services for adults with complex health needs, including brain injuries, physical and learning disabilities and autism, in the UK (the “Group”). Willkie’s London Business Reorganization and Restructuring team advised the Group.

Summary

Can a corporate debtor be denied a Subchapter V discharge under § 523(a), despite this § 523(a) language (emphasis added):

• “A discharge under section . . . 1192 [Subchapter V] . . . does not discharge an individual debtor from . . . ”?

A recent Bankruptcy Court opinion (in Avion Funding) says, essentially, this: “No! You can’t paint over explicit statutory language.”[Fn. 1]

Such recent opinion:

Bryant v Badenoch Integrated Logging Pty Ltd [2023] HCA 2

The High Court has unanimously dismissed an appeal against the Full Court decision in Badenoch Integrated Logging Pty Ltd v Bryant, in the matter of Gunns Limited (in liq) (receivers and managers appointed) [2021] FCAFC 64, finding that the “peak indebtedness rule” does not form part of s 588FA(3) of the Corporations Act and providing guidance as to how to approach the analysis required under that section.

Background

1. INTRODUCTION

Material Chapter 11 cases have morphed to the point that the outcome is often predetermined at the “first day” hearing. Unsecured creditors with material credit exposure should engage early to protect their interests and reduce risk of loss.

Strelia assisted a franchisor in an action brought against a personal surety – a company director – who attempted to escape his obligations by filing for his personal bankruptcy. However, according to the Court of Cassation, a company director cannot automatically be considered as an enterprise and therefore is not capable of filing for bankruptcy.

In the much-anticipated decision of Bryant v Badenoch Integrated Logging Pty Ltd [2023] HCA 2 (Badenoch (HCA)), the High Court of Australia (the HCA) has now confirmed that the peak indebtedness rule may not be used when assessing the quantum of an unfair preference claim arising from a continuing business relationship.

Strelia stond een franchisegever bij in een procedure tegen een persoonlijke borgsteller – een bedrijfsleider – die zich aan zijn verplichtingen als borg wilde onttrekken door zichzelf failliet te laten verklaren. Echter, volgens het Hof van Cassatie kan een bedrijfsleider niet automatisch als onderneming gekwalificeerd worden en dus niet zomaar zijn faillissement aanvragen.