Steve Thatcher
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EC Council Regulation 1346/2000 was enacted to achieve efficiency and effectiveness in cross-border insolvency proceedings in the EU. The Regulation also recited that countries should act to prevent “forum shopping” for the best state in which to undertake insolvency, as it would have been impossible and undesirable to enact comparative EU insolvency practices.
The divergence of Insolvency practice across the EU caused many to look at England and Wales with interest as a jurisdiction which had a debtor friendly bankruptcy regime.
The contrast with the bankruptcy laws in Ireland couldn’t have been more extreme. The rational behind the introduction of the Enterprise Act 2002 was that , entrepreneurs and consumers in debt should be encouraged to participate again in the economics of society as soon as possible by acknowledging quick release from debt. The converse appears to be in place in Ireland with the Bankruptcy Act 1988 acting more as a debt collection service for creditors, than a release from debt.
So, in order that “forum shopping” for bankruptcy between the two very close neighbours does not take place, a series of checks has been put in place by the Official Receiver here to make sure that anybody who presents their bankruptcy petition to a court in England and Wales is entitled to do so by virtue of having established their COMI, or centre of main interest here.
CENTRE OF MAIN INTERESTS AND BANKRUPTCY PETITIONS PRESENTED BY CITIZENS OF OTHER EUROPEAN UNION NATIONS
The official internal guidance from the Insolvency Service is that a debtor may change their COMI at almost any time and for self-serving reasons– for example, to take advantage of a more favourable insolvency regime but, crucially, the re-location must be real, and must be effected prior to the presentation of the petition.
Official Receivers have been guided to note that the majority of EU citizens who seek the protection of the bankruptcy court will have genuinely relocated to the UK. They may have decided to move simply to take advantage of more favourable insolvency legislation but, crucially, so long as the re-location is real then the bankruptcy order would be correctly made in the UK. I
In summary, it is the fact of the relocation, rather than the intention behind, the re-location which is the decisive factor.
JUDICIAL SCRUTINY
Establishing a Centre of Main Interest has attracted judicial scrutiny in the last couple of years in a few cases predominantly involving Austrian and German citizens. These cases decided whether or not a person had truly settled their COMI here. General guidance came out of these cases which help to formulate some guidance which the Insolvency Service will apply
Stephen Baister, a senior UK bankruptcy judge, thinks that it may be easier for the Irish to establish their COMI here than say the Austrians or Germans. "If an O'Neill or a Joyce turns up and gives an address in the UK, you think no more of it.". There is nothing wrong at all with establishing your COMI here. It matters not how and where you built up your debt, your COMI is decided on what you do when you declare bankruptcy. "If you prove you have a genuine tenancy agreement or if you have gainful employment and prove you are settled here, you can fill in the forms and say you can't pay your debts and we will make you bankrupt," he said.
Other good news as set out by the Insolvency service says, "Official receivers should note that the majority of EU citizens who seek the protection of the bankruptcy court will have genuinely relocated to the UK. They may have decided to move simply to take advantage of more favourable insolvency legislation but, crucially, so long as the re-location is real then the bankruptcy order would be correctly made in the UK. In summary, it is the fact of the relocation, rather than the intention behind, the re-location which is the decisive factor."
So in order to be sure of your COMI you need to be able to show that at the date the petition is submitted you are habitually resident here in England. You may keep a property overseas habited by your wife, but you need to be genuinely resident here. It doesn't matter if you choose to be here just because you choose to, but be prepared to show evidence of your life here.
Official Receiver v Eichler [2007]
Facts
In this case, the Chief Registrar was faced with an application by the Official Receiver for directions as to whether or not a bankruptcy order, which was made upon the debtor’s self petition, should have been made in the UK, on the basis that the debtor’s COMI was actually in Germany.
In his self petition the debtor disclosed that his COMI was within England and Wales and that for the greater part of the preceding six months he had been residing in Hertfordshire. However, the evidence disclosed by the Official Receiver illustrated that the debtor was German by birth, and worked as a locum consultant in the area of radiology and nuclear medicine. His Statement of Affairs disclosed no assets. He had three German creditors, to whom he owed £206,700 (two of whom were owed £200,000 under a judgment obtained in Germany), and no UK creditors.
The Official Receiver, in support of his application to have the bankruptcy over turned, advised that the debtor’s debts were incurred entirely in Germany, and that the debtor had moved to England approximately five months before presenting his petition. During this period, he lived in temporary accommodation provided in connection with his employment and his wife continued to live in Germany. The Official Receiver also submitted that as the debtor had owned a property in Germany which had been recently transferred into his wife’s name, proceedings to undo this transaction could more conveniently be pursued in Germany through a German bankruptcy.
The debtor argued that he had genuinely moved to the UK for work purposes, and whilst his wife remained in Germany, he spent more time in the UK in connection with his work than in Germany. He denied that there was any impropriety in connection with the transfer of the property to his wife, and that he had initiated bankruptcy proceedings in this jurisdiction after taking advice from a Solicitor in Germany.
The Court’s Ruling
The Chief Registrar ruled that the debtor was at liberty to change his COMI, and that the country in which the debtor’s debts were incurred was not a relevant consideration in establishing his COMI. The true inquiry was to the debtor’s habitual residence. It was ruled that at the date the proceedings were opened, the debtor’s COMI was in the UK, and even where the debtor’s residence was temporary, that would not necessarily change the position. The Chief Registrar stated that he was not aware of any authority establishing any minimum period of time which a person must spend in a Member State before it could be said to have become his COMI. It was declared that the bankruptcy order was properly made and the declaration as to the applicability of the EC Regulation and the nature of the proceedings was also properly made.
IMPLICATIONS FOR IRISH CITIZENS
According to a senior UK bankruptcy Judge, little thought would be given to anyone Irish declaring bankruptcy here.
It matters not that you move to England just for the purposes of going bankrupt.
It is the fact of moving here and establishing yourself that is key.
There are no rules on how long you need to be here to establish your COMI. ( I would suggest at least three months).
It doesn’t matter that all your debts are in Ireland.
It doesn’t matter of your spouse remains in Ireland.
WHY IT IS IMPORTANT TO ESTABLISH YOUR COMI
If the Official Receiver believes that you are “forum shopping” which is where this article opened, he can ask the court to undo the bankruptcy order.
In order to check your COMI is here:-
A check can be made on the address given to see that it is occupied by the petitioner and not merely an agents address.
Evidence of settlement in the UK can be obtained such as telephone bills hosing UK calls, credit card statement showing UK purchases, shopping receipts and cash point withdrawal slips.
Details of the bankrupts NI number and of his employment contract plus UK tax reference can be sought.
He might ask if the Petitioner has informed his creditors of his move to the UK
He could ask whether the command of the language is commensurate with the employment being undertaken. This helps verify whether the employment is genuine or not.
www.helpwithdebtuk.com
The divergence of Insolvency practice across the EU caused many to look at England and Wales with interest as a jurisdiction which had a debtor friendly bankruptcy regime.
The contrast with the bankruptcy laws in Ireland couldn’t have been more extreme. The rational behind the introduction of the Enterprise Act 2002 was that , entrepreneurs and consumers in debt should be encouraged to participate again in the economics of society as soon as possible by acknowledging quick release from debt. The converse appears to be in place in Ireland with the Bankruptcy Act 1988 acting more as a debt collection service for creditors, than a release from debt.
So, in order that “forum shopping” for bankruptcy between the two very close neighbours does not take place, a series of checks has been put in place by the Official Receiver here to make sure that anybody who presents their bankruptcy petition to a court in England and Wales is entitled to do so by virtue of having established their COMI, or centre of main interest here.
CENTRE OF MAIN INTERESTS AND BANKRUPTCY PETITIONS PRESENTED BY CITIZENS OF OTHER EUROPEAN UNION NATIONS
The official internal guidance from the Insolvency Service is that a debtor may change their COMI at almost any time and for self-serving reasons– for example, to take advantage of a more favourable insolvency regime but, crucially, the re-location must be real, and must be effected prior to the presentation of the petition.
Official Receivers have been guided to note that the majority of EU citizens who seek the protection of the bankruptcy court will have genuinely relocated to the UK. They may have decided to move simply to take advantage of more favourable insolvency legislation but, crucially, so long as the re-location is real then the bankruptcy order would be correctly made in the UK. I
In summary, it is the fact of the relocation, rather than the intention behind, the re-location which is the decisive factor.
JUDICIAL SCRUTINY
Establishing a Centre of Main Interest has attracted judicial scrutiny in the last couple of years in a few cases predominantly involving Austrian and German citizens. These cases decided whether or not a person had truly settled their COMI here. General guidance came out of these cases which help to formulate some guidance which the Insolvency Service will apply
Stephen Baister, a senior UK bankruptcy judge, thinks that it may be easier for the Irish to establish their COMI here than say the Austrians or Germans. "If an O'Neill or a Joyce turns up and gives an address in the UK, you think no more of it.". There is nothing wrong at all with establishing your COMI here. It matters not how and where you built up your debt, your COMI is decided on what you do when you declare bankruptcy. "If you prove you have a genuine tenancy agreement or if you have gainful employment and prove you are settled here, you can fill in the forms and say you can't pay your debts and we will make you bankrupt," he said.
Other good news as set out by the Insolvency service says, "Official receivers should note that the majority of EU citizens who seek the protection of the bankruptcy court will have genuinely relocated to the UK. They may have decided to move simply to take advantage of more favourable insolvency legislation but, crucially, so long as the re-location is real then the bankruptcy order would be correctly made in the UK. In summary, it is the fact of the relocation, rather than the intention behind, the re-location which is the decisive factor."
So in order to be sure of your COMI you need to be able to show that at the date the petition is submitted you are habitually resident here in England. You may keep a property overseas habited by your wife, but you need to be genuinely resident here. It doesn't matter if you choose to be here just because you choose to, but be prepared to show evidence of your life here.
Official Receiver v Eichler [2007]
Facts
In this case, the Chief Registrar was faced with an application by the Official Receiver for directions as to whether or not a bankruptcy order, which was made upon the debtor’s self petition, should have been made in the UK, on the basis that the debtor’s COMI was actually in Germany.
In his self petition the debtor disclosed that his COMI was within England and Wales and that for the greater part of the preceding six months he had been residing in Hertfordshire. However, the evidence disclosed by the Official Receiver illustrated that the debtor was German by birth, and worked as a locum consultant in the area of radiology and nuclear medicine. His Statement of Affairs disclosed no assets. He had three German creditors, to whom he owed £206,700 (two of whom were owed £200,000 under a judgment obtained in Germany), and no UK creditors.
The Official Receiver, in support of his application to have the bankruptcy over turned, advised that the debtor’s debts were incurred entirely in Germany, and that the debtor had moved to England approximately five months before presenting his petition. During this period, he lived in temporary accommodation provided in connection with his employment and his wife continued to live in Germany. The Official Receiver also submitted that as the debtor had owned a property in Germany which had been recently transferred into his wife’s name, proceedings to undo this transaction could more conveniently be pursued in Germany through a German bankruptcy.
The debtor argued that he had genuinely moved to the UK for work purposes, and whilst his wife remained in Germany, he spent more time in the UK in connection with his work than in Germany. He denied that there was any impropriety in connection with the transfer of the property to his wife, and that he had initiated bankruptcy proceedings in this jurisdiction after taking advice from a Solicitor in Germany.
The Court’s Ruling
The Chief Registrar ruled that the debtor was at liberty to change his COMI, and that the country in which the debtor’s debts were incurred was not a relevant consideration in establishing his COMI. The true inquiry was to the debtor’s habitual residence. It was ruled that at the date the proceedings were opened, the debtor’s COMI was in the UK, and even where the debtor’s residence was temporary, that would not necessarily change the position. The Chief Registrar stated that he was not aware of any authority establishing any minimum period of time which a person must spend in a Member State before it could be said to have become his COMI. It was declared that the bankruptcy order was properly made and the declaration as to the applicability of the EC Regulation and the nature of the proceedings was also properly made.
IMPLICATIONS FOR IRISH CITIZENS
According to a senior UK bankruptcy Judge, little thought would be given to anyone Irish declaring bankruptcy here.
It matters not that you move to England just for the purposes of going bankrupt.
It is the fact of moving here and establishing yourself that is key.
There are no rules on how long you need to be here to establish your COMI. ( I would suggest at least three months).
It doesn’t matter that all your debts are in Ireland.
It doesn’t matter of your spouse remains in Ireland.
WHY IT IS IMPORTANT TO ESTABLISH YOUR COMI
If the Official Receiver believes that you are “forum shopping” which is where this article opened, he can ask the court to undo the bankruptcy order.
In order to check your COMI is here:-
A check can be made on the address given to see that it is occupied by the petitioner and not merely an agents address.
Evidence of settlement in the UK can be obtained such as telephone bills hosing UK calls, credit card statement showing UK purchases, shopping receipts and cash point withdrawal slips.
Details of the bankrupts NI number and of his employment contract plus UK tax reference can be sought.
He might ask if the Petitioner has informed his creditors of his move to the UK
He could ask whether the command of the language is commensurate with the employment being undertaken. This helps verify whether the employment is genuine or not.
www.helpwithdebtuk.com