Thursday, June 23, 2022

BVI Insolvency Proceeding Recognized as Foreign Main Proceedings

The Bankruptcy Court in the case of In re Grand Prix Associates, Inc., et al., 2009 WL 1410519 (Bankr. D.N.J. 2009) recognized the British Virgin Islands insolvency proceedings as "foreign main proceedings" under chapter 15. The foreign insolvency proceedings were pending in the Eastern Caribbean Supreme Court, High Court of Justice, BVI. The principal debtors invested in private equity limited partnership and partially funded the investments in exchange for a registered floating charge under BVI law against the assets of the principal debtors.

The Court looked to the following factors listed in In re Sphinx, Ltd., 351 B.R. 103, 117 (Bankr. S.D.N.Y. 2006) in making it recognition determination: the location of the debtor's headquarters, the location of those who actually manage the debtor (which may be the headquarters of a holding company), the location of the debtor's primary assets, the location of the majority of the debtor's creditors or of a majority of the creditors who would be affected, and the jurisdiction whose law would apply to most disputes.

Based on the application of these factors, the Court found that BVI is where the foreign debtors have their CoMI. The Court found that the foreign debtors have there only place of business in the BVI, the books and records are located in the BVI, the foreign debtors were organized in the BVI, etc. In addition the Court found that previously objecting parties were in support of recognition as a foreign main proceeding.

The Court noted that the Guide to Enactment of the UNICITRAL Model Law on Cross-Border Insolvency, upon which chapter 15 was based, allows the courts to expedite the evidentiary process but neither prevent the court nor an interested party from questioning the presumption that the foreign debtor's registered office is presumed to be the CoMI. The Court suggested that the court's decision in In re Bear Stearns High-Grade Structured Credit Strategies Master Fund, Ltd., 374 B.R. 122 (Bankr. S.D.N.Y.2007) was a departure from In re Sphinx where the court enumerated useful factors in making the CoMI determination but also found that the court should defer to the creditors' acquiescence in or support of a proposed CoMI. The Bear Stearns court stated that the chapter 15 petition process should not become a "rubber stamp exercise" even when no objection is filed.