COMI Maybe

For an individual debtor, this multi-national complexity often arises where the debtor is expatriate, and peripatetic at that, and is further complicated physical separation of a fractured family. In In re Kemsley, Case No. 12-13570, 2013 WL 1164930 (Bankr. SDNY March 22, 2013), the United States Bankruptcy Court for the Southern District of New York recently declined to recognize an individual debtor's foreign proceeding pending in the United Kingdom (the UK Proceeding). The question for the court was whether the UK Proceeding qualified for recognition as either a foreign main proceeding or a foreign nonmain proceeding where the debtor had been resident in the United States since 2009. Significantly, however, in its analysis, the court discussed the range of factors that a court may consider when evaluating an individual debtor's COMI, which, in the court's view, may include where other members of the debtor's family reside.

When a foreign representative of a foreign insolvency proceeding seeks recognition of that proceeding under Chapter 15 of the Bankruptcy Code, the bankruptcy court may only enter an order recognizing the foreign proceeding if “such foreign proceeding ' is a foreign main proceeding or foreign non-main proceeding within the meaning of section 1502.” See 11 U.S.C. ' 1517(a). A foreign main proceeding is a “foreign proceeding pending in the country where the debtor has the center of its main interests,” 11 U.S.C. ' 1502(4), whereas a foreign nonmain proceeding is a “foreign proceeding, other than a foreign main proceeding, pending in a country where the debtor has an establishment,” 11 U.S.C. ' 1502(5). Upon recognition as a foreign main proceeding, the Bankruptcy Code's automatic stay immediately applies to prohibit actions against the debtor and the debtor's assets located in the territorial United States. 11 U.S.C. ' 1520(a)(1). A bankruptcy court may impose the automatic stay in a foreign nonmain proceeding, but such action by the court is not mandatory. 11 U.S.C. ' 1521(a)(1). However, the effect of a court declining to recognize a foreign proceeding as either a foreign main proceeding or a foreign nonmain proceeding is dramatic. In that circumstance, where a foreign proceeding does not qualify as either a foreign main proceeding or a foreign nonmain proceeding, the foreign representative is effectively precluded from relief in United States bankruptcy courts.