In this bulletin we focus on the issue of centres of main interest (COMI), which is relevant post-Brexit under the Retained Recast Regulation. Amy Gallimore considers the decision in Melars Group Ltd v East-West Logistics LLP, which provides a helpful summary of the key principles on assessing COMI; Olivia Reader and Alan Bennett focus on the case of Moskalev and Yanishevskiy concerning service of statutory demand in connection with COMI and costs issues following withdrawal of the demand; and Olivia Reader also provides an update on interesting developments in the cross border space.
In the recent case of Melers Group Ltd v East-West Logistics LLP [2021] EWHC 1523 (Ch) the High Court considered an appeal from a winding-up order made by Deputy ICC Judge Baister, who had concluded that the centre of main interest (COMI) of Melers Group Ltd (the Company) was in England and Wales rather than in Malta where its registered office was located.
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In the case of Moskalev v Yanishevskiy [2021] EWHC 1575 (Ch), ICC Judge Barber considered what order for costs should be made in respect of an application to set aside a statutory demand following the Respondent's subsequent withdrawal of the demand, where both COMI and the judgment which the demand concerned were disputed.
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Indian Businessman Vijay Mallya the former head of India’s United Breweries and United Spirits and the founder and former owner of now defunct Kingfisher Airlines, was made bankrupt in July 2021, by Chief ICC Judge Briggs in relation to a judgment debt which stands at over GBP 1 billion on the petition of 13 Indian banks – after a long-running dispute. The banks can now pursue a worldwide freezing order to seek repayment of debt owed by Kingfisher Airlines.
The bankruptcy petition debt comprises principal and interest, plus compound interest at a rate of 11.5% per annum from 25 June 2013. Mallya has made applications in India to contest the compound interest charge. Mallya had previously lost his battle against extradition from the UK in May 2020 to face charges of fraud and money laundering in India.
The bankruptcy has implications for all Mallya’s creditors, including United Spirits and its parent company Diageo. They are suing Mallya for GBP 250 million for breach of agreements and diversion of funds with Diageo already awarded GBP 130 million.
Having been severely impacted by Covid-19 travel restrictions and a decline in tourism, Philippines Airlines has filed for Chapter 11 bankruptcy in the United States, with the majority of its creditors being based outside of the Philippines. At the same time, the airline has filed a restructuring plan which seeks to reduce over USD 2bn of debt and includes USD 505 million debtor in possession in long-term debt equity and debt financing from the airline's majority shareholder, PAL Holdings Inc, and $150 million of additional debt financing from new investors. The restructuring plan is subject to court approval.
The restructuring plan would allow the airline to return 22 aircraft to lessors, effectively reducing their fleet size by 25% from 92 to 70 aircraft. The airline will also ask Airbus to delay the arrival of 13 new narrow-body jets to between 2026 and 2030 in order to reduce costs.
The airline is applying for recognition of the US insolvency proceedings in the Philippines under the Financial Insolvency and Rehabilitation (FRIA) Act of 2010. Philippines Airlines expects to emerge from the Chapter 11 bankruptcy process before the end of 2021. The airline’s statement on the restructuring plan can be found here.
Following the administration of Victoria’s Secret in the UK in June 2020 as a result of the Covid-19 lockdown, the company has now moved into liquidation to enable a dividend to be paid to creditors. The brand’s online business is not owned by Victoria’s Secret UK and therefore will continue as usual. Fashion retailer Next formed a joint venture with Victoria’s Secret’s US parent company L Brands to acquire the majority of the assets of Victoria’s Secret’s UK business and save over 500 jobs at the time. Subject to reaching agreement with landlords, Next now operates all of Victoria’s Secret’s stores in the UK and Ireland.
For more information, please contact Olivia Reader in our Restructuring & Insolvency team.
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