Second Circuit Determines the Relevant Date for Determining a Chapter 15 Debtor’s “COMI”

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A. INTRODUCTION -

Courts in the Southern District of New York and elsewhere have issued conflicting decisions regarding the appropriate time period to consider in determining a foreign debtor’s “center of its main interests” or “COMI” for the purpose of recognition of a “foreign main proceeding” under Chapter 15 of the Bankruptcy Code. The split in authority that has developed over the past several years can be distilled into a single question: should COMI be measured at the time of the filing of the foreign proceeding for which recognition is being sought under Chapter 15 of the Bankruptcy Code, or, alternatively, at the time of the filing of the Chapter 15 petition? The answer may have a significant impact on the automatic relief a Chapter 15 debtor can obtain upon recognition of the foreign proceeding.

The Second Circuit, in Morning Mist Holdings Ltd., et al. v. Kenneth Krys, et al. (In re Fairfield Sentry Ltd.), resolved the split and concluded that a foreign debtor’s COMI should be determined on the date that the Chapter 15 petition is filed. At the same time, the court left lower courts with some discretion to consider the pre-filing period if there has been an obvious attempt to manipulate a foreign debtor’s COMI or indicia of bad faith.

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