PART 1

February 2010

DEALING WITH THE AFFAIRS OF A FOREIGN NATIONAL BANKRUPT - GENERAL

43.0.2 When might the official receiver find him/herself dealing with the affairs of a foreign national?

The Act [note 1] allows the court to make a bankruptcy order against any individual who:

• Is domiciled in England and Wales,
• is personally present in England and Wales on the day on which the petition is presented, or
• at any time in the period of three years ending with the day on which the petition is presented:
  • has been ordinarily resident, or has had a place of residence, in England and Wales [note 1a], or
  • has carried on business in England and Wales.

As a consequence the courts have wide ranging power to make a bankruptcy order against an individual where there may only be the slightest connection with England and Wales.  The court has discretion not to make an order (by dismissing or staying the petition [note 2]) and may choose to exercise this discretion where, for example, it was shown that the debtor had/has no real connection with the UK. 

The power to make or not make an order, however, is limited by EC law (see paragraph 43.0.3).

43.0.3 Exception to general power of court to make a bankruptcy order where there is a connection with the UK

The powers outlined in paragraph 43.0.2 give the court wide power to make (or not make) an order against a foreign national who has a connection with England and Wales (even if that connection is simply that they are in the jurisdiction on the day that the petition is presented).

It is important to note that this power is restricted by the provisions of the EC Regulation on Insolvency Proceedings 2000 [note 3] (see Chapter 41), which determines where bankruptcy proceedings must be opened in the case of an individual who has his/her “centre of main interests” (“COMI”) (see Part 5 of Chapter 41) in the EU. If an individual’s COMI is in the UK, bankruptcy proceedings must be opened here as main proceedings. If an individual’s COMI is in another part of the EU, bankruptcy proceedings may be opened here as secondary or territorial proceedings if the individual has an establishment (see paragraph 41.29) here.

Where the individual has his/her COMI outside of the EU (or in Denmark – which opted out of the Regulation – see paragraph 41.7) then it is open to the court to make a bankruptcy order against him/her provided the requirements of the Act [note 4] (see paragraph 43.0.2) are met.

43.0.4 Verifying the COMI

To maintain the integrity of the rules [note 5] on cross-border insolvency within the EU, it is important to check that the bankrupt’s COMI is within England and Wales if the order has been made in a court of England and Wales here, and Part 2 gives guidance and information on verifying the accuracy of the stated COMI.

43.0.5 Cross border insolvency – use of informal procedures

Most cases where the official receiver may need to invoke powers granted under relevant legislation outlined in Parts 3, 4 and 5 (particularly Parts 4 and 5) will be in respect of the recovery of assets or the provision of information by third parties.  Due to the time and financial cost of some of these procedures, it is likely to be more beneficial to deal with matters on an informal basis, such as having the bankrupt agree to surrender the assets voluntarily (providing, if necessary, a declaration authorising the surrender and disposal of the asset), or provide an authority for the disclosure of information, as appropriate.

See paragraph 43.0.6 for steps that can be taken where the bankrupt will not co-operate in obtaining information or assets overseas. 

43.0.6 Use of compulsive powers in a cross-border insolvency

The fact that an insolvency proceeding has a cross border dimension need not, in itself, stop the official receiver from taking enforcement action where a bankrupt is failing to co-operate.

Where property or information is situated overseas and the official receiver is having difficulty in obtaining an authorisation declaration (see paragraph 43.0.5), the official receiver should draw the bankrupt’s attention in writing to the provisions of the Act that set out the duty to co-operate and deliver property [note 6] [note 7] [note 8], set out the consequences of failure to deliver up property [note 9] and the provisions regarding the suspension of the period of automatic discharge [note 10] (see Chapter 13 and Chapter 22, Part 4). 

43.0.7 Effect of BRO/BRU overseas

The effect of a BRO/BRU overseas will depend upon the law of the country in question.  English legislation does not provide for a BRO/BRU to have any effect outside the UK, but the legislation of other countries may provide that a particular action is prohibited if the person is subject to a BRO/BRU in England and Wales.

For example, in the UK an undischarged bankrupt or a person subject to a BRO/BRU cannot act as the director of a limited company [note 11]. The person could be a director of a foreign company if that company does not do any business in the UK. The laws of the country in which the company is registered may have its own restriction on someone who is an undischarged bankrupt or subject to a BRO/BRU in England and Wales acting as a director of a company.

[Back to Introduction] [On to Part 2 – Verifying a foreign national bankrupt’s centre of main interests (COMI)]