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In a recent blog we discussed the Tamworth case and a lender’s ability to enforce its security against a borrower registered in a foreign jurisdiction. The case looked at a borrower’s Centre of Main Interests (COMI) – a concept that is often mentioned, even if its practical implications are rarely fully understood.

What is COMI?

So just what is COMI? How and why can it change? And what does it mean for lenders?

COMI is a term used (though not defined) in the EC Regulation on Insolvency Proceedings (the “Regulation”) and the UNCITRAL Model Law on Cross-Border Insolvency (“UNCITRAL”) to describe the jurisdiction with which a person or company is most closely associated for the purposes of cross-border insolvency proceedings. Or, as the preamble to the Regulation rather helpfully puts it: COMI should correspond to the place where a borrower regularly conducts the administration of its interests, such that this is ascertainable by third parties. This really is a mouthful of variables!

Why is it important?

COMI is important because, in the Regulation, COMI determines which insolvency jurisdiction in the EU (but not Denmark) takes precedence, if competing insolvency processes commence in different jurisdictions. UNCITRAL uses COMI to set the level to which courts of one jurisdiction are to recognise and assist an insolvency process commenced in another jurisdiction. (The Tamworth case involved the latter.)

Establishing COMI and forum shopping

In both UNCITRAL and the Regulation, there is a rebuttable presumption that a company’s COMI is the place in which its registered office is situated. In fact, this is often as much consideration as is given to a borrower’s COMI at the time of lending. It is easy to assume that, since the borrower’s jurisdiction of registration is unlikely to change, neither will COMI. But consider this scenario: an SPV registered in Jersey for tax purposes, owns no assets and has no administration in Jersey, but owns and operates two care homes in England.

Where is its COMI? “England!” you cry. OK. What if it buys another care home in Scotland? Now where is its COMI? What if it only holds the property assets and doesn’t operate the business of the care homes? Oh and the shareholder/directors conduct the borrowers’ affairs in Ireland, where they live…

This is the point: COMI can be difficult to pin down and it can change. Add to this the fact that across the EU (and throughout the world) insolvency regimes differ (sometimes wildly). Some jurisdictions are more borrower-friendly than others. Borrowers have become wise to this and the courts in the UK now deal with cases where borrowers have tried to change their COMI to take advantage of a more lenient system – This is called ‘forum shopping’.

Lenders need to be sure, at the time of the lend, where, how and against whom they may enforce the security they take as part of the transaction. It is not enough to assume that a borrower’s COMI is the place of registered office (or residence if an individual) and that this will not change. It would be prudent to assess, periodically, where a borrower’s COMI is situated and if this has or will change.

Legal advisors are not always able to give a ‘quick’ view on a borrower’s COMI. There are so many variables, that proper investigation and due diligence may be required to enable lawyers to take a reliable view. Throw a foreign registration into the mix and the English lawyer advising you needs to consult with a foreign counterpart.

In addition, lenders will generally have to rely on the honesty of the statements made by the borrower, who has (or should have) the best view of where and to what extent administrative functions and enterprise are carried on. As an extra safeguard, lenders should ensure that facility and security documentation contains appropriate representations and warranties to compel the borrower to seek the lender’s consent to a change of COMI.


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This blog is intended only as a synopsis of certain recent developments. If any matter referred to in this blog is sought to be relied upon, further advice should be obtained.