U.S. Bankruptcy Court Denies Chapter 15 Recognition of Maltese Liquidation Absent Evidence of Meaningful Activities Supporting Finding of COMI or Establishment in Malta
Having reached its 20th anniversary of enactment, chapter 15 of the Bankruptcy Code has proven to be an invaluable tool in assisting foreign debtors, their duly-appointed representatives, and foreign bankruptcy courts to, among other things, preserve the debtor's U.S. assets, enforce the terms of foreign restructuring plans in the United States, and otherwise provide assistance in support of foreign bankruptcy proceedings. Although "recognition" of foreign bankruptcy proceedings in the United States as a matter of international comity has become almost routine since chapter 15 came into force in 2005, such recognition depends on satisfaction of the Bankruptcy Code's eligibility requirements. One of those requirements for chapter 15 recognition of a foreign bankruptcy case by a U.S. bankruptcy court is that the foreign debtor must have either a "center of main interests" ("COMI") or an "establishment" in the country where the debtor's bankruptcy proceeding is pending.
The U.S. Bankruptcy Court for the Southern District of Texas recently addressed this issue in In re Geden Holdings, Ltd., No. 25-90138, 2025 WL 2484883 (Bankr. S.D. Tex. Aug. 28, 2025). The court ruled that, although the debtor may have had a COMI or an establishment in Malta when a liquidation proceeding was commenced for it in a Maltese court in 2017, the absence of any meaningful activity by the debtor's liquidator from that time until the liquidator filed a chapter 15 petition in the United States more than five years later meant that the debtor had neither a COMI nor an establishment in Malta on the chapter 15 petition date. The court accordingly denied the petition for recognition.
Procedures and Recognition Under Chapter 15
Chapter 15 was enacted in 2005 to govern cross-border bankruptcy and insolvency proceedings. It is patterned on the 1997 UNCITRAL Model Law on Cross-Border Insolvency, which has been enacted in some form by more than 50 countries.
Under section 1515 of the Bankruptcy Code, the "foreign representative" of a non-U.S. debtor may file a petition in a U.S. bankruptcy court seeking "recognition" of a "foreign proceeding." Section 101(24) of the Bankruptcy Code defines "foreign representative" as "a person or body, including a person or body appointed on an interim basis, authorized in a foreign proceeding to administer the reorganization or the liquidation of the debtor's assets or affairs or to act as a representative of such foreign proceeding."
"Foreign proceeding" is defined in section 101(23) of the Bankruptcy Code as:
[A] collective judicial or administrative proceeding in a foreign country, including an interim proceeding, under a law relating to insolvency or adjustment of debt in which proceeding the assets and affairs of the debtor are subject to control or supervision by a foreign court, for the purpose of reorganization or liquidation.
More than one bankruptcy or insolvency proceeding may be pending with respect to the same foreign debtor in different countries. Chapter 15 therefore contemplates recognition in the United States of both a foreign "main" proceeding—a case pending in the country where the debtor's COMI is located (see 11 U.S.C. § 1502(4))—and foreign "nonmain" proceedings, which may be pending in countries where the debtor merely has an "establishment" (see 11 U.S.C. § 1502(5)). A debtor's COMI is presumed to be the location of the debtor's registered office, or "habitual residence" in the case of an individual. See 11 U.S.C. § 1516(c). However, this presumption can be overcome.
Although the COMI presumption can be relied on in "easy cases," the presumption should not be relied upon in cases involving a substantial dispute regarding the issue. See In re Creative Finance Ltd. (In Liquidation), 543 B.R. 498, 517 (Bankr. S.D.N.Y. 2016); In re SPhinX, Ltd., 351 B.R. 103, 112 (Bankr. S.D.N.Y. 2006), aff'd, 371 B.R. 10 (S.D.N.Y. 2007); see also In re Iovate Health Sciences International Inc., 673 B.R. 516, 530 (Bankr. S.D.N.Y. 2025) (discussing factors considered by courts in determining whether the COMI presumption can be overcome). And, "[e]ven in the absence of an objection, courts must undertake their own jurisdictional analysis and grant or deny recognition under Chapter 15 as the facts of each case warrant." Lavie v. Ran (In re Ran), 607 F.3d 1017, 1021 (5th Cir. 2010).
Various factors have been deemed relevant by courts in determining a debtor's COMI, including the physical location of the debtor's headquarters, managers, employees, investors, primary assets, and creditors, as well as the jurisdiction whose law would apply to most of the debtor's disputes. See SPhinX, 351 B.R. at 117–18. In addition, courts have considered any relevant activities leading up to the chapter 15 filing, including liquidation or reorganization activities and administrative functions. See Morning Mist Holdings Ltd. v. Krys (In re Fairfield Sentry Ltd.), 714 F.3d 127 (2d Cir. 2013). Such activities can entail the negotiation or execution of a restructuring support agreement with creditors, creditor meetings, liquidation activities (including court hearings), or administrative functions. See, e.g., In re Oi Brasil Holdings Coöperatief U.A., 578 B.R. 169, 222 (Bankr. S.D.N.Y. 2017) (citing Creative Finance, 543 B.R. at 517; In re Modern Land (China) Co., 641 B.R. 768, 778–81, 789–90 (Bankr. S.D.N.Y. 2022)). In addition, where the debtor is an entity with limited operations, it may be the case that restructuring activities performed outside the United States constitute the debtor's primary business activity prior to the filing of the chapter 15 petition.
Courts may also consider the situs of each debtor entity's "nerve center," including the location from which such entity's "activities are directed and controlled, in determining a debtor's COMI." Fairfield Sentry, 714 F.3d at 138. "[R]egularity and ascertainability" by creditors are also important factors in the COMI analysis. Id.; In re British Am. Ins. Co., 425 B.R. 884, 912 (Bankr. S.D. Fla. 2010) ("The location of a debtor's COMI should be readily ascertainable by third parties."); In re Betcorp Ltd., 400 B.R. 266, 289 (Bankr. D. Nev. 2009) (looking to the whether COMI is ascertainable by creditors). Creditors' expectations regarding the location of a debtor's COMI are also relevant. See In re Serviços de Petróleo Constellation S.A., 613 B.R. 497 (Bankr. S.D.N.Y. 2019); Oi Brasil, 578 B.R. at 228.
COMI can sometimes be found to have shifted, or "migrated," from a foreign debtor's original principal place of business or habitual residence to a new location. See Pirogova, 593 B.R. at 410; see also Creative Finance, 543 B.R. at 519 (ruling that the liquidator's efforts were too minimal to find a shift in COMI and noting that "[i]n the two months between the time [the debtors' principal] retained him and the time he filed his chapter 15 case in this Court, the Liquidator failed to do the basic things that can under normal circumstances cause a change in COMI—even in a liquidation").
In Fairfield Sentry, the Second Circuit ruled that, due principally to the present verb tense of the language of section 1517, the relevant time for assessing COMI is the chapter 15 petition date, rather than the date a foreign insolvency proceeding is commenced with respect to the debtor. See Fairfield Sentry, 714 F.3d at 137. The Fifth Circuit previously reached the same conclusion in In re Ran, 607 F.3d 1017 (5th Cir. 2010), as did the bankruptcy court in British American.
In Fairfield Sentry, the Second Circuit also expressed concern about possible COMI "manipulation," ruling that a court "may look at the period between the commencement of the foreign proceeding and the filing of the Chapter 15 petition to ensure that a debtor has not manipulated its COMI in bad faith." Fairfield Sentry, 714 F.3d at 138; see also In re Mega Newco, Ltd., 2025 WL 601463 (Bankr. S.D.N.Y. Feb, 24, 2025) (granting chapter 15 recognition of a UK "scheme of arrangement" proceeding commenced by a newly formed English subsidiary of a Mexican company for the purpose of restructuring the Mexican company's U.S. law-governed debt in the absence of any "serious questions" that the restructuring "structure" had been opposed, unfair, or thwarted creditor expectations).
In cases involving multiple foreign debtors, COMI must be determined on an entity-by-entity basis. See In re Black Press Ltd., No. 24-100044 (MFW) (Bankr. D. Del. Feb. 14, 2024) (unpublished order) (Doc. No. 73) (in a case involving multiple enterprise group debtors, the court must examine each debtor's COMI separately, rather than the enterprise group as a whole, for purposes of chapter 15 recognition; U.S. debtors' guarantee of their Canadian parent company's debts was an insufficient basis to conclude that the U.S. debtors' COMI was located in Canada, or that the U.S. debtor's even maintained an "establishment" in Canada); In re Serviços de Petróleo Constellation S.A., 600 B.R. 237, 244 (Bankr. S.D.N.Y. 2019) ("While the Constellation Group is discussed as a group entity at times throughout this opinion's opening sections for context, it is important to bear in mind that the Court's recognition is granted on an individual debtor by debtor basis."); In re OAS S.A., 533 B.R. 83, 92 n.8 (Bankr. S.D.N.Y. 2015).
An "establishment" is defined by section 1502(2) as "any place of operations where the debtor carries out a nontransitory economic activity." See In re Mood Media Corp., 569 B.R. 556 (Bankr. S.D.N.Y. 2017) (concluding that an "establishment" must be an actual place from which economic market-facing activities are regularly conducted). Unlike with the determination of COMI, there is no statutory presumption regarding the determination of whether a foreign debtor has an establishment in any particular location. See British American, 425 B.R. at 915. A "place of operations" has been defined as "a place from which economic activities are exercised in the market (i.e. externally)." Lavie v. Ran, 406 B.R. 277, 284 (S.D. Tex. 2009) (internal quotation marks omitted), aff'd, 607 F.3d 1017 (5th Cir. May 27, 2010). The terms "operations" and "economic activity" require demonstration of "a local effect on the marketplace, more than mere incorporation and record-keeping and more than just the maintenance of property." British American, 425 B.R. at 915. "Establishment" has also been construed to mean a "local place of business" in the relevant country. Id. at 914–15 (quoting Bear Stearns High-Grade Structured Credit Strategies Master Fund, Ltd., 374 B.R. 122, 131 (Bankr. S.D.N.Y. 2007)).
A foreign debtor's restructuring activities alone are inadequate to support a finding that the debtor has an establishment for purposes of foreign nonmain proceeding recognition. See Ran, 607 F.3d at 1028 (holding that if a foreign "bankruptcy proceeding and associated debts, alone, could suffice to demonstrate an establishment, this would render the framework of Chapter 15 meaningless. There would be no reason to define establishment as engaging in a nontransitory economic activity."); see also In re Modern Land (China) Co., 641 B.R. 768, 785-86 (Bankr. S.D.N.Y. 2022) (same); Rozhkov v. Pirogova (In re Pirogova), 612 B.R. 475, 484 (S.D.N.Y. 2020) (same).
Geden Holdings
Malta-registered shipping company Geden Holdings, Ltd. ("Geden") was the parent company for approximately 50 subsidiaries that operated Maltese-flagged ships in the international shipping market. Each subsidiary was a Maltese company that, together with Geden, filed annual consolidated financial statements in Malta. Geden also paid tonnage taxes in Malta on the vessels and maintained books and records and a corporate address in Malta. One of Geden's shipping subsidiaries—Geden Line—managed several vessels in Turkey and certain other countries.
In June 2017, a Maltese court ordered the dissolution and winding up of Geden (the "Maltese Proceeding") and appointed a liquidator for the company, which had ceased operating. The initial liquidator did not receive any documents or other information from Geden during his tenure, although he met with ex-representatives of Geden and its lawyers in Malta. He performed no liquidation activities due to the absence of relevant information concerning Geden's affairs and moved to resign.
The Maltese court approved the initial liquidator's application to resign in 2018. In December 2023, the court appointed another liquidator for Geden and authorized the liquidator, as Geden's foreign representative (the "FR"), to file a petition in the United States on Geden's behalf seeking recognition of the Maltese Proceeding under chapter 15. The FR later testified that he was unaware of any liquidation activities for Geden that took place during the time between the initial liquidator's motion to resign and the FR's appointment as successor liquidator.
After his appointment, the FR learned that Geden had been actively defending litigation for many years in a Pennsylvania state court. Even though the litigation was resolved in Geden's favor, the FR appealed the judgment to the Superior Cout of Pennsylvania, which dismissed the appeal in April 2024, finding that the FR lacked standing to appeal. The Supreme Court of Pennsylvania denied the FR's application to hear the appeal in January 2025. In connection with the appeals, the FR was represented by counsel for one of the plaintiffs in the state court litigation, Eclipse Liquidity, Inc. ("Eclipse"), which funded the FR's attorneys' fees.
The FR filed a chapter 15 petition in the U.S. Bankruptcy Court for the Southern District of Texas (the "bankruptcy court") on April 28, 2025. One of Geden's creditors—Advantage Award Shipping, LLC ("Advantage")—objected to chapter 15 recognition of the Maltese Proceeding. According to Advantage: (i) before it ceased operating, Geden's business activities were located in Turkey, and Malta was merely a "letterbox jurisdiction"; (ii) because Geden was non-operational for many years prior to the chapter 15 petition date, the only material activities that could create COMI for Geden in Malta were the activities of the FR, as successor liquidator; and (iii) the only action the FR took during his tenure as successor liquidator was his unsuccessful attempt to intervene in the state court litigation.
The FR later testified that, although his general responsibilities as a liquidator under Maltese law included identifying creditors and assets, paying creditors and taxes, and holding creditor meetings, he did none of this during his tenure, nor did he seek discovery of any parties regarding potential assets or claims other than in the United States.
The FR moved to strike Advantage's objection, questioning whether Advantage had standing as a party-in-interest to object to the recognition petition and arguing that the objection impermissibly attempted to preserve Advantage's right to contest personal jurisdiction while objecting to the substantive relief sought in the chapter 15 petition.
Eclipse supported the chapter 15 petition, stating, among other things, that Geden's COMI was in Malta.
The Bankruptcy Court's Ruling
The bankruptcy court denied the FR's petition for recognition of the Maltese Proceeding under chapter 15 as either a foreign main or nonmain proceeding.
According to U.S. Bankruptcy Judge Alfredo R. Pérez, there was no dispute that the Maltese Proceeding was a "foreign proceeding," as defined in section 101(23) of the Bankruptcy Code, or that the petition otherwise satisfied the requirements of sections 1515 and 1517.
However, Judge Pérez concluded, due to Geden's complicated procedural history and Advantage's objections, it was not appropriate for the court to rely on the presumption in section 1561(c) that Geden's COMI was in Malta where its registered office was located. Instead, he explained, the court was required to examine the facts independently to determine whether it should grant chapter 15 recognition to the Maltese Proceeding.
According to Judge Pérez, COMI must be determined as of the chapter 15 petition date. Even though there was no evidence that Geden had manipulated its COMI, the bankruptcy court concluded, in the absence of any meaningful activities—operating, liquidation, or otherwise—by the FR in Malta during his tenure, that Malta could not be Geden's COMI as of the chapter 15 petition date. Therefore, the court declined to recognize the Maltese Proceeding as a foreign main proceeding. Geden Holdings, 2025 WL 2484883, at *10.
The bankruptcy court also determined that chapter 15 recognition of the Maltese Proceeding as a foreign nonmain proceeding was inappropriate because Geden did not have an "establishment" in Malta. According to Judge Pérez, this conclusion was based on, among other things, the lack of any evidence showing that: (i) Geden had a place of operations in Malta or conducted business there as of the chapter 15 petition date; or (ii) the FR's actions had had an impact on the Maltese marketplace or consisted of something more than mere incorporation, recordkeeping, or maintenance of property.
Because the bankruptcy court refused to recognize the Maltese Proceeding under chapter 15, it determined that the FR's motion to strike Advantage's objection was moot.
Outlook
Geden Holdings is instructive in illustrating the analysis that a U.S. bankruptcy court must undertake to determine whether chapter 15 recognition of a foreign bankruptcy proceeding is warranted in the United States. There was no question in the case that the debtor's Maltese liquidation proceeding was a "foreign proceeding" that could have been recognized by the U.S. bankruptcy court. However, although the debtor's COMI or an establishment might have been in Malta on the commencement date of the Maltese liquidation, the court found that this was not the case as of the chapter 15 petition date, because the debtor was no longer operating and the debtor's liquidator had not engaged in any meaningful activities that would have supported a finding that the debtor's COMI was still in Malta on the chapter 15 petition date or that it had an establishment there.
Key takeaways from the decision include the following:
- A U.S. bankruptcy court will not "rubber-stamp" a petition for chapter 15 recognition of a foreign bankruptcy proceeding, but is instead obligated to inquire whether all of the statutory requirements for recognition have been satisfied.
- Although the COMI presumption can be relied on in "easy cases," the presumption should not be relied upon in cases involving a substantial dispute regarding the issue.
- COMI or the existence of an establishment must be determined as of the chapter 15 petition date.
- Activities—operating, restructuring, liquidating, or otherwise (such as discovery)—occurring during the time between commencement of the foreign proceeding and the chapter 15 petition may be considered by a U.S. bankruptcy court in determining COMI or the existence of an establishment.
- Using a recently formed foreign NewCo to access non-U.S. restructuring regimes will require sufficient activities to reinforce the COMI presumption for such NewCo and provide evidence to support an argument that there is an establishment in the NewCo's foreign jurisdiction.
