19 Entertainment Ltd (the Company) and Another (Applicants)
| Jurisdiction | England & Wales |
| Judge | Mr. Jeremy Cousins QC |
| Judgment Date | 29 April 2016 |
| Neutral Citation | [2016] EWHC 1545 (Ch) |
| Docket Number | Case No. CR-2016-002356 |
| Court | Chancery Division |
| Date | 29 April 2016 |
[2016] EWHC 1545 (Ch)
Mr. Jeremy Cousins QC
(Sitting as a Deputy Judge of the High Court)
Case No. CR-2016-002356
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
COMPANIES COURT
IN THE MATTER OF 19 ENTERTAINMENT LIMITED
AND
IN THE MATTER OF THE CROSS-BORDER INSOLVENCY REGULATIONS 2006
Rolls Building
Mr. Stephen Robins (instructed by Willkie Farr & Gallagher (UK) LLP) appeared on behalf of the Applicants.
JUDGMENT (As approved by the Judge)
Background
This is an application made by 19 Entertainment Limited ("the Company") and its directors, Mr. Scott Frosch, Mr. Peter Hurwitz and Ms. Kelly Pontano, whereby they, as applicants, seek, first, recognition of Chapter 11 Bankruptcy proceedings, commenced in the early hours of yesterday morning in the Bankruptcy Court for the Southern District of New York as foreign main bankruptcy proceedings under Art.17 of sch.1 to the Cross-Border Insolvency Regulations 2006 ("the 2006 Regulations") and, secondly, discretionary relief pursuant to Art.20 and/or Art.21 of the schedule to the 2006 Regulations, substantially in the form of a moratorium in the terms of para.43 of sch. B1 to the Insolvency Act 1986 ("the 1986 Act").
The Company is part of a group of companies of which the ultimate parent company is CORE Entertainment Holdings Incorporated ("CORE"), which is incorporated under the laws of the State of Delaware. The group of companies of which CORE is the ultimate parent company, is in the business of owning, producing, developing, and commercially exploiting entertainment content. It has, amongst its brands, a number of apparently well-known television series.
The Company is part of the 19 Entertainment Business Division of the CORE group of companies ("the CORE Group") and operates in and primarily from Los Angeles in California. The Company has, since October of 2010, though registered in London and with a registered office here, transferred its business and operations to Los Angeles.
The Company's centre of main interests
As will become apparent from what I mention later in this judgment, for the purposes of the present application, it is necessary to identify the centre of main interests for the company ("COMI"). From the evidence of Mr. Frosch, set out in an affidavit before me, it is very clear that, although the registered office of the company is in London, at New Bridge Street, it is, in fact, the paradigm case of a letterbox company because its business, direction and operation is now entirely conducted in the United States of America and, in particular, in Los Angeles. It has closed down, as I mentioned a moment ago, its London office; its directors are United States citizens and are resident there. Its board meetings are held in the United States. The Company's website, or rather that of the group to which it belongs, makes it clear that it is a Los Angeles-based concern with a Los Angeles telephone number. Further, the major creditors of the company are in the United States and its business dealings are also conducted there, as is its banking.
It is clear from the decision of the Court of Appeal in Stanford International Bank Limited [2011] 1 Ch 33 that, in deciding issues as to COMI for purposes of the UNCITRAL Model Law, which is given effect in English law by the 2006 Regulations, I am to apply the test promulgated by the European Court of Justice in the case of Eurofood IFSC Limited [2006] Ch 508. The effect of this decision is that, under the European Council Regulations on Insolvency Proceedings, there is a rebuttable presumption that the registered office is the company's COMI; see the judgment of the European Court at paras 34 and 35, which are in the following terms:
"34. It follows that, in determining the centre of the main interests of a debtor company, the simple presumption laid down by the Community legislature in favour of the registered office of that company can be rebutted only if factors which are both objective and ascertainable by third parties enable it to be established that an actual situation exists which is different from that which locating it at that registered office is deemed to reflect.
"35. That could be so in particular in the case of a 'letterbox' company not carrying out any business in the territory of the Member State in which its registered office is situated."
The evidence in this case, which is contained in the affidavit of Mr. Frosch, extends to material provided from a number of creditors, each of whom has confirmed that they understood the COMI of the Company to be in the United States. In my judgment, the fact that its COMI is situated in that country is extremely clear and I shall approach this case on that basis.
The financial position of the Company
The Company's financial difficulties are considerable. It has many liabilities, including a secured guarantee liability for $200 million. That is referred to in the evidence as the 'First Lien Debt.' There is a further secured guarantee liability of $160 million, referred to in the evidence as the 'Second Lien Debt.'
There are other unsecured liabilities to other companies within the CORE Group of about $190 million, and there are liabilities also to a Mr. Simon Fuller who figures in the evidence in this case. It is not necessary for me to refer to his position in any great detail, save to say that Mr. Fuller is owed by the Company just under £3 million, under a consultancy agreement dated January 2010. What is material to this application is that Mr. Fuller has served a statutory demand upon the Company, and the circumstances are now such that if that demand is not satisfied pretty much forthwith, on Tuesday of next week, Mr Fuller would be in a position to present a petition to wind up the Company. There is, therefore, a degree of urgency in this application which is before me, which is why it has come on at very short notice and extremely soon after the commencement of the Chapter 11 Bankruptcy proceedings to which I have referred already.
Chapter 11 Bankruptcy proceedings, and the UNCITRAL Model Law
The Chapter 11 proceedings concern not only the Company but other entities within the CORE Group. There is before me an expert report from Mr. Mathew Feldman, an attorney qualified to practice in several United States jurisdictions, including New York. He explains, at para. 18 of his report, the purpose of Chapter 11 Bankruptcy proceedings as follows:
"The purpose of commencing a chapter 11 case...
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