In Re Zipmex Co Ltd (2022), the Singapore High Court ruled that the Thai, Indonesian and Australian subsidiaries of the Zipmex Group have their primary center of interest in Singapore. It was clear to account holders of companies operating cryptocurrency exchange platforms that the cryptocurrencies would be transferred to a “hot wallet” held by an incorporated group holding company in Singapore.Ze
The company’s main center of interest (Komi) is important for bankruptcy proceedings. It is the UNCITRAL Model Law on Cross-Border Insolvency (model law), the principal insolvency proceeding and therefore the insolvency remedy available to the company or its creditors. There is also. Doing so will give you the right to initiate restructuring and other insolvency-related proceedings in Singapore, thereby giving you access to the Singapore proprietary debtor insolvency proceedings framework.
Latest Judgment by Singapore High Court, Re Zipmex Co Ltd  SGHC 196 (17 August 2022) provides further guidance on how courts can determine a company’s COMI, and that the test of COMI is under the Model Law and Singapore’s Bankruptcy, Restructuring and Dissolution Act 2018. Checking that they are the same (IRDA).
Whether Zipmex’s overseas subsidiary has a Singapore COMI
In that case, the High Court had to consider the moratorium application made by the Zipmex group of companies under Section 64 of the IRDA. Two of his five companies in the applied group were Singapore companies. His other three were established outside of Singapore, notably in Thailand, Indonesia and Australia.
The Zipmex subsidiaries in Thailand, Indonesia, and Australia were not Singapore incorporated companies and were not registered as branches doing business in Singapore, so they were required to establish substantial ties with Singapore. What constitutes a material association is set out in Section 246 of the IRDA. This provides that courts rely on the existence of one or more of the matters enumerated in the section to support a determination that a foreign company has a material relationship with Singapore. The matters so enumerated include that Singapore is the company’s COMI.
Factors that determine a company’s COMI
The court has previously considered what factors are relevant in determining a company’s COMI in connection with its use of that term in the model law. In Re Zetta Jet Pte Ltd (2019), the Singapore High Court presumed that the company’s registered office was its COMI, but that presumption could only be refuted if there was evidence to the contrary. determined to be sexual. In this regard, consider the following factors that are evaluated as a whole in determining his COMI location in the company.
- A place where control and direction take place.
- client location;
- the location of the creditor;
- employee location;
- place of business;
- dealings with third parties; and
- Governing law.
The High Court held that the same test applies to COMI’s determinations under section 246. This is because I see no reason to distinguish between her uses of COMI in different contexts.
The Singapore ties would have been obvious to account holders
In this case, the court relied on the following to determine that the Thai, Indonesian and Australian subsidiaries’ COMI was in Singapore:
- The company’s management and operations are located in Singapore.When
- The majority of the assets provided by the clients to the subsidiary were further deposited into the Zipmex subsidiary in Singapore.
It becomes clear from the decision that what would have been objectively apparent to the creditors of the company before they decided to extend credit played an important role. In the case, he noted, account holders would have little knowledge that cryptocurrencies would be transferred from a foreign subsidiary and integrated into a “hot wallet” hosted by the Singapore Zipmex holding company. Similarly, the Court gave some weight to the fact that the command and control of each subsidiary was in Singapore, but stated that the weight given to this was less than in the case of Re Zetta Jet Pte Ltd. As such, the fact that direction and control were centralized in Singapore was less obvious to creditors and observers.
Court proposes practical steps to ensure creditor involvement
The court also observed the execution and conduct of complex restructurings in Singapore, where the restructuring company has many unrepresented creditors. The court stressed that it would scrutinize whether the company engaged with its creditors and set out a series of steps that the restructuring company could take to ensure proper engagement. This includes:
- Ensure appropriate communication and engagement through city halls and information dissemination facilities.
- Providing translations of documents;
- Describes how Section 64 of the IRDA works, possible investments and possible timelines.
- Establishment of a creditors committee;
- Consider the framework for election and representation to these committees.When
- Appoint independent legal and financial advisors to focus on the needs of unrepresented creditors.
COMI: The Importance of Being Visible to Company Creditors
The case highlights that one of the key factors in determining COMI by a court is that the location of the company is known or apparent to creditors. Therefore, the location and direction of the company’s management have also been evaluated from this perspective. This trend has also emerged from previous cases. for example:
- of Re Zetta Jet Pte Ltd, a Singapore incorporated company, was in the aircraft charter business. Although the business was based in Singapore, the website marketed it as being based in the United States. This, along with the fact that its management is located in the United States, was relied upon by courts in determining that his COMI was located in the United States.
- of Re Rooftop Group International Pte Ltd (2019), a Singapore incorporated company sold toys in the United States and was controlled in the United States, but nowhere indicated that it was a United States-based entity. Its creditors were in Asia and its loan agreements were governed by Singapore or Hong Kong law. Therefore, the court found that his COMI for the company was Singapore.
- of Alan Tantleff (2022), Singapore set up a REIT subsidiary to own a hotel in the United States and conduct all its business there. Therefore, his COMI of the subsidiary was determined to be the United States.
It should also be noted that the list of elements listed in Section 246 for establishing a substantive connection is not exhaustive. Courts may rely on matters not stipulated. Re PT MNC Investama TBK (2020), the listing of a bond by an Indonesian company on the Singapore Stock Exchange created a substantial connection.
Creditors who do business with a company and wish to secure a particular jurisdiction for bankruptcy proceedings may want to keep this in mind in their review and due diligence of the company. You may want to obtain COMI assertions. Doing so can be part of the evidence that future restructuring or bankruptcy proceedings will reveal to the company’s creditors.