Contributed By Winston & Strawn London LLP
As referenced in Section 6 Enforcement, enforcement in the context of an insolvency may occur as part of a formal insolvency procedure. An important exception is that if the debtor company is in administration, then its assets will be subject to a temporary moratorium and the lender will be unable to enforce its security unless that security constitutes a financial collateral arrangement. A further exception where a moratorium applies to suspend creditor action is where the debtor has been put into compulsory liquidation and where an eligible small debtor company has proposed a voluntary arrangement. The insolvency of the principal obligor does not reduce or extinguish the lender’s rights against the guarantor.
A lender wishing to start insolvency proceedings against a borrower with interests in more than one EU member state, should consider the location of the borrower’s centre of main interest (COMI). Under the EC Insolvency Regulation (which is currently incorporated into English law but its continued effect in the UK is to be determined following Brexit), there is a rebuttable presumption that the COMI will be the place of the company’s registered office. However, there may be occasions where a borrower’s COMI is held to be located in a different EU member state, despite the registered office being located in England or Wales.