In re Cell C Proprietary Ltd.
571 B.R. 542
Bankr. S.D.N.Y.2017Background
- Cell C, a South African mobile operator, pursued a restructuring under Section 155 of the South African Companies Act to restructure ~R24bn of debt and bring in new equity partners; a scheme (the "Arrangement") was voted overwhelmingly in favor by holders of its Euro Notes.
- The South African Court held a sanction hearing and entered a Sanction Order approving the Arrangement on July 18, 2017; Cell C’s board had earlier authorized three individuals as Foreign Representatives to file a Chapter 15 petition in the U.S.
- Cell C filed a Chapter 15 petition in the Southern District of New York; the Court entered a TRO and then a Preliminary Injunction preserving U.S. assets, and later recognized the South African proceeding as a foreign main proceeding and enforced the Sanction Order.
- Cell C has limited U.S. contacts: an attorney retainer in a New York bank account and Euro Notes governed by New York law with a New York forum clause — both were relied on to satisfy section 109(a) "property" requirement.
- The U.S. court found the Section 155 proceeding met the statutory criteria for a foreign proceeding and that Cell C’s center of main interests (COMI) is South Africa, so recognition as a foreign main proceeding was appropriate.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the Section 155 proceeding qualifies as a "foreign main proceeding" under 11 U.S.C. §1517 | The Section 155 process is a collective, judicial insolvency-related proceeding in South Africa and COMI is in South Africa | No objections were filed | Court recognized the Section 155 proceeding as a foreign main proceeding (COMI in South Africa) |
| Whether Cell C is eligible under §109(a) (domicile, place of business, or property in the U.S.) | Cell C has U.S. "property": a retainer in a NY bank account and Euro Notes governed by NY law with a NY forum clause | (No opposition filed) | Court held the retainer and NY-law notes suffice to satisfy §109(a) property requirement |
| Whether the appointed individuals qualify as "foreign representatives" under 11 U.S.C. §101(24) | Board resolution authorized the individuals to act; judicial appointment not required | (No opposition filed) | Court held corporate authorization sufficed; the Foreign Representatives qualify |
| Whether the Sanction Order may be recognized and enforced in the U.S. under §§1521 and 1507 | Enforcement is appropriate to effectuate the foreign reorganization; Arrangement affects only Compromise Creditors and protections exist for U.S. creditors | (No opposition filed) | Court granted recognition and enforcement of the Sanction Order as appropriate relief under §§1521 and 1507 |
Key Cases Cited
- Morning Mist Holdings Ltd. v. Krys, 714 F.3d 127 (2d Cir.) (COMI and factors for determining center of main interests)
- Ad Hoc Group of Vitro Noteholders v. Vitro S.A.B. de C.V., 701 F.3d 1031 (5th Cir.) (foreign representative need not be judicially appointed)
- Drawbridge Special Opportunities Fund LP v. Barnet (In re Barnet), 737 F.3d 238 (2d Cir.) (§109(a) applied to Chapter 15 eligibility)