673 B.R. 516
Bankr. S.D.N.Y.2025Background
- Debtors: Iovate Health Sciences International Inc. (Ontario), Iovate Health Sciences USA Inc. (Delaware), and Northern Innovations Holding Corp. (Ontario) are part of an integrated health & wellness group headquartered in Oakville, Ontario; management, treasury, payroll, and most operations are centralized in Oakville.
- Prepetition distress: Lenders under a Canada-governed credit facility declared defaults and threatened enforcement after Orgain obtained a U.S. judgment (~$12.5M) and writs of garnishment that caused major customer Walmart to withhold payments critical to cash flow and secured collateral.
- Canadian filings: On September 5, 2025, each Debtor filed a Notice of Intention under Canada’s BIA and KSV Restructuring Inc. was appointed proposal trustee; the Ontario Superior Court authorized Iovate International to serve as foreign representative.
- Chapter 15: The Foreign Representative filed for Chapter 15 recognition in SDNY and moved for provisional relief under 11 U.S.C. § 1519 to apply certain automatic-stay protections (e.g., § 362) pending recognition, to prevent U.S. creditors from defeating the Canadian stay.
- U.S. nexus: Debtors maintain a retainer in counsel’s New York trust account and Iovate USA holds New York bank accounts (funds are daily-swept to Canada), satisfying the minimal U.S. property requirement for Chapter 15 filing.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Debtors are eligible to be debtors under § 109(a) | Retainers and U.S. bank accounts constitute "property" in the U.S.; minimal property suffices | Motion uncontested | Held: Retainers (and Iovate USA’s NY account) satisfy § 109(a) eligibility. |
| Whether the Canadian proceeding is a "foreign main proceeding" (COMI) | COMI is in Canada: registered offices, headquarters, centralized management and treasury in Oakville; creditor expectations align with Canadian locus | No opposition; acknowledged presumption of COMI at place of incorporation for Delaware entity but argued overcome | Held: Likely COMI in Canada for all Debtors, including Iovate USA, so Canadian proceeding is likely a foreign main proceeding. |
| Whether provisional relief under § 1519 is warranted (likelihood of success; irreparable harm) | Likelihood of recognition exists; immediate irreparable harm from garnishment and lender enforcement that could dismantle restructuring and prejudice secured collateral | No opposition | Held: Provisional relief warranted—movant showed likelihood of success and imminent irreparable harm. |
| Whether interests of U.S. creditors are sufficiently protected; bond required | Relief will preserve estate and creditor parity; affected parties retain access to courts in both jurisdictions; bond unnecessary | No opposition | Held: Interests sufficiently protected; no security/bond required. |
Key Cases Cited
- Drawbridge Special Opportunities Fund LP v. Barnet, 737 F.3d 238 (2d Cir. 2013) (Chapter 15 debtor eligibility under § 109(a) requires some U.S. property)
- In re Fairfield Sentry Ltd., 714 F.3d 127 (2d Cir. 2013) (COMI factors and presumption of registered office; creditor-expectation analysis)
- In re U.S. Steel Canada Inc., 571 B.R. 600 (Bankr. S.D.N.Y. 2017) (retainer in U.S. qualifies as property for § 109(a))
- In re Octaviar Admin. Pty Ltd., 511 B.R. 361 (Bankr. S.D.N.Y. 2014) (prepetition retainers/deposits can satisfy § 109(a))
- In re Berau Capital Resources Pte Ltd., 540 B.R. 80 (Bankr. S.D.N.Y. 2015) (granting provisional relief in cross-border insolvency to protect foreign proceeding and creditor parity)