## Facts

- Two Cayman-incorporated hedge funds invested in leveraged structured credit products tied to the U.S. subprime market.
- The funds maintained a registered office in the Cayman Islands but had no employees or active management conducting business there.
- Investment management was performed by a New York-based manager; key managed assets and relationships were centered in the United States.
- Administrative services and day-to-day maintenance of books and records were performed in Delaware; the investor register was kept in Ireland.
- In mid-2007, market volatility led to severe devaluations, margin calls, counterparty defaults, and secured creditor asset sales.
- The Cayman court appointed joint provisional liquidators in Cayman winding-up proceedings.
- The liquidators filed Chapter 15 petitions seeking recognition of the Cayman winding-up as a foreign main proceeding, or alternatively as a foreign nonmain proceeding.

## Issues

1. Whether the Cayman winding-up qualified for recognition as a foreign main proceeding because the funds’ center of main interests (COMI) was in the Cayman Islands.
2. If not, whether the Cayman winding-up qualified for recognition as a foreign nonmain proceeding because the funds had an “establishment” in the Cayman Islands.
3. Whether procedural compliance for recognition filings could support recognition despite failure to meet COMI or establishment requirements.

## Decision

- The court denied Chapter 15 recognition of the Cayman proceedings as a foreign main proceeding.
- The court held the presumption that COMI was at the registered office was rebutted because the funds’ actual management and operational center was in the United States.
- The court also denied recognition as a foreign nonmain proceeding because the funds had no “establishment” in Cayman and conducted no nontransitory economic activity there.
- The court noted procedural filing compliance did not substitute for meeting the statutory COMI/establishment standards.

## Legal Principles

- A foreign proceeding is recognizable as a foreign main proceeding only if pending where the debtor’s COMI is located. 11 U.S.C. §§ 1502(4), 1517(b)(1).
- The presumption that COMI is at the debtor’s registered office is rebuttable and yields to evidence of where management, operations, assets, and creditor-facing activity are centered. 11 U.S.C. § 1516(c).
- A foreign nonmain proceeding requires an “establishment,” meaning a place of operations where the debtor carries out nontransitory economic activity; mere registration and corporate formalities are insufficient. 11 U.S.C. § 1502(2).
- Chapter 15 recognition is a statutory gateway; failure to satisfy COMI or establishment requires denial of recognition even if foreign proceedings exist and required documents are filed.

## Conclusion

The bankruptcy court denied Chapter 15 recognition of the Cayman liquidation proceedings because the funds’ COMI was in the United States and the funds’ Cayman presence amounted to corporate formality rather than a place of operations conducting nontransitory economic activity.


In re Bear Stearns High-Grade Structured Credit Strategies Master Fund, Ltd., 374 B.R. 122 (Bankr. S.D.N.Y. 2007)