Glosband on In re Basis Yield Alpha Fund (Master)

Glosband on In re Basis Yield Alpha Fund (Master)


May a bankruptcy judge question the presumption that a debtor's place of registration is its centre of main interests if the debtor has met the requirements for recognition of a foreign proceeding as a foreign main proceeding under 11 U.S.C. § 1517(a)(2) and (3) and there are no objections to the debtor's chapter 15 petition? In a January 16, 2008 ruling, a U.S. Bankruptcy Judge answered this question in the affirmative and rejected an attempt by a Cayman Islands-registered hedge fund to qualify for bankruptcy protection under chapter 15 of the Bankruptcy Code. In re Basis Yield Alpha Fund (Master), 381 B.R. 37, 2008 Bankr. LEXIS 67 (Bankr. S.D.N.Y. 2008). This commentary, written by Daniel M. Glosband, a draftsman of the Model Law on Cross-Border Insolvency and Chapter 15 of the Bankruptcy Code, discusses the Basis Yield case and its outcome.
           
Mr. Glosband writes: The Court found that there was no question that the [joint provisional liquidators (“JPLs”)] had satisfied two of the three requirements for recognition contained in section 1517(a) of the Code, namely that (i) the JPLs met the definitions of “person”7 and “foreign representative”8 in satisfaction of section 1517(a)(2) and (ii) that the JPLs fulfilled the application prerequisites of section 15159 in satisfaction of section 1517(a)(3). To prevail on a petition for recognition, however, the Court noted “the JPLs must satisfy each of the three requirements of section 1517(a) of the Code”, i.e., was the foreign proceeding a foreign main proceeding, a foreign non-main proceeding or neither? Accordingly, the recognition sought by the JPLs on summary judgment turned on whether the JPLs had shown that the Cayman proceeding was a foreign main proceeding as defined in Section 150211 of the Code. The Court framed the issues before it as:
 
whether, on the evidence before the Court, the [JPLs] have shown the
propriety of such as a matter of law, and without regard to any other facts
– and whether the Court has the right to consider all of the facts when the
JPLs elected not to put them forth and instead elected to rely on a statutory
presumption embodied in section 1516 of the Code.
 
The Court repeated the “array of factors” that the bankruptcy court in In re SPhinX, LTD., 351 B.R. 103 (Bankr. D.N.Y. 2006), found probative regarding such determination; in contrast, the Court noted “the silence is deafening” with respect to such factors or the lack of any other pertinent facts to support the existence of the foreign main proceeding.  Given the insufficiency of facts in the record supporting a foreign main proceeding, the Court turned its inquiry as to whether the presumption embodied in section 1516(c) legally excused the JPLs from proffering such evidence. [footnotes omitted]