Recognizing US proceedings where head office located in Canada?

In the Matter of Curo Canada Corp. and LendDirect Corp.
Should the court grant an order recognizing US bankruptcy proceedings as foreign main proceedings even though the company has its registered office in Canada?

Overview: In this case, the court granted a request to recognize US bankruptcy proceedings as foreign main proceedings even though the company had its registered office in Canada. It is true that, absent evidence to the contrary, a debtor’s COMI is deemed to be the location of its registered office. However, this is a rebuttable presumption and the determination of COMI is substantive, rather than technical. Here, that presumption was rebutted by a plethora of factors suggesting that the COMI for each entity was in the US, including that all executive and management level decision making for the company was made by management and leadership in the US, and that the Canadian debtors had no Canadian head office and relied on back-office service support provided in the US.

CURO Group Holdings Corp. (“CURO Parent”), CURO Canada Corp., LendDirect and certain other affiliates (collectively, the “Debtors”) were part of a group of companies that offered a broad range of direct-to-consumer finance products to customers in the United States and Canada. Those products included installment loans, revolving line-of-credit loans, single-pay loans and insurance products.

On March 25, 2024, the Debtors filed voluntary petitions for relief pursuant to Chapter 11 of Title 11 of the United States Code with the United States Bankruptcy Court for the Southern District of Texas to commence insolvency proceedings (the “Chapter 11 Cases”). The Applicant, CURO Parent, in its capacity as the Proposed Foreign Representative of itself, CURO Canada Corp. and LendDirect, sought foreign recognition and related relief pursuant to Part IV of the Companies’ Creditors Arrangement Act and section 106 of the Courts of Justice Act. Specifically, CURO Parent sought an Order, among other things, recognizing the Canadian Debtors’ Chapter 11 Cases as foreign main proceedings.

Part IV of the CCAA establishes the process for addressing the administration of cross-border insolvencies to promote cooperation and coordination with foreign courts. The central principle governing Part IV is comity, which mandates that Canadian courts should recognize and enforce the judicial acts of other jurisdictions, provided that those other jurisdictions have assumed jurisdiction on a basis consistent with principles of order, predictability and fairness.

The Court was satisfied that it was appropriate to recognize the Canadian Debtors’ Chapter 11 Cases as Foreign Main Proceedings. First, the relevant provisions of the CCAA were satisfied. Subsection 47(1) of the CCAA provides that the Court shall make an order recognizing a foreign insolvency proceeding if it is satisfied the following two requirements are met:

1. the application for recognition of a foreign proceeding relates to a “foreign proceeding” within the meaning of the CCAA; and

2. the applicant is a “foreign representative” within the meaning of the CCAA in respect of that foreign proceeding.

Proceedings under the US Bankruptcy Code are consistently recognized by Canadian courts to satisfy the definition of “foreign proceeding” under subsection 45(1) of the CCAA. Further, the Proposed Foreign Representative obtained an order from the US Bankruptcy Court declaring CURO Parent as the Foreign Representative for purposes of the Chapter 11 Cases.

Second, the Canadian Debtors’ Chapter 11 Cases were Foreign Main Proceedings since the Canadian Debtors’ centre of main interest (“COMI”) was in the United States. Subsection 45(2) of the CCAA provides that, absent evidence to the contrary, a debtor’s COMI is deemed to be the location of its registered office. However, this is a rebuttable presumption and the determination of COMI is substantive, rather than technical. Where it is necessary to go beyond the presumption under subsection 45(2), Courts have found the COMI to be where:

1. the location is readily ascertainable by creditors;

2. the location of the debtor’s principal assets or operations; and

3. the location where the management of the debtor takes place.

In addition to those primary considerations, Canadian courts have also considered the following factors:

1. the location where corporate decisions are made;

2. the location of employee administrations, including human resource functions;

3. the location of the company’s marketing and communication functions;

4. whether the enterprise is managed on a consolidated basis;

5. the extent of integration of an enterprise’s international operations;

6. the centre of an enterprise’s corporate, banking, strategic and management functions;

7. the existence of shared management within entities and in an organization;

8. the location where cash management and accounting functions are overseen;

9. the location where pricing decisions and new business development initiatives are created; and

10. the location an enterprise’s treasury management functions, including management of accounts receivable and accounts payable.

Here, notwithstanding that the registered offices of CURO Canada and LendDirect were a single store location in Ontario and a law firm in Alberta, respectively, the COMI for each entity was in the US. All executive and management level decision making for the company was made by management and leadership in the US. The Canadian Debtors had no Canadian head office and relied on back-office service support provided in the US. They were unable to operate independently of that support. Oversight of cash management and accounting functions, the seat of the treasury management, supervision of human resources, legal and corporate development all took place in the US. The principal creditors of the Canadian Debtors were US-based entities whose address for services was located in the US. In short, the Canadian Debtors’ operations were deeply interconnected with the operations of the US-based Debtors. The Canadian Debtors were governed from a strategic and management perspective out of the US.

Coordination of the insolvency proceedings in the US and Canada supported the equal and fair treatment of stakeholders. Accordingly, the Court granted the proposed relief.

Judge: Justice Osborne

Counsel: Ryan Jacobs, Jane Dietrich, Natalie Levine and Alec Hoy of Cassels for CURO; Aubrey Kauffman of Fasken for WF MARLIE 2018-1; Jamie Ernst, Sean Zweig and Joshua Foster of Bennett Jones for FTI as information officer; and Tracy Sandler and Martino Calvaruso of Osler for Atalaya Asset Income Fund Parallel 345 LP