Vol 12 (2015) - Issue 2

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Opening Bank Account Opens the Door to Chapter 15 Eligibility (In re Suntech Power Holdings Co., Ltd., 2014 WL 6152761)

Introduction
On 17 November 2014, the United States Bankruptcy Court for the Southern District of New York (the 'Bankruptcy Court') issued a ruling in In re Suntech Power Holdings Co., Ltd. that will make it easier for offshore companies to obtain relief under chapter 15 of the US Bankruptcy Code (the 'Bankruptcy Code'). In Suntech, the Bankruptcy Court ruled that a chapter 15 debtor could satisfy the eligibility requirements of Bankruptcy Code section 109(a), which requires a chapter 15 debtor to have a residence, domicile, place of business or property in the United States, by opening a bank account shortly before the chapter 15 filing – even if the purpose of opening the account was to satisfy section 109(a). The Bankruptcy Court also rejected assertions that the court-appointed liquidators had manipulated venue by opening the account in New York to avoid a chapter 15 filing in California, and had manipulated the debtor's centre of main interests ('COMI') by transferring business records and assets to the Cayman Islands, and commencing a provisional liquidation proceeding (the 'Cayman Proceeding') there, to avoid an insolvency filing in China. Finally, after granting foreign main recognition to the Cayman Proceeding, the Bankruptcy Court denied a creditor's cross-motion seeking to transfer venue to California, on the basis that the chapter 15 case was properly venued in New York.

Background
Suntech Power Holdings Co., Ltd. ('Suntech' or the 'Debtor') is a Cayman Islands exempted company formed in August 2005, with its registered office in George Town, Grand Cayman. As an exempted company, Suntech did not conduct business in the Cayman Islands, but instead identified its principal executive offices as being in Wuxi, China.
As a holding company, Suntech is the ultimate parent company of a group of direct and indirect subsidiaries that develop, manufacture and market photovoltaic modules (i.e., solar energy equipment). Suntech's primary indirect US subsidiary, Suntech America, Inc. ('Suntech America') was incorporated in Delaware and is based in San Francisco.
Suntech issued USD 575 million of notes in 2008 (the 'Notes'). The Notes matured on 15 March 2013, and Suntech defaulted. Following the default, certain noteholders (the 'Noteholders') filed lawsuits against Suntech in the United States District Court for the Southern District of New York, seeking to enforce the Notes (the 'SDNY Litigation').