Author: Marta Grzelak, Partner at McHale & Co Solicitors* (see website).
*McHale & Co Solicitors do not provide legal advice in Scotland
In March last year I had the pleasure to be invited to a seminar on bankruptcy organised by ASBiRO University. I listened to a number of very interesting, although sad stories about entrepreneurs struggling with personal insolvency in Poland. My presentation resulted in a very positive feedback and I have been told that its video recording is the University’s most popular talk online. I have also received many questions concerning this subject, thus I decided to share shed some light on the matter here as well.
We represent clients with such problems from across the European Union, although most often we help customers from Ireland, Germany and Poland. Cross-border insolvency proceedings are regulated by the Council Regulation (EC) No 1346/2000.
Many of our clients tried to become insolvent previously in Poland, however they found it to be extremely difficult. Personal bankruptcy was introduced in Poland on 31st of March 2009. However, recent statistics tell us that on average only about 2% of all applications end in insolvency being declared.
Cross-border bankruptcy allows for declaring oneself insolvent in one EU member country as a result of the debt accumulated in another, also EU member country.
In order to declare bankruptcy in England and Wales an application must meet three conditions:
1. Determine Centre of Main Interest (COMI) being in England and Wales;
2. Prove that creditors are aware of the applicant’s new COMI;
3. Prove that the applicant is unable to pay their debts.
It is absolutely vital to determine COMI. It is defined as the place where the debtor conducts the administration of his interests on a regular basis and is therefore ascertainable by third parties (institutions, banks, place of claiming benefits etc.). We accept, that this can be achieved after having lived in England and Wales for at least 6 months.
The COMI is determined at the date the petition is presented and not where, historically, the relevant activity was carried out. Therefore, the location of creditors and the country in which debts were incurred are not material issues in determining a COMI.
If the debtor declares bankruptcy in the United Kingdom, then the laws of this country and not Polish law apply to both the debtor and the creditors. This is extremely important as the UK regulations are far more favourable to an application than Polish regulations stipulated in the Personal Insolvency Act. Once somebody is declared bankrupt in the UK, their Polish creditors do not have a right to recover the debts and Polish debt collectors are required to withdraw from debt enforcement. Moreover, they do not have a right to question in any way the legitimacy of the judgement of the court in the United Kingdom. In this instance, the regulations of the country in which a petition for bankruptcy was lodged must be applied and the country where the debt was accrued.
If you require more information about this topic please feel free to contact me directly by phone or email.