COMI Sense Prevails: U.S. Court Finds Canada As COMI In Iovate Case

In the recent decision of Re: Iovate Health Sciences International Inc. et al ("Iovate"), the United States Bankruptcy Court held that an American corporation's centre of main interest ("COMI") was in Canada. This is the third recent decision involving Canadian entities where one corporation in the debtor group was American and the Court determined that its COMI was in Canada. Iovate clarifies when the presumption that an entity's COMI is the jurisdiction of its registered office can be rebutted.

Background Facts

The objective of determining a debtor's COMI is to identify the jurisdiction most closely related to its business to facilitate resolving claims in a single forum.¹ Article 16(3) of the Model Law on Recognition and Enforcement of Insolvency-Related Judgments establishes a rebuttable presumption that a debtor's COMI is the location of its registered office.² However, it does not specify what proof is necessary to overcome this presumption.

Here, Iovate Health Sciences International Inc. ("Iovate International") brought a motion for provisional relief in its capacity as the authorized foreign representative of itself, Iovate Health Sciences USA Inc. ("Iovate USA") and Northern Innovations Holding Corp ("Northern Innovations" and, collectively with their non-debtor affiliates, the "Iovate Group"). The Iovate Group is a health and wellness brand that specializes in supplements and vitamins. It is based in Oakville, Ontario and distributes products internationally.³

Iovate International and Northern Innovations Holding Corp. are Ontario corporations, both with registered offices in Oakville. Iovate International, being the Iovate Group's primary operating entity, also operates the business' corporate head office in Oakville. Iovate International owns the Iovate Group's inventory, raw materials and most of its cash, non-United States-based accounts receivable and other assets. Furthermore, Iovate International employs 165 people in Canada and two in the United Kingdom. Northern Innovations has a registered office in Oakville and no employees. It owns the group's intellectual property.⁴

Iovate USA is a Delaware limited liability company with its registered office in Wilmington, Delaware. It oversees warehousing and third-party logistics for the group's customers outside of Canada. Iovate USA employs 11 people in the United States. It manages the Iovate Group's relationship with United States-based customers and owns the corresponding accounts receivable. The Iovate Group's cash management practice involves Iovate USA's deposit of receivables into a New York-based account, which are then swept by the Iovate Group into its Canadian accounts on a daily basis.⁵

On September 5, 2025, Iovate International, Iovate USA and Northern Innovations each filed a Notice of Intention to Make a Proposal under the Bankruptcy and Insolvency Act (Canada)⁶ On September 9, 2025, the Ontario Superior Court of Justice granted an order which, among other relief, authorized Iovate International to act as the debtors' foreign representative. Iovate International subsequently commenced proceedings under Chapter 15 of the United States Bankruptcy Code (the "Code").

The Decision

The Court found that Iovate International, as foreign representative, met its burden for provisional relief under section 1519 of the Code.

First, the debtors satisfied the statutory definition of "debtor" under the Code, which imposes a requirement to own property in the United States. The debtors each have a retainer with a New York-based law firm. Since retainers qualify as "property" under section 109 of the Code, this satisfies the requirement that a debtor hold property in the United States. Further, Iovate USA's separate New York-based bank account independently satisfies the property requirement. The Court also held that the New York court was the appropriate venue for the Chapter 15 proceedings because the debtors' only property in the United States was in New York.⁷

Next, the Court held that the Canadian proceeding likely constituted a "Foreign Main Proceeding" for the debtors. A "Foreign Main Proceeding" is pending in the country where the debtor has its COMI.⁸ The Code does not define COMI, so the Court looked to section 1516(c) which provides that the debtor's registered office or habitual residence is presumed to be its COMI. The Court in Iovate confirmed this presumption can be rebutted by circumstances as of the time that a debtor files its Chapter 15 petition, including the following non-exhaustive list of factors:

1. the location of the debtor's headquarters;
2. the location of those who actually manage the debtor;
3. the location of the debtor's primary assets;
4. the location of the majority of the debtor's creditors, or those creditors who would be affected by the case;
5. the jurisdiction whose law would govern most disputes;
6. the expectation of creditors, as determined based on public information; and
7. the debtor's pre-filing restructuring efforts.

Additionally, the Court cautioned that it may undertake a "holistic analysis" to assess whether a debtor has manipulated COMI to shift it to its preferred locale.⁹

Applying the test described above, the Court readily concluded that the COMI for both Iovate International and Northern Innovations, being Canadian corporations, was Canada. With respect to Iovate USA, the Court found that the relevant circumstances were sufficient to rebut the statutory presumption favouring an American COMI, and that the appropriate COMI was Canada. In so finding, the Court was informed by the highly integrated nature of the Iovate Group's business enterprise (which were primarily managed and operated out of Canada), as well as the location of Iovate USA's senior management being either China or Canada and outside of the U.S. Importantly, Iovate USA was dependent on those management, business, finance and other operational functions which occurred in Canada.

Given the provisional nature of the relief sought by Iovate International, the Court also applied the test for preliminary injunction, which included an assessment of, among other things, whether irreparable harm would arise from denying the requested relief and an assessment of the balance of harms. Here, the Court concluded that there was a significant risk of irreparable harm arising from creditor enforcement activities in the absence of the relief requested. Further, the Court found that the balance of harms favoured granting interim relief because the relief sought protected the debtors' estate and benefitted creditors. The Court also held that granting relief was in the public interest and consistent with the policies underlying the Code and Chapter 15. Further, the Court noted that permitting an international workaround to the Canadian stay would erode the Debtors' estate. Conversely, granting relief would minimize interjurisdictional inconsistencies and facilitate cooperation with the Canadian court. Last, the Court noted that the affected parties were sufficiently protected because they could access the Canadian court and seek relief in connection with the debtors' Canadian insolvency proceedings. ¹⁰

Implications and Key Takeaways

Iovate provides clarity as to the analysis to be undertaken by the U.S. Bankruptcy Court in Chapter 15 proceedings to determine a U.S. company's COMI. The Court will take a holistic approach, with a view to how the U.S. company functions as part of a larger cross-border enterprise, as well as any attempts of forum shopping by the debtor group. This clarification increases certainty surrounding the U.S. Bankruptcy Court's approach to determining whether it will grant provisional relief in Chapter 15 proceedings commenced by businesses on both sides of the border, and illustrates the U.S. courts' recognition of increased cross-border filings in recent years. Iovate is part of a growing trend where U.S. courts recognize Canadian COMI for cross-border entities, even where some debtor companies are incorporated in the U.S. It reinforces the functional approach to COMI, focusing on actual business operations rather than prescribed formal registration.

Footnotes

1 Alfonso Nocilla, Modified Universalism and COMI: A Comparative Analysis, 2024 22 Annual Review of Insolvency Law, 2024 at 13.

2 UNCITRAL, UNCITRAL Model Law on Cross-Border Insolvency with Guide to Enactment and Interpretation (Vienna: United Nations, 2014), online (pdf): UNCITRAL < uncitral.un.org/sites/uncitral.un.org/files/media-documents/uncitral/en/1997-model-lawinsol-2013-guide-enactment-e.pdf > [MLCBI].

3 Re: Iovate Health Sciences International Inc, 25-11958-mg (Bankruptcy Southern Dist. N.Y. 2025) at 3.

4 Ibid.

5 Supra, note 3 at 10.

6 Pursuant to section 50.4 of the BIA.

7 Ibid at 11.

8 Ibid at 18, citing section 1517(b)(1) of the Code.

9 Ibid at 21, citing Re: Fairfield Sentry Ltd, 714 F.3d 127, 137 (2d Cir. 2013) 440 B.R at 66.

10 Ibid at 27.

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