Cross-Border Insolvency Coordination: What Directors Owe When Jurisdictions Disagree

Executive Summary

Here's a scenario that plays out more often than boards like to admit: a restructuring plan gets approved, everyone breathes out, and then a court in a completely different country looks at the exact same plan and asks why it should be bound by any of it. That's cross-border insolvency in a nutshell, and it's not really a legal footnote, it's a live risk for anyone signing board minutes at a multinational in distress. This piece gets into why coordinating a restructuring across borders is genuinely hard, looks at one deal that pulled it off and one that's still being tested in court, and lays out what directors actually owe creditors once the restructuring stops respecting national lines.

Quick Answer:

What Are Director Duties in a Cross-Border Insolvency?

Once insolvency looks likely, a director's duty stops being mainly about shareholders and starts being mainly about creditors. That shift doesn't stay neatly inside one country's rulebook just because the company happens to operate in several. The practical upshot: directors need to know which jurisdiction's standard governs their conduct at any given moment, because a call that's perfectly defensible under one legal system can land very differently under another.

What Makes Cross-Border Insolvency So Hard to Coordinate?

Almost every cross-border insolvency case starts with the same question: where's the company's COMI, its center of main interests? That's the test courts use to figure out which jurisdiction actually gets to run the show. Sounds simple enough, usually it's wherever the headquarters and day-to-day decisions sit, but in practice it's a recurring flashpoint, especially when a company has recently restructured itself or spun up a new holding entity specifically to land in a friendlier restructuring regime. Courts have gotten noticeably less patient with what people in the field call manufactured COMI, a brand-new entity with zero operating history trying to anchor a restructuring somewhere it only just showed up.

Who ends up dealing with this mess? Mostly the board and its restructuring advisors, usually under brutal time pressure, because COMI fights tend to erupt exactly when a company has the least room to wait things out. And here's where it gets genuinely tricky: countries don't agree on how directors are supposed to behave once things start going sideways. In the UK, directors can be personally on the hook for wrongful trading under section 214 of the Insolvency Act 1986, if they kept trading after they knew, or should have known, that insolvent liquidation was unavoidable, a court can make them personally chip in to cover creditor losses. India's Insolvency and Bankruptcy Code has its own version under section 66. Other countries frame it differently again. And a director on a genuinely multinational board can easily find more than one of these regimes pointing at them at once, depending on where the various entities are incorporated and where the real decisions get made.

So why doesn't the UNCITRAL Model Law just fix all this? It helps a lot, honestly. A growing list of countries have adopted it precisely so foreign insolvency proceedings get recognised outside their home turf. But it's a framework for cooperation, not one unified insolvency code sitting above everyone. Courts still run their own domestic tests. And post-Brexit, the UK sits entirely outside the EU's recast Insolvency Regulation, meaning UK restructuring tools now lean on local private international law and Model Law adoption, country by country, rather than getting automatic recognition across the EU. That gap is exactly where most of today's friction lives.

Real-World Example: When Coordination Works, and When It's Still Being Tested

McDermott International: the deal that made it look easy

In 2024, Texas-based McDermott International got Chapter 15 recognition, filed in the Southern District of Texas, for parallel restructuring plans running simultaneously in the UK and the Netherlands. People in the restructuring world still point to it as one of the standout cross-border deals of that year, and it's easy to see why. It showed Chapter 15 could be more than a narrow support tool bolted onto a foreign case, it could genuinely anchor a coordinated, multi-jurisdictional strategy, tying together funded debt plus trade and litigation claims across three legal systems in one coherent process.

The UK's Aggregate plan: still a work in progress

Not every case goes that smoothly, though. A UK restructuring plan tied to the Aggregate group has run into an active challenge in the German courts, a pretty sharp reminder that UK restructuring tools no longer get waved through in EU member states the way they did before Brexit. However that case lands, it points straight at the problem boards need to be planning for: a plan approved in one court doesn't automatically bind creditors or assets sitting in another, and directors who assume otherwise can end up badly exposed.

The Boardroom View

Let's be blunt about this one: cross-border insolvency coordination isn't mainly a legal strategy question, it's a personal liability question for the people around the board table. Once a company drifts into what's often called the zone of insolvency, that stretch where insolvency looks probable or imminent even though it hasn't technically happened yet, directors are expected to start weighing creditors' interests seriously. Get that shift wrong and the consequences are real: personal contribution orders, claims from insolvency officeholders, and in the worse cases, disqualification from acting as a director at all.

What makes the cross-border piece especially dangerous is that a director can genuinely believe they're doing everything right under one jurisdiction's rules, while a court somewhere else, wherever a subsidiary happens to be incorporated, or wherever creditors are based, applies a completely different standard to the same conduct. And handing this off entirely to outside counsel and assuming it's sorted isn't good enough either. Directors keep an independent duty to actually exercise judgment on things like whether there's still a reasonable prospect of avoiding insolvent liquidation. That's not a decision you can simply outsource to a lawyer's opinion letter.

A Practical Framework

None of this is unmanageable. It just requires boards to start treating cross-border insolvency risk as something worth planning for before a restructuring turns urgent, not after.

Work out COMI reasoning early, and write it down. Don't wait for a creditor to challenge jurisdiction before figuring out, on paper, why a particular court should be the one leading the process. Courts have made it clear they'll look hard at structures that seem built purely to shop for a friendlier jurisdiction.

Put one person in charge of coordinating across jurisdictions. Letting each country's process run on its own track multiplies cost and practically invites inconsistent outcomes. A single coordinating foreign representative, aligning strategy across every court involved, is a big part of what made McDermott's deal work.

Map out which wrongful-trading-style rules actually apply, and when. Because incorporation, headquarters, and creditor location can all sit in different countries, directors need real clarity on which regime governs their conduct at each stage, rather than assuming home-jurisdiction rules just travel with them everywhere.

Keep minutes that actually show real-time awareness of the numbers. If a wrongful trading claim, or something like it, ever gets brought, courts pay close attention to what the board knew and when they knew it. Minutes showing ongoing monitoring of forecasts and professional advice sought are a director's best defence that duties were taken seriously, not bolted on after the fact.

Keep an eye on where harmonization is heading. The EU's proposed directive, informally called Insolvency III and expected to become law in early 2026, would introduce a requirement for directors to file for insolvency across EU jurisdictions, something a handful of member states already require but plenty don't. Boards operating across the EU should assume the bar is going up, not staying put.

Frequently Asked Questions

What is COMI, and why does it matter so much?

COMI, the center of main interests, decides which country's court gets to run the company's main insolvency proceeding. Get it wrong, or push too hard to engineer a favourable one, and the whole restructuring risks getting challenged or simply ignored exactly where it matters most, wherever the creditors and assets actually sit.

Can a director be personally liable in a country they've never set foot in?

Yes. If a company entity is incorporated there, or creditors and assets are located there, a director can fall under that jurisdiction's insolvency standards no matter where they personally sit. It's exactly why multinational boards need jurisdiction-by-jurisdiction advice rather than one blanket assumption about exposure.

Does the UNCITRAL Model Law create one single global insolvency process?

No. It's a cooperation framework that helps courts recognise and support each other's proceedings, and plenty of countries have adopted versions of it, but every jurisdiction still runs its own domestic insolvency law underneath. Coordination has to be actively managed, it never just happens on its own.

How early should a board start planning for cross-border insolvency risk?

Earlier than most people assume, as soon as financial distress becomes a realistic possibility, not once it's already confirmed. Director duties shift gradually as a company drifts into the zone of insolvency, and courts expect to see the board was already watching the situation closely well before any formal filing became unavoidable.

Is Brexit still relevant to how UK restructurings get recognised in Europe?

Very much so. The UK now sits outside the EU's recast Insolvency Regulation, which used to hand out automatic mutual recognition. UK restructuring plans have to rely on local private international law and Model Law adoption, country by country, which is exactly the friction currently playing out in the Aggregate case before the German courts.

Key Insights

• COMI sits at the center of nearly every cross-border insolvency dispute, and courts are getting sharper about spotting structures engineered to manufacture a favourable one.

• Director duties tilt toward creditors as insolvency becomes likely, and that shift can trigger different legal standards depending on where a company's entities and creditors happen to sit.

• The UNCITRAL Model Law makes cooperation between courts possible, but it's no substitute for boards actively coordinating strategy themselves.

• The post-Brexit recognition gap between the UK and EU is still live and unresolved, not a settled question, as the Aggregate case makes clear.

Key Takeaways

• Work out COMI early and put the reasoning in writing, don't wait to be challenged on it.

• Coordinate restructuring strategy from one place rather than letting each jurisdiction's process run on its own.

• Know exactly which jurisdiction's director-conduct standards apply at each stage of financial distress.

• Keep detailed, real-time board records, they're a director's best protection if duties ever get challenged later.

  
  

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Understand how directors can navigate conflicting jurisdictions, protect creditor interests, and strengthen boardroom decision-making during multinational restructuring.

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