What are key recommendations of the insolvency law committee to deal with cross border insolvency?
The Insolvency Law Committee (ILC) was constituted by the Ministry of Corporate Affairs to recommend amendments to Insolvency and Bankruptcy Code of India, 2016.
Recommendations of the committee:
- The committee has recommended the adoption of the UNCITRAL Model Law of Cross Border Insolvency, 1997 to address the issues of cross border insolvency.
- Ensuring that there is no inconsistency between the domestic insolvency framework and the proposed Cross Border Insolvency Framework.
How UNCITRAL model law will help?
- The UNCITRAL Model Law has been adopted in as many as 44 countries. Hence it forms part of international best practices in dealing with cross border insolvency issues.
- It gives precedence to domestic proceedings and protection of public interest.
- It also boosts greater confidence generation among foreign investors, as it assures adequate flexibility for seamless integration with the domestic Insolvency Law and a robust mechanism for international cooperation.
UNCITRAL model law
The model law deals with four major principles of cross-border insolvency
- Direct access to foreign insolvency professionals and foreign creditors to participate in or commence domestic insolvency proceedings against a defaulting debtor
- Recognition of foreign proceedings & provision of remedies
- Cooperation between domestic and foreign courts & domestic and foreign insolvency practioners
- Coordination between two or more concurrent insolvency proceedings in different countries.
Many Indian companies have a global footprint and many foreign companies have presence in multiple countries including India. This makes a strong case for having Cross Border Insolvency Framework under the Insolvency and Bankruptcy Code. The inclusion of the Cross Border Insolvency Chapter in the Insolvency and Bankruptcy Code of India, 2016, will be a major step forward and will bring Indian Insolvency Law on a par with that of matured jurisdictions.