Panel for adopting UN model on cross-border insolvency

What is Important?
UPSC perspective:
Prelims:Insolvency & Bankruptcy Code, 2016
Mains: Policy measures to curb cross border insolvency.

Why in News?

The Insolvency Law Committee (ILC), entrusted with proposing alterations to the Insolvency and Bankruptcy Code of India (IBC), has prescribed for adopting the UN model to handle cross-border insolvency cases.

UNCITRAL Model Law of Cross Border Insolvency

*The UNCITRAL Model Law on Cross-Border Insolvency was a model law issued by the secretariat of UNCITRAL on 30 May 1997 to assist states in relation to the regulation of corporate insolvency and financial distress involving companies which have assets or creditors in more than one state.
*It defines a cross-border insolvency as one where the insolvent debtor has assets in more than one state, or where some of the creditors of the debtor are not from the state where the insolvency proceeding is taking place.
*The model law deals with four major principles of cross-border insolvency namely: access to foreign insolvency professionals and foreign creditors to participate in or commence domestic insolvency proceedings against a defaulting debtor;
2.recognition of foreign proceedings & provision of remedies;
3.cooperation between domestic and foreign courts & domestic and foreign insolvency practioners;
4.coordination between two or more concurrent insolvency proceedings in different countries.
*The main proceeding is determined by the concept of centre of main interest (“COMI”).

Need for cross-border insolvency framework:

*The necessity of having Cross Border Insolvency Framework under the Insolvency and Bankruptcy Code arises from the fact that many Indian companies have a global footprint and many foreign companies have presence in multiple countries including India.
* Although the proposed Framework for Cross Border Insolvency will enable us to deal with Indian companies having foreign assets and vice versa, it still does not provide for a framework for dealing with enterprise groups, which is still work in progress with UNCITRAL and other international bodies.
*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

Panel for adopting UN model on cross-border insolvency Panel for adopting UN model on cross-border insolvency Reviewed by The Hindu Current Affairs on October 23, 2018 Rating: 5

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