In a key move aimed at revamping the current IBC ( insolvency and bankruptcy code), Finance Minister Nirmala Sitharaman said the existing regime would be tweaked to improve the overall efficiency of the resolution process as well as address the subject of cross-border insolvency resolution.
“Necessary amendments in the Code will be carried out to enhance the efficacy of the resolution process and facilitate cross border insolvency resolution,” said Sitharaman during the Budget speech.
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To be sure, cross–border insolvency refers to circumstance in which an insolvent debtor has assets and /or creditors in more than one country. Currently, the legal and regulatory framework does not allow automatic recognition of such cases.
Earlier, the Government had held off on adopting a comprehensive framework to deal with cross-border insolvency citing insufficient experience even with domestic insolvency cases, according to experts. With the regime around domestic insolvency cases having matured, these experts feel it’s an opportune time for the government to step in and address the gap.
“A detailed statutory mechanism for resolution of cross border insolvency would help in tackling the complex insolvency cases of groups having presence in different jurisdictions and would maximise value for all stakeholders,” said Anoop Rawat, Partner at Shardul Amarchand Mangaldas & Co.
A new framework on cross-border insolvency is expected to allow foreign professionals and creditors direct access to domestic courts and enable them to participate in domestic insolvency proceedings. Experts also expect the framework would allow recognition of foreign proceedings and would also assist courts to determine relief on a case by case basis.
Interestingly, the Economic Survey had pushed for a standardized framework for cross-border insolvency. It has also been highlighted in the report of the Insolvency Law Committee (ILC) which had recommended the adoption of the United Nations Commission On International Trade Law (UNCITRAL)
(This is a developing story and will be updated shortly)
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