A committee to look into amendments to the Insolvency and Bankruptcy Code (IBC) on Monday recommended the adoption of the UNCITRAL Model Law of Cross Border Insolvency to deal with cross-border insolvency issues.
The Insolvency Law Committee constituted by the Corporate Affairs Ministry also recommended some changes to ensure there was no inconsistency between the domestic insolvency framework and the proposed cross-border insolvency framework, an official statement said.
The committee submitted its report to Finance Minister Arun Jaitley. The UNCITRAL model law, which is adopted in as many as 44 countries, focuses on authorising and encouraging cooperation and coordination between jurisdictions, rather than attempting the unification of substantive insolvency law.
“The advantages of the model law are the precedence given to domestic proceedings and protection of public interest. The other advantages include greater confidence generation among foreign investors, adequate flexibility for seamless integration with the domestic insolvency law and a robust mechanism for international cooperation,” the government statement said.
It said that having cross-border insolvency framework under the IBC was necessary as many Indian companies have a global footprint and many foreign companies have presence in multiple countries including India.
“Although the proposed framework 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,” the statement added.