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Cross-border insolvency should use Uncitral model, says panel

The committee, which submitted its report to Finance Minister Arun Jaitley has however, recommended a few changes to laws to remove any inconsistency between the existing domestic and the proposed cross border insolvency framework. Photo: MintPremium
The committee, which submitted its report to Finance Minister Arun Jaitley has however, recommended a few changes to laws to remove any inconsistency between the existing domestic and the proposed cross border insolvency framework. Photo: Mint

The UNCITRAL Model Law, adopted by 44 countries, will give greater confidence to foreign investors while giving precedence to domestic laws

New Delhi: A committee constituted to look into further changes into the Insolvency and Bankruptcy Code has recommended adoption of the UNCITRAL model law on cross-border insolvency.

This is significant because many Indian companies operate overseas and multinational companies have subsidiaries in India, thereby increasing the need for a cross-border insolvency framework. The Insolvency and Bankruptcy Code, 2016, had added a chapter on cross-border insolvency at the time of enactment.

The committee, which submitted its report to Finance Minister Arun Jaitley on Monday, has however, recommended a few changes to laws to remove any inconsistency between the domestic regime and the proposed cross-border insolvency framework, according to a government statement.

The UNCITRAL model law, 1997, facilitates direct access to foreign insolvency professionals and foreign creditors to be involved in domestic insolvency proceedings, recognition of foreign proceedings and provision of remedies; cooperation between domestic and foreign courts and domestic and foreign insolvency practitioners; and coordination between two or more concurrent insolvency proceedings in different countries.

The UNCITRAL model law, adopted by 44 countries, will provide greater confidence to foreign investors while giving precedence to domestic laws.

“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 statement added.

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