IBBI chief advocates comprehensive cross-border insolvency framework
The new head of the Insolvency and Bankruptcy Board of India (IBBI) has emphasized on a comprehensive cross-border insolvency framework.
- Cross-border insolvency refers to situations in which an insolvent debtor(s) has assets or creditors in more than one country.
- At present, the provisions of the Insolvency and Bankruptcy Code (IBC), 2016, deal with cases of cross-border insolvency through bilateral agreements. For this the adjudicating authorities issue letters of request to foreign courts under Section 234, and Section 235 of the IBC.
- The Insolvency Law Committee (ILC) has observed that the process is an ad-hoc framework. This leads to delays and uncertainty for creditors, debtors and courts.
- Consequently, the Ministry of Corporate Affairs has proposed a legal remedy for cross-border insolvency under IBC. However, it is yet to be finalized.
Importance of Cross-Border Insolvency Framework:
- It will provide a robust and principles-based framework for cross-border bankruptcy proceedings. Through this, Indian and foreign stakeholders will be able to solve their problems faster and efficiently.
- This will be seen by global investors and advanced economies as a progressive and foresight-based market reform.
- It will facilitate access and recognition of Indian proceedings in jurisdictions that have already adopted such model legislation.
- This need has been felt by Indian businesses due to the expansion of their business in the world and increased linkages with the financial market.
Source – The Hindu
