ILC constituted by the Ministry of Corporate Affairs has recommended the adoption of The United Nations Commission on International Trade Law (UNCITRAL) Model Law of Cross Border Insolvency, 1997, as it provides for a comprehensive framework to deal with cross border insolvency issues.
The Committee has also recommended a few carve outs to ensure that there is no inconsistency between the domestic insolvency framework and the proposed Cross Border Insolvency Framework.
The UNCITRAL Model Law has been adopted in as many as 44 countries and, therefore, forms part of international best practices in dealing with cross border insolvency issues. 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 model law deals with four major principles of cross-border insolvency:
- Direct access to foreign insolvency professionals and foreign creditors to participate in or commence domestic insolvency proceedings against a defaulting debtor.
- Recognition of foreign proceedings and provision of remedies.
- Cooperation between domestic and foreign courts and domestic and foreign insolvency practitioners.
- Coordination between two or more concurrent insolvency proceedings in different countries.
