MUMBAI: The government has proposed changes to the bankruptcy legislation by adopting a global model law that will enable lenders to apply the insolvency law to defaulters’ assets lying overseas. These will include the offshore personal assets of the promoter if they have issued a personal guarantee. The changes would also allow execution of orders against defaulters by overseas courts that have adopted the model law.
The government has invited public comments on the proposed modifications by December 15. The comments can be sent only through a web link provided on the website of the Insolvency and Bankruptcy Board of India (IBBI).
The model law is provided by the United Nations Commission on International Trade Law (UNCITRAL) — a subsidiary body of the UN. The model law lays down the basic framework for cooperation between domestic and foreign courts, and domestic and foreign insolvency professionals.
It also provides a framework for the commencement of domestic insolvency proceedings when a foreign insolvency proceeding has already commenced, or vice versa. Among the bills proposed for the winter session of Parliament is an amendment to the Insolvency and Bankruptcy Code (IBC).
“The proposed regulations will help align our bankruptcy process with major countries like the US and the UK who have implemented a model UNCITRAL cross-border insolvency law. With the increased globalisation of business, synchronised judicial cooperation and synergy are required to obtain optimal resolution outcome,” UV ARC director Hari Hara Mishra said. He added that this will also add to the ease of doing business in India and attracting foreign investors.
The adjudicating authority for pursuing personal guarantees can be the debt recovery tribunal or the National Company Law Tribunal and their appellate authority. The pre-packaged insolvency resolution process that was recently enacted for small businesses would not be subject to the cross-border norms. The changes were proposed after the Insolvency Law Committee (ILC), constituted under the corporate affairs ministry to review the implementation of the IBC, noted the lack of a framework for cross-border insolvency. The government has decided to put in place a comprehensive framework for this purpose based on UNCITRAL model law on cross-border insolvency, which could be made a part of the IBC by inserting a separate chapter for this purpose.
In January 2020, the government had constituted a cross-border insolvency rules/regulations committee to recommend subordinate legislation.