Govt halts plan to adopt cross-border insolvency

The government has shelved its plan to introduce a cross-border insolvency regime that would have integrated India with several other markets that have adopted a harmonized debt resolution regime for companies with assets spread across multiple markets.

“Only about 50 countries have adopted the UN model of cross-border insolvency, and many of them have stringent restrictions. Adoption of this model is no longer on the top of the agenda,” said a person with knowledge of discussions in the government.

Priorities now include making large corporations eligible for an informal debt resolution scheme that is currently only available to small businesses, a new regime to deal with bankruptcies of group companies, and a special regime for the real estate sector. Carve, said the person. condition of anonymity. These amendments to the Insolvency and Bankruptcy Code (IBC) are expected to be taken up in the monsoon session of Parliament.

A cross-border insolvency regime has many benefits, but it also needs to address a number of issues, including the preparedness of the overall insolvency ecosystem. Apart from allowing foreign creditors to initiate or participate in insolvency proceedings in local tribunals, it will also enable creditors in India to pursue overseas assets of Indian debtors as part of the debt resolution process. Such ruling may result in recovery of applicable dues in India as well as any stay granted by a foreign court in certain scenarios.

Experts said the time had not yet come to introduce such far-reaching measures. Anoop Rawat, Partner (Insolvency & Bankruptcy) said, “Once we build the institutional capacity and the overall ecosystem of insolvency resolution is more robust to deal with such a demanding system, the cross-border insolvency regime can be Implementation might be ideal.” Law Firm Shardul Amarchand Mangaldas & Co.

“We first need a robust credit resolution infrastructure that takes up cases and approves resolution plans without delay, and for that, practice and decision-making on cross-border cases before a plan is put in place. Prepare the base as well. Given the amount of work required in that direction, it makes sense not to rush into introducing a cross-border insolvency regime at this juncture,” Rawat said.

The current priority of the government is to address key concerns around the operation of the Bankruptcy Code, particularly in reducing delays in admission of cases and approving rescue plans. It also seeks to focus on investigation of improper dealings by the management of a defaulting company during the crisis period leading up to admission of cases in tribunals. The proposed amendment, currently being reviewed by top government officials, would have specific measures in this regard. Also, the conduct of resolution professionals will be a major area of ​​focus in the proposed Bill. The Insolvency and Bankruptcy Board of India (IBBI), the rule maker, is cracking down on errant resolution professionals, as the government feels that professional discipline and transparent decision-making is the key to resolving industrial sickness.

An email sent to the Ministry of Corporate Affairs spokesperson for comments on Friday did not elicit any response.

In the absence of a harmonized arrangement for dealing with sick businesses with assets in multiple markets, judicial authorities establish a protocol for handling parallel bankruptcy proceedings in different countries. Jet Airways (India) Limited is an example of parallel bankruptcy proceedings in India and the Netherlands.

The parties shall, in such cases, coordinate efforts to minimize costs and maximize the value of the property while respecting the independence of local authorities. The United Nations Model Law on Cross-Border Insolvency provides a template for handling such situations, recognizes foreign proceedings by a local court, and gives foreign professionals and creditors access to local courts.