UNCITRAL Model Law for Crossborder Insolvency Resolution
A committee set by the Ministry of Corporate Affairs has recommended the UNCITRAL model law for cross-border insolvency resolution. The committee makes the following recommendations for addressing the cross-border insolvency:
- Adopting the UNCITRAL or United Nations Commission on International Trade Laws on cross-border insolvency.
- The UNCITRAL model law envisages a balance between liquidation and reorganization and provides a framework for resolution in four areas of cross border insolvency: access, recognition, relief (assistance) and cooperation.
- The new framework divides individuals into three categories: personal guarantors, proprietors and common individuals. This resolution process is likely to begin in phases starting from guarantors to proprietors.
- Cross border insolvency provisions will apply to corporate debtors to start with and not in personal cases.
Limitations with the Current Provisions
- Sections 234 and 235 of the Insolvency and Bankruptcy Code (IBC) are yet to be notified. Hence they cannot be enforced.
- Section 234 of the IBC states that the Central Government may enter into an agreement with the Government of any country outside India for enforcing the provisions of this Code. But there is no explicit legal arrangement for cross border insolvency.
Since many of the insolvency resolution cases that financial creditors pursue, the corporate debtors have assets or subsidiary companies outside India, these assets can also be taken into account after cross-border insolvency law kicks in.
United Nations Commission on International Trade Law
The United Nations General Assembly by resolution 2205 (XXI) in 1966 to play an important role in developing the framework to further the progressive harmonization and modernization of the law of international trade by preparing and promoting the use and adoption of legislative and non-legislative instruments in a number of key areas of commercial law.
With globalization and increasingly economically interdependent world, the importance of an improved legal framework for the facilitation of international trade and investment is widely acknowledged.
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Topics: Crossborder Insolvency Resolution • IBC • Insolvency and Bankruptcy Code • Insolvency Resolution • International Trade • Ministry of Corporate Affairs • UNCITRAL model law • United Nations Commission on International Trade Laws • United Nations General Assembly
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