The aims is to enable India to seek cooperation from foreign countries to bring defaulters’ assets there under consideration for insolvency proceedings.
The Ministry of Corporate Affairs (MCA), on Wednesday, put before public draft note on cross-border insolvency.
In a statement, the ministry said, "The MCA is keen to introduce a globally accepted and well-recognised cross-border insolvency framework, fine-tuned to suit the needs of aspirational Indian economy."
The Government of India has taken initiatives for cross-border insolvency within the Insolvency & Bankruptcy Code, 2016 (the Code) to provide a comprehensive legal framework for lenders seeking access to overseas assets of a stressed company.
Also, the draft aims to enable India to seek cooperation from foreign countries to bring defaulters’ assets there under consideration for insolvency proceedings.
With the growth in the Indian economy, business and trade have adopted an increasingly international character. Not only creditors and corporates but India's banks have exposures in more than one jurisdiction, the statement said.
"Global experience demonstrates that cross-border investment decisions and their outcomes, are considerably affected by the insolvency laws in force in a country. Towards this end, even though the Insolvency and Bankruptcy Code, 2016 (Code) has resulted in significant improvement in India's insolvency regime, there is a need to include cross-border insolvency in the Code to provide a comprehensive insolvency framework," it said.
As per the ministry, inclusion of cross-border insolvency framework will further enhance ease of doing business, provide a mechanism of cooperation between India and other countries in the area of insolvency resolution, and protect creditors in the global scenario.
"Furthermore, it will make India an attractive investment destination for foreign creditors given the increased predictability and certainty of the insolvency framework."
On the global scale, the UNCITRAL (United Nations Commission on International Trade Law) Model Law on Cross-Border Insolvency, 1997 (model Law) has emerged as the most widely accepted legal framework to deal with cross-border insolvency issues while ensuring the least intrusion into the country's domestic insolvency law.
According to the ministry, due to the growing prevalence of multinational insolvencies, the model law has been adopted by 44 states till date, including Singapore, UK and US.
Introductory note and draft on cross-border insolvency have been uploaded on MCA website and suggestions are invited from stakeholders till June-end.