All you need to know about Cross Border Insolvency
Cross border insolvency is simply the treatment of financially distressed debtors who have assets or creditors in more than one country.
Also known as international insolvency, cross border insolvency is also concerned more with the companies that exist across borders.
The Ministry of Corporate Affairs have announced a provision for introducing a chapter of Cross Border Insolvency under the current Insolvency and Bankruptcy Code 2016. And to enforce their rights on overseas assets, or for foreign proceedings to recognize their assets on Indian borders, the introduction was made keeping in view the need for provisions available separately under the Code for reference of foreign creditors.
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Cross border insolvency in India is a recognition of foreign proceedings within the Indian borders.
This advancement will be a stepping stone for Indian businessmen and also for Indian creditors who can now reach out to corporate debtors, with much ease.
At present, the Code inculcates Section 234 and Section 235 to handle situations that are not yet notified.
However, the bilateral agreement that have been signed between countries can now be enforced under the current Insolvency and Bankruptcy Code 2016. The need for separate treaties will either become a setback, or will unite the major countries on the law’s approach, which seems like a distant dream right now.
It is expected that India will adopt a mechanism like the UNCITRAL Model Law on Cross-Border Insolvency. This will further help to manage cross-border insolvency issues and work towards global integration. Insolvency, Bankruptcy Code and other recent measures introduced by the Government and the Reserve Bank of India could also be addressed once the UNCITRAL is introduced.
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What we understand –
Incorporation of cross-border insolvency into the already existing Insolvency and Bankruptcy Code will uplift and strengthen the Indian legislation by highlighting it as a one-stop legislation for all matters related to insolvency. By enacting this provision, the Indian Insolvency framework can receive global acceptance and recognition as businesses today are rapidly becoming trans-border.
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