27.7 C
Thursday, July 25, 2024

Standards for group and cross-border insolvency soon after elections

<p>As it prepares to take office for a third term, the Narendra Modi administration has developed a strategy to concurrently enact changes to the bankruptcy and Bankruptcy Code (IBC) that would establish group and cross-border bankruptcy rules, a government source told FE.</p>
<p><img decoding=”async” class=”alignnone wp-image-488958″ src=”https://www.theindiaprint.com/wp-content/uploads/2024/03/theindiaprint.com-standards-for-group-and-cross-border-insolvency-soon-after-elections-bankruptcy-11-750×422.jpg” alt=”theindiaprint.com standards for group and cross border insolvency soon after elections bankruptcy 11″ width=”994″ height=”560″ title=”Standards for group and cross-border insolvency soon after elections 9″ srcset=”https://www.theindiaprint.com/wp-content/uploads/2024/03/theindiaprint.com-standards-for-group-and-cross-border-insolvency-soon-after-elections-bankruptcy-11-750×422.jpg 750w, https://www.theindiaprint.com/wp-content/uploads/2024/03/theindiaprint.com-standards-for-group-and-cross-border-insolvency-soon-after-elections-bankruptcy-11-768×432.jpg 768w, https://www.theindiaprint.com/wp-content/uploads/2024/03/theindiaprint.com-standards-for-group-and-cross-border-insolvency-soon-after-elections-bankruptcy-11-390×220.jpg 390w, https://www.theindiaprint.com/wp-content/uploads/2024/03/theindiaprint.com-standards-for-group-and-cross-border-insolvency-soon-after-elections-bankruptcy-11.jpg 1024w” sizes=”(max-width: 994px) 100vw, 994px” /></p>
<p>The Cabinet has received submissions from the Ministry of Corporate Affairs. The IBC Bill will probably be submitted to Parliament by the incoming administration soon after it takes power, according to an official source.</p>
<p>According to the source, group insolvency regulations are related to cross-border insolvency laws since they are necessary for their proper execution.</p>
<p>Group insolvency is the process of combining all of the assets and liabilities of a company into one corporate group and starting resolution procedures before addressing each individual company.</p>
<p>A member of the Insolvency and Bankruptcy Board of India (IBBI), Sudhaker Shukla, said in December that the government is beginning to realize that the cross-border insolvency component “will not work at all” in the absence of group insolvency.</p>
<p>In a previous study, IBBI Chairman Ravi Mittal said that enterprises are often done via groups of firms in the current environment. This has resulted in situations where the financial standing of one company affects other companies in the group. “These situations lead to defaults by one or more group companies and are classified as group insolvency,” he had previously said.</p>
<p>Conversely, cross-border bankruptcy assists in handling situations when the insolvent debtor has creditors and assets located across national borders. Experts suggest that delays in the execution of judgments rendered by courts in other jurisdictions may be prevented by having clearly established legislation.</p>
<p>As a debtor may have assets in multiple group companies, either inside or outside the jurisdiction where a proceeding is initiated, which may be dealt with or disposed of during the pendency of a proceeding, group insolvency and cross-border insolvency are inextricably linked, according to Piyush Agrawal, associate partner at AQUILAW.</p>
<p>In the absence of a legal framework, the National Company Law Tribunal makes ad hoc decisions in instances involving group resolution and other cross-border aspects. The IBC currently lacks a tool to reorganize enterprises involving cross-border countries.</p>
<p>Although the NCLT has established broad guidelines, experts have noted that the varied execution of these guidelines compromises the certainty needed to produce effective results in situations of cross-border and group bankruptcy. Anoop Rawat, partner at Shardul Amarchand Mangaldas & Co., said that “a comprehensive legislative framework introducing these concepts would plug certain important gaps in the insolvency jurisprudence in India and be a welcome step.”</p>
<p>Sources claim that the UNCITRAL Model Law on Cross-Border Insolvency (MLCBI) will serve as the foundation for the new cross-border insolvency regulations. As previously reported by FE, negotiations are underway between the government and the United Nations Commission on International Trade Law (UNCITRAL) to modify regulations pertaining to cross-border bankruptcy in a way that would benefit developing countries.</p>
<p>According to reports, with regard to group bankruptcy, the government wants to combine the Corporate bankruptcy Resolution Process (CIRP) for Corporate Debtors (CDs) that are related via ownership or control.</p>
<p>“It may be introduced to include provisions that allow resolution professionals (RPs) of such CDs to apply for group coordination proceedings, whereby a committee of creditors (CoCs) and group coordinator will form a strategy for the CD,” the source said.</p>
<p>“The new norms could allow the initiation of the CIRP against multiple CDs interconnected by control, ownership, economic dependencies, or where such companies are carrying business in pursuit of common objectives to a financial creditor (FC),” said Asav Rajan, principle associate at IndiaLaw LLP.</p>
<p>According to Sudhir Chandi, a partner at Resurgent Resolution Professional, the implementation of new guidelines would enable a more seamless and effective process while accounting for the foreign-based CD’s assets and liabilities. “With proper assessment and valuation of the assets comprehensively across all locations with proper backing of the legal framework for recovery, the recoveries are expected to be improved,” he said.</p>

Related Articles

- Advertisement -
- Advertisement -
- Advertisement -
error: Content is protected !!