GS Paper 2:
Topics Covered: Important International institutions, agencies and fora, their structure, mandate.
The Economic Survey 2021-22 has highlighted the need for a “standardised framework for cross-border insolvency” that will help lenders of debt-ridden companies to claim and recover the corporations’ assets and liabilities on foreign shores also.
What needs to be done now?
The survey mentioned the report of the Insolvency Law Committee, which had recommended the adoption of the United Nations Commission on International Trade Law (UNCITRAL) with certain modifications to bring the foreign assets under the insolvency process.
The IBC currently does not allow for automatic recognition of any insolvency proceedings in other countries” and the present provisions “leads to uncertainty of outcomes of claims for creditors, debtors and other stakeholders as well.
- It provides a legislative framework that can be adopted by countries with modifications to suit the domestic context of the enacting jurisdiction.
- It has been adopted by 49 countries, including Singapore, UK, US and South Africa.
- UNCITRAL allows foreign professionals and creditors direct access to domestic courts and enables them to participate in and commence domestic insolvency proceedings.
- It allows recognition of foreign proceedings and enables courts to determine relief accordingly.
Did you know that the UN Commission on International Trade Law (UNCITRAL) is a subsidiary body of the U.N. General Assembly responsible for helping to facilitate international trade and investment? It was established by the UNGA in 1966.
Sources: the Hindu.