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CROSS-BORDER INSOLVENCY: Report on the rules and regulations released in November, 2021 by Insolvency and Bankruptcy Board of India (IBBI)

By Isha Virmani      22 December, 2021 01:43 PM      0 Comments


Cross-border insolvency, which can also be termed as International Insolvency, is the principle that governs the fate of debtors who have financial creditors in more than one nation in a situation of insolvency. The importance of cross-border insolvency lies in the fact that businesses today involve an international and cross border element, and therefore, the implications of cross border insolvency cannot be ignored for too long. When an investor invests in a multinational company and that company goes into insolvency, both domestic as well as international investors would seek to protect their interests, and at such times cross-border insolvency plays a major role.

In India, the Insolvency and Bankruptcy Code, 2016 (“IBC/Code”) provides the mechanism for the creditors of an entity to initiate Corporate Insolvency Resolution Process (“CIRP”) in the event of default in the payment of debts by the corporate debtor. However, the Code does not provide for an effective mechanism to deal with cross-border insolvency proceedings. Sections 234 & 235 of the Code assist in cross-border insolvency disputes.[1] Section 234 empowers the Central Government to enter into agreements with foreign countries to resolve situations of cross-border insolvency. Section 235 allows the Adjudicating Authority (“AA”) to issue a letter of request to a court in a country with which an agreement under Section 234 has been entered into, to deal with assets situated in that country. However, Section 234 and Section 235 of the Code have not yet been notified and no steps have been taken to implement them. [2] 



The Insolvency Law Committee (“ILC”) was constituted on 16 November 2017 by the Ministry of Corporate Affairs to re-evaluate the current cross-border insolvency framework in India as it was fragmented, complicated and not at par with global standards. Considering the importance of an effective mechanism for cross-border insolvency, the ILC in its second report on 16-10-2018, recommended incorporating the UNCITRAL Model Law, with certain modifications, into the existing IBC. [3]



The UNCITRAL 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. It has been adopted by 49 States to date. This includes developed as well as developing countries, such as Singapore, the UK, the US, South Africa, the Republic of Korea, etc. In a detailed report in October 2018, the ILC made recommendations with suitable modifications for the adoption of the UNCITRAL model in the Indian context. On this basis, it recommended draft provisions on cross-border insolvency for insertion in the Code (hereinafter referred to as “Draft Part Z”). [4]


Report Details

On 23rd November 2021, the Insolvency and Bankruptcy Board of India (“IBBI”) released the Report on the rules and regulations for cross-border insolvency resolution believing that the enactment and implementation of cross border insolvency provisions along with the rules and regulatory framework would make the insolvency regime more comprehensive and internationally competitive. [5] These rules may be called the Insolvency and Bankruptcy (Cross Border Insolvency) Rules, 2020. They shall come into force from the date of the publication of these Rules in the Official Gazette. These Rules shall apply to matters relating to the cases of cross-border insolvency provided in Part Z of the Code in exercise of the powers conferred by [suitable references inserted in section 239 read with sections 7, 8, 11, 12 and 14 of Part Z] of IBC, 2016.

The report focuses on, among other things, the type of cases that are likely to have cross border insolvency implications. It also discusses in detail the necessity and the purpose of having a cross- border system and what situations actually lead to its use and which companies are likely to have cross border proceedings. The report discusses in detail the 4 key elements of Part Z, i.e., access, recognition, cooperation and coordination, along with analysing the scenarios to examine the applicability of each of the four elements. The report answers an important question about the importance of sequencing in concurrent proceedings, considering that the effective date for  Centre of Main Interest (COMI) determination for a proceeding should be the date of commencement.

The report further has a provision for the designated benches for the adjudication of cross-border insolvency cases.The Cross Border Insolvency Rules/Regulations Committee (CBIRC) recommends that all the benches of the National Company Law Tribunal (NCLT) should be vested with the jurisdiction to deal with applications under Part Z in respect of corporate debtors whose registered office is located within their territorial jurisdiction. However, cases pertaining to ’foreign companies’ could be dealt with by a designated bench. In such cases, the designated bench would be the Principal Bench of the NCLT on the same analogy as Indian owned foreign companies are required to register themselves with the Registrar of Companies (RoC) in New Delhi.



The rules include definitions of different terms, provisions for access to foreign representatives, how foreign representatives have to seek authorisation from the board in connection with an application made under Part Z, and so on. The report also includes the drafts of various forms, applications, affidavits, etc. to be filed at various stages of proceedings. Rule 9 includes a detailed study of the various manners of entrustment of assets. The manner of entrustment is, in simple terms, a list of actions that the Adjudicating Authority may pass for the foreign administrator to choose from for the purpose of realization of assets of the corporate debtor.

Some of the options available to the foreign administrator include executing deeds, receipts, etc. in the name or on behalf of the corporate debtor, making a public announcement for collection of claims, preparing a consolidated list of claims with a resolution professional or liquidator, advertising the assets for sale in the manner agreed, and so on. The report includes provisions in Rule 8 for the manner for application of reliefs and the various particulars required in an application seeking relief under section 18 of Part Z. Meanwhile Rule 10 of the report lists down the additional reliefs that may be available to a resolution professional or liquidator under the Code under clause (f) of sub-section (1) of section 18 of Part Z. These reliefs include access to electronic records, books of accounts, records and other relevant documents of corporate debtor, conducting a valuation of the corporate debtor’s assets, etc.

The Centre of main interests have been discussed in Rule 7 of the report. In simple words, the centre of main interest is the location where the debtor administers its business and which, as such, is "recognizable" by a third party. Rule 7 explains the relevant factors to be considered while determining the centre of main interests under sub-section (3) of section 14 of Part Z and the relevant date for determining the centre of main interests of the corporate debtor, which shall be the date of commencement of the foreign proceedings as per the laws of the respective foreign country.

Rule 8 makes a request for facilitating co-operation by the foreign representative to the Adjudicating Authority under Chapter IV of Part Z including the list of information to be submitted in respect of the same foreign proceeding, such as, a certified copy of the decision of the commencement of the foreign proceeding and appointment of the foreign representative in such proceedings; a certificate from the foreign court affirming the existence of the foreign proceeding and of the appointment of the foreign representative; and in the absence of any of the above mentioned documents, any other evidence affirming the existence of the foreign proceeding and of the appointment of the foreign representative; proof of fees having been paid, etc. The report makes provisions in cases when a foreign representative ceases to be the foreign representative in relation to the foreign proceeding for the corporate debtor and is replaced by another person. There are also rules for the procedure of filing and application fee.



There is also a long list of regulations issued by the Insolvency and Bankruptcy Board, in exercise of powers conferred by sections 3, 7, 8 and 11 of the Part Z of the Code. The regulations have been divided into 4 chapters. Chapter I named Preliminary, includes the first 2 basic regulations laying down the groundwork for the title and commencement and definitions of the various terms that come under discussion. Chapter II named resolution professional or liquidator, includes the regulations that when a resolution professional or liquidator acts in a foreign country in relation to a proceeding under this Code, as authorised by section 3 of Part Z, he shall intimate the Board by submitting Form A prior to undertaking any such acts and another regulation regarding the costs incurred by the resolution professional or liquidator in relation to a proceeding under this Code, shall form part of the insolvency resolution process costs.

Chapter III of regulations includes provisions regarding foreign representatives such as, the code of conduct, preservation of an electronic copy of the records relating to the proceedings in India, and disciplinary proceedings against foreign representatives. Chapter IV, which is the last chapter under regulations by IBBI, elaborates on the procedure to notify the creditors having addresses outside India in situations when the notice can be given in accordance with the rules and regulations of the code as well as in situations when it is not possible to give notice to a foreign creditor in accordance with the rules and regulations of the Code. 



The Cross-Border Insolvency Rules and Regulations Committee in the first part of its Report on the rules and regulatory framework for cross border insolvency has done a commendable job in considering the minutest details and issues to be considered in the cross- border insolvency mechanism of our country. The goal has been to resolve the barrier of international disputes in case of default happening in the financial dealings between debtors and creditors of a business.

The committee has issued guidelines for communication and cooperation between the adjudicating authority and foreign courts in cross- border insolvency matters, adoption and interpretation, communication between the adjudicating authority and foreign courts, appearance before the adjudicating authority, consequential provisions and joint hearings. The Committee has been successful in trying to formulate effective rules and regulations to solve the problem of cross- border insolvency in India.



[1] Section 234 & 235, The Insolvency & Bankruptcy Code, 2016.

[2] Notice for public comments on cross border insolvency, 24 November 2021, File No. 30/27/2018-Insolvency Section Government of India Ministry of Corporate Affairs, https://ibbi.gov.in/webfront/Noticefor-Public-Comments-on-Cross-Border-Insolvency-241121.pdf

[3]  The SCC online blog, By Manisha Arora and Raushan Kumar, https://www.scconline.com/blog/?p=247207

[4]  Report on the rules and regulations for cross-border insolvency resolution June 2020, By Cross Border Insolvency Rules/ Regulations Committee (CBIRC), Ministry of Corporate Affairs, Government of India, https://ibbi.gov.in/uploads/resources/47fe7576712190d5554e2e50ce646e2f.pdf

[5] Report on the rules and regulations for cross-border insolvency resolution June 2020, By Cross Border Insolvency Rules/ Regulations Committee (CBIRC), Ministry of Corporate Affairs, Government of India, https://ibbi.gov.in/uploads/resources/47fe7576712190d5554e2e50ce646e2f.pdf


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