Draft Policy on Cross-Border Insolvency


  • In big step towards ushering in a legal framework for cross-border insolvency, the Ministry of Corporate Affairs (MCA) has invited stakeholders’ comments on a draft policy for the same.
  • The Government has taken initiative for Cross-Border Insolvency within the Insolvency & Bankruptcy Code, 2016 (the Code) to provide a comprehensive legal framework.

The need:

  • As the size of the Indian economy grows, business and trade have adopted an increasingly international character. Creditors and corporates frequently transact business in more than one jurisdiction. Foreign banks and creditors finance Indian companies and Indian banks have foreign exposure. Also, as part of its Ease of Doing Business and Make in India policies, India seeks to attract foreign companies to set up manufacturing facilities in India.
  • Besides, 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 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.

Inclusion of cross-border:

  • 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.
  • A framework would also make India an attractive investment destination for foreign creditors given the increased predictability and certainty of the insolvency framework.

United Nations Commission on International Trade Law:

  • Globally, 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.
  • Due to the growing prevalence of multinational insolvencies, the Model Law has been adopted by 44 states, including Singapore, the UK and the US.


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