The Insolvency and Bankruptcy Board of India releases the Report on the Rules and Regulations for Cross-Border Insolvency Resolution.

  November 26, 2021

The Insolvency Law Committee, in its October 2018 Report on Cross Border Insolvency (‘ILC Report’) has recommended the insertion of Part Z to the Insolvency and Bankruptcy Code 2016 (‘IBC’) as the framework for Cross-Border Insolvency, modelled after the UNCITRAL Model Law on Cross-Border Insolvency Resolution. The Central Government had entrusted the task to propose the rules and regulatory framework that would enable the implementation of Part Z of the IBC to the Cross Border Insolvency Rules/Regulations Committee (‘CBIRC’).

The Insolvency and Bankruptcy Board of India (‘IBBI’) has released the report of the CBIRC recently. Key recommendations of the Report include:

Key Recommendations

  • Applicability of Part Z: 
    1. Part Z of the IBC should not be applied to Financial Service Providers (FSPs), unless otherwise notified by the Central Government. Other than the FSPs, Part Z should apply to all kinds of companies (and LLPs), including critical infrastructure companies and utilities.
    2. Part Z should also apply to foreign companies incorporated with limited liability, that have an establishment in India.
  • Jurisdiction of the NCLTs
    1. All NCLT benches should have the jurisdiction to deal with Part Z applications of Indian companies/LLPs. However, if the company/LLP concerned is a foreign one, only the Principal Bench of the NCLT would have the jurisdiction. 
  • Access and Regulation of Foreign Representatives 
    1. Foreign representatives in a cross-border insolvency proceeding should be allowed to access the Indian insolvency system. No distinction to be made between a professionally regulated foreign representative and an unregulated one.
    2. Foreign representatives must undergo a minimal authorisation process with the IBBI before acting in a cross-border insolvency proceeding in India.
    3. A principle-based, light-touch code of conduct to be applied to the foreign representatives. 
    4. IBBI to be empowered to investigate and take disciplinary actions against misconducts by foreign representatives.
  • Access of Indian Insolvency Professionals to foreign proceedings 
    1. Indian IP should not be restricted to access any foreign insolvency system. However, they must report to the IBBI of such assignments.
  • Notice
    1. Notice of the CIRP, liquidation (or any other IBC proceeding) of a corporate debtor must be given to the known foreign creditors as well. 
    2. However, when serving of notice is not possible, the following shall be considered as deemed notice to the known foreign creditors: 
      • Publication of the notice on the corporate debtor’s website, if any, and
      • Publication of the notice on the website designated by the IBBI for this purpose
    3. When a Part Z application is made in India, the foreign representative making such application must supply a copy of the application to the corporate debtor or its IP if a domestic insolvency proceeding is pending against the corporate debtor. Similarly, if the domestic insolvency proceeding is initiated during the pendency of a Part Z proceeding, the applicant must supply a copy of the application to the foreign representative.
  • Determination of the Centre of Main Interest of the corporate debtor
    1. The Committee recommended that ‘other factors’ criteria should be placed on the same footing as the ‘identifiable place of central administration’ criteria in determining the centre of main interest (COMI) of the corporate debtor.

Context: The ILC Report had recommended that, to determine the Centre of Main Interest (COMI) of the corporate debtor, if the registered address is rebutted as the COMI, the ‘identifiable place of central administration’ has to be considered to determine the COMI. If no such place can be identified, then ‘other factors’ prescribed by the central government can be considered. The CBIRC however, observed that this hierarchy of criteria that places ‘other factors’ after ‘identifiable place of central administration’ is inappropriate as ‘other factors’ do affect the identifiable place of central administration. Thus, it recommended that ‘other factors’ criteria should be placed on the same footing as the ‘identifiable place of central administration’ criteria in determining COMI.

  • Protocols and court-to-court co-operation across jurisdictions
    1. The Committee recommended that the Central Government may substantially adopt the JIN Guidelines regarding the co-operation and communication between the NCLTs, foreign courts, foreign representatives and the IPs.

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