Bankruptcy law to give lenders access to foreign assets of loan defaulters
The Insolvency and Bankruptcy Code will be strengthened with the addition of provisions covering cross-border insolvency, which will help lenders access overseas assets of a bankrupt company.
The Insolvency and Bankruptcy Code (IBC) is set to be strengthened further with the addition of provisions covering cross-border insolvency, two officials familiar with the matter said. The move will help lenders access the overseas assets of a bankrupt company.
“Presentations on clauses of cross-border insolvency are being made before the government and the committee of experts. The new provisions are likely to be finalised within the next few weeks,” said another official.
Any additions of provisions to the IBC have to be done through amendments and Parliament’s approval. The official quoted above said the new provisions were likely to be taken up for approval in the upcoming Budget session.
The official added the focus was on three issues to tackle offshore assets of defaulters. First, these provisions should empower India to seek cooperation from foreign countries to bring defaulters’ assets there under consideration for insolvency. The second issue is the existing UN model law on cross-border insolvency that has 46 countries as signatories.
“India’s cross-border insolvency laws will have to be in line with the model law of UNCITRAL (United Nations Commission on International Trade Law),” said a second official privy to the ongoing discussions.
And finally, the cross-border insolvency law has to recognize that one country has to proceed with the main insolvency case and the other with the supplementary case depending on the defaulters’ location of assets.
If a foreign country has undertaken insolvency proceedings to recover stressed assets and some of them lie here, then India will also have to cooperate.
“Cross-border insolvency is the need of the hour. The House panel when studying the provisions of IBC had also suggested that these provisions should be added,” said Sumant Batra, an insolvency expert.
The need for cross-border insolvency provisions came to the fore during the bankruptcy proceedings against Delhi-based Amtek Auto, said the two officials quoted above.
Once one of the world’s largest auto parts makers, Amtek was among the 12 top defaulters that were identified by the Reserve Bank in 2016 for action by banks to recover their debts. Since its incorporation in 1988, Amtek has acquired several auto parts manufacturers across the world and set up a few others in locations in the UK and Europe.
Insolvency proceedings began against Amtek in August 2017 and as of March last year, the company’s consolidated debt stood at over Rs 3,900 crore.