The proposed legislative changes also include a code of conduct for the committee of creditors (CoC) that decides on insolvency resolution proposals.
The proposed cross-border insolvency legislation will pave the way for lenders to include foreign assets of a bankrupt entity in their recovery proceedings, including offshore personal assets of promoters where they have offered personal guarantees, the sources said.
A senior official said the draft legislation has incorporated feedback from stakeholders and recommendations by a parliament standing committee. “With all relevant views included, we are now in a better position to formulate the regulation,” the person told ET.
The corporate affairs ministry (MCA), which is in the process of finalising the bill, expects to roll out the regime from the next financial year with certain safeguards, officials said.
According to them, the cross-border legislation will be broadly in line with the international model law provided by the United Nations Commission on International Trade Law (Uncitral) that lays down a basic framework for cooperation between domestic and foreign courts.
.The legislation will allow courts of countries that have adopted the model law to execute orders against defaulters.
At least 50 countries including some advanced economies are in the process of adopting the model law. “By adopting it, we will automatically get access to all those nations and don’t need to have a separate agreement with them,” said the official quoted above.
However, the regulation will have certain terms that will safeguard the public interest considerations that foreign courts may have, he said. Sources said the proposed law will not be applicable to companies in the critical sector. Some key strategic sectors could also be excluded from its ambit, they said.
Some changes to the corporate insolvency resolution process (CIRP) under the IBC are under consideration to make it more robust and to cut delay so that it could prevent further erosion of the value of stressed firms.
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