• Notification Date: 27-11-2021
• Notification No: 61/2021-22

Cross-border insolvency: Exclusion of financial service providers; exemption for pre-pack process for MSMEs- proposed by MCA

The Ministry of Corporate Affairs ( MCA) has recommended exclusion of critical financial service providers such as banks and insurance companies from the applicability of cross-border insolvency provisions under the fresh draft it floated outlining legal framework for such matters.

The ministry specified that such exclusion is in line with the design of the Insolvency and Bankruptcy Code ( IBC), where financial service providers are subject to a special insolvency process.

ET has reported about MCA floating fresh draft rules on November 19 to cater cross-border insolvency cases.

It further said that the proposed norms would not be applicable to newly introduced pre-packaged insolvency resolution process deals with small and micro (MSMEs) companies.

Besides, MCA proposed that all benches of National Company Law Tribunal and Debt Resolution Tribunal

may have jurisdiction to adjudicate all such applications.

This implies that cross-border proceedings arising in respect of corporate debtors that have registrations in India will be dealt with at the NCLT bench having jurisdiction over the registered office of the corporate debtor, however, cross-border applications regarding any person incorporated with limited liability outside India may be dealt with by the Principal Bench of NCLT.

This implies that cross-border proceedings arising in respect of corporate debtors that have registrations in India will be dealt with at the NCLT bench having jurisdiction over the registered office of the corporate debtor, however, cross-border applications regarding any person incorporated with limited liability outside India may be dealt with by the Principal Bench of NCLT.

MCA has sought public comments on draft cross-border insolvency framework under IBC by December 15, 2021.

“…enacting legislative provisions on cross-border insolvency is essential to address the emerging issues on cross-border insolvency in recent cases under the Code,” MCA noted

The introduction of a cross-border insolvency law in the IBC, that is in line with international best practices and suitable for the Indian context, may be beneficial to all stakeholders.” it added.