{"id":21966,"date":"2023-04-20T10:00:59","date_gmt":"2023-04-20T04:30:59","guid":{"rendered":"https:\/\/gstguntur.com\/?p=21966"},"modified":"2023-04-20T10:02:26","modified_gmt":"2023-04-20T04:32:26","slug":"cross-border-insolvency-cs-professional-study-material","status":"publish","type":"post","link":"https:\/\/gstguntur.com\/cross-border-insolvency-cs-professional-study-material\/","title":{"rendered":"Cross Border Insolvency &#8211; CS Professional Study Material"},"content":{"rendered":"<p>Chapter 23 Cross Border Insolvency &#8211; <a href=\"https:\/\/gstguntur.com\/cs-professional-corporate-restructuring-insolvency-liquidation-winding-up-study-material\/\">Corporate Restructuring Insolvency Liquidation &amp; Winding Up Notes<\/a> is designed strictly as per the latest syllabus and exam pattern.<\/p>\n<h2>Cross Border Insolvency &#8211; Corporate Restructuring Insolvency Liquidation &amp; Winding Up Study Material<\/h2>\n<p>Question 1.<br \/>\nWrite note on the following:<br \/>\nCorporate insolvency (Dec 2012, 2 marks)<br \/>\nAnswer:<br \/>\nCorporate insolvency<\/p>\n<ul>\n<li>By corporate insolvency we mean the insolvency Of the company.<\/li>\n<li>Just as a natural person can become insolvent a company can also become insolvent.<\/li>\n<li>A company is said to be insolvent when its liabilities exceeds its assets which results in its inability to pay off the debts.<\/li>\n<li>In corporate insolvency, the question is not whether the company can pay all its debts presently or payable in future and continue to function, but whether it is able to meet its current demand and whether its existing or probable assets would be sufficient to meet future demand.<\/li>\n<\/ul>\n<p><img loading=\"lazy\" decoding=\"async\" src=\"https:\/\/gstguntur.com\/wp-content\/uploads\/2021\/10\/GST-Guntur.png\" alt=\"Cross Border Insolvency - CS Professional Study Material\" width=\"123\" height=\"13\" \/><\/p>\n<p>Question 2.<br \/>\nWrite short note on the following:<br \/>\nCorporate insolvency (June 2013, 3 marks)<\/p>\n<p>Question 3.<br \/>\nWrite short notes on the following:<br \/>\n(i) Foreign court<br \/>\n(ii) Meaning of State. (Dec 2013, 2 marks each)<br \/>\nAnswer:<br \/>\n(i) Foreign Court: Any judicial or other authority competent to control or supervise a foreign proceeding.<br \/>\n(ii) The word \u201cState\u201d, as used in the preamble and throughout the UNCITRAL Model Law, refers to the country that enacts the Law (the \u201cenacting State\u201d). The term should not be understood as referring, for example, to a state in a country with a federal system.<\/p>\n<p><img loading=\"lazy\" decoding=\"async\" src=\"https:\/\/gstguntur.com\/wp-content\/uploads\/2021\/10\/GST-Guntur.png\" alt=\"Cross Border Insolvency - CS Professional Study Material\" width=\"123\" height=\"13\" \/><\/p>\n<p>Question 4.<br \/>\nWrite notes on the following :<br \/>\n(a) Objectives of UNCITRAL Model Law<br \/>\n(b) World Bank principles for effective insolvency (June 2014, 4 marks each)<br \/>\nAnswer:<br \/>\n(a) The various objectives of UNCITRAL Model Law are as follows:<\/p>\n<ul>\n<li>The purpose of the Model Law is to provide effective mechanisms for dealing with cases of cross-border insolvency.<\/li>\n<li>Promote cooperation between the courts and other competent authorities of a .State and Foreign States involved in cases of cross-border insolvency;<\/li>\n<li>Increase greater legal certainty for trade and investment;<\/li>\n<li>Ensure fair and efficient administration of cross-border insolvencies that protects the interests of all creditors and other interested persons, including the debtor;<\/li>\n<li>Protection and maximization of the value of the debtor\u2019s assets; and<\/li>\n<li>Facilitation of the rescue of financially troubled businesses, thereby protecting investment and preserving employment.<\/li>\n<\/ul>\n<p>(b) The various principles of World Bank for effective insolvency &amp; creditor rights systems are :-<br \/>\nCredit Information System:<\/p>\n<ul>\n<li>It requires that there should be an access to complete, accurate &amp; timely information relating to borrower\u2019s payment histories.<\/li>\n<li>Legal environment should provide for creation of effective credit information system.<\/li>\n<li>Insolvency law systems should provide for efficient liquidation.<\/li>\n<li>Insolvency law systems should provide for timely, efficient &amp; impartial resolution of insolvencies.<\/li>\n<li>As per its principles, strong institutions &amp; regulations are crucial to an effective insolvency system.<\/li>\n<li>Standards of transparency &amp; good corporate governance should be established.<\/li>\n<li>There should be an efficient, transparent system relating to property rights in the borrower&#8217;s assets.<\/li>\n<\/ul>\n<p><img loading=\"lazy\" decoding=\"async\" src=\"https:\/\/gstguntur.com\/wp-content\/uploads\/2021\/10\/GST-Guntur.png\" alt=\"Cross Border Insolvency - CS Professional Study Material\" width=\"123\" height=\"13\" \/><\/p>\n<p>Question 5.<br \/>\nWrite notes on the following:<br \/>\n(a) \u2018State\u2019 with reference to the UNCITRAL model law<br \/>\n(b) Types of foreign proceedings covered<br \/>\n(c) Protection of creditors and other interested persons under the UNCITRAL model law (June 2015, 4 marks each)<br \/>\nAnswer:<br \/>\n(b) Foreign proceeding:<br \/>\n&#8220;Foreign proceeding&#8221; means a collective judicial or administrative proceeding in a foreign State, including an interim proceeding, pursuant to a law relating to insolvency in which proceeding the assets and affairs of the debtor are subject to control or supervision by a Foreign Court, for the purpose of reorganization or liquidation;<\/p>\n<p>Types of foreign proceedings covered:<br \/>\nTo fall within the scope of the Model Law, a foreign insolvency proceeding needs to possess certain attributes. These include the basis in insolvency-related law of the originating State; involvement of creditors collectively; control or supervision of the assets and affairs of the debtor by a Tribunal or another official body; and reorganization or liquidation of the debtor as the purpose of the proceeding.<\/p>\n<p><img loading=\"lazy\" decoding=\"async\" src=\"https:\/\/gstguntur.com\/wp-content\/uploads\/2021\/10\/GST-Guntur.png\" alt=\"Cross Border Insolvency - CS Professional Study Material\" width=\"123\" height=\"13\" \/><\/p>\n<p>Within those parameters, a variety of collective proceedings would be eligible for recognition, be they compulsory or voluntary, corporate or individual, winding-up or reorganization. It also includes those in which the debtor retains some measure of control over its assets, albeit under Tribunal supervision (e.g. suspension of payments, &#8220;debtor in possession&#8221;).<\/p>\n<p>(c) UNCITRAL Model Law (hereinafter &#8220;the Model Law)in its preamble mention that objects of the Model Law is not to create substantive rights but to give general orientation for users of the Model Law and to provide effective mechanism to deal with cross border insolvency. Model Law contains following provisions for protection of the creditors, the debtors and other affected persons:<\/p>\n<ol>\n<li>temporary relief upon application for recognition of a foreign proceeding or upon recognition, which is at the discretion of the Tribunal, on being satisfied that interest of the creditors and other interested persons are adequately protected;<\/li>\n<li>the Tribunal may grant relief subject to the conditions, as it thinks fit;<\/li>\n<li>the Tribunal may modify or terminate the relief granted, if so requested by a person affected thereby.<\/li>\n<\/ol>\n<p>Model Law further provides that in case of actions are manifestly contrary to the public policy of the enacting state, the Tribunal may refuse taking any action under the Model Law.<\/p>\n<p><img loading=\"lazy\" decoding=\"async\" src=\"https:\/\/gstguntur.com\/wp-content\/uploads\/2021\/10\/GST-Guntur.png\" alt=\"Cross Border Insolvency - CS Professional Study Material\" width=\"123\" height=\"13\" \/><\/p>\n<p>Question 6.<br \/>\nExplain the term \u2018cross border insolvency\u2019. (June 2012, 4 marks)<br \/>\nAnswer:<br \/>\nInsolvency refers to a situation wherein liabilities exceed assets which results in inability to pay off the debts.<\/p>\n<ul>\n<li>&#8216;Cross border insolvency&#8217; is coined to reflect a situation wherein the insolvent home company has non resident debtor or creditor or contributory.<\/li>\n<li>In order to protect the interest of creditors and mitigate the chances of fraud, UNCITRAL has come up with UNCITRAL Model Laws on cross border insolvency.<\/li>\n<\/ul>\n<p>Question 7.<br \/>\nThough UNCITRAL Model Law is not a substantive law, it recommends protection to creditors and other interested persons. Briefly describe the protections provided under the UNCITRAL Model Law. (Dec 2012, 4 marks)<br \/>\nAnswer:<\/p>\n<ul>\n<li>&#8216;Model law&#8217; refers to a legislative piece which is framed with the viewpoint that countries can include in their national laws.<\/li>\n<li>United Nations Commission on International Trade Law has come up with UNCITRAL Model on Gross Border Insolvency in May 1997.<\/li>\n<li>Legislative guide on Insolvency law were later issued in the year 2004. -* UNCITRAL Model Laws offer various useful solutions so as to effectively handle the cross border insolvency issues.<\/li>\n<li>It calls for cross border cooperation, recognition of foreign proceedings and greater co-ordination of concurrent proceedings.<\/li>\n<li>Thus, UNCITRAL Laws have been framed with the purpose of protecting the interest of creditors by providing fair &amp; efficient administration.<\/li>\n<\/ul>\n<p>Various protections provided under UNCITRAL Model Law are<\/p>\n<ul>\n<li>Temporary relief upon application for recognition of a foreign proceeding.<\/li>\n<li>The Court\/Tribunal before granting relief must be satisfied that interest of creditors &amp; debtors are protected.<\/li>\n<li>Court\/Tribunal has the power to modify or terminate the relief granted.<\/li>\n<\/ul>\n<p><img loading=\"lazy\" decoding=\"async\" src=\"https:\/\/gstguntur.com\/wp-content\/uploads\/2021\/10\/GST-Guntur.png\" alt=\"Cross Border Insolvency - CS Professional Study Material\" width=\"123\" height=\"13\" \/><\/p>\n<p>Question 8.<br \/>\n(a) Enumerate the salient features of a desired code of ethics for insolvency practitioners. (June 2013) (5 marks)<br \/>\n(b) Explain the purpose of UNCITRAL Model Law. (5 marks)<br \/>\nAnswer:<br \/>\n(a) The salient features of a desired code of ethics for insolvency practitioners are as follows:<br \/>\n1. Fundamental Principles:<br \/>\nSome of the fundamental principles that insolvency practitioners should adopt are:<\/p>\n<ul>\n<li>Integrity.<\/li>\n<li>Objectivity.<\/li>\n<li>Professional competence &amp; due care.<\/li>\n<li>Confidentiality.<\/li>\n<li>Professional Behaviour.<\/li>\n<\/ul>\n<p>2. Conflict of Interest:<br \/>\nAn insolvency practitioner should take reasonable steps to identify circumstances of conflict of interest.<\/p>\n<p>3. Professional &amp; personal relationships:<br \/>\nThe insolvency practitioner should evaluate the impact of the professional &amp; personal relationship.<\/p>\n<p>4. Transparency:<br \/>\nAn insolvency practitioner should be transparent on his acts and dealings.<\/p>\n<p>5. Record Keeping:<br \/>\nAn insolvency practitioner should maintain the proper records.<\/p>\n<p>6. Gifts &amp; hospitality:<br \/>\nAn insolvency practitioner should not accept any offer of gift or hospitality from the persons involved in the process of insolvency during the course of insolvency.<\/p>\n<p><img loading=\"lazy\" decoding=\"async\" src=\"https:\/\/gstguntur.com\/wp-content\/uploads\/2021\/10\/GST-Guntur.png\" alt=\"Cross Border Insolvency - CS Professional Study Material\" width=\"123\" height=\"13\" \/><\/p>\n<p>(b)<\/p>\n<ul>\n<li>&#8216;Model law&#8217; refers to a legislative piece which is framed with the viewpoint that countries can include in their national laws.<\/li>\n<li>United Nations Commission on International Trade Law has come up with UNCITRAL Model on Cross Border Insolvency in May 1997. &#8211; Legislative guide on Insolvency law were later issued in the year 2004.<\/li>\n<li>UNCITRAL Model Laws offer various useful solutions so as to effectively handle the cross border insolvency issues.<\/li>\n<li>It calls for cross border cooperation, recognition of foreign proceedings and greater co-ordination of concurrent proceedings.<\/li>\n<li>Thus, UNCITRAL Laws have been framed with the purpose of protecting the interest of creditors by providing fair &amp; efficient administration.<\/li>\n<\/ul>\n<p><img loading=\"lazy\" decoding=\"async\" src=\"https:\/\/gstguntur.com\/wp-content\/uploads\/2021\/10\/GST-Guntur.png\" alt=\"Cross Border Insolvency - CS Professional Study Material\" width=\"123\" height=\"13\" \/><\/p>\n<p>Question 9.<br \/>\nBriefly describe the role of professionals in the insolvency process. (Dec 2013, 5 marks)<br \/>\nAnswer:<br \/>\nThe concept of insolvency practitioners was recommended by the Irani Committee. Currently the law does not support effective participation of professionals and experts in the insolvency process. Disciplines of chartered accountancy, company secretaryship, cost and work accountancy, law etc. can act as feeder streams, proving high quality professional for this new activity.<\/p>\n<p>In fact private professionals can play a meaningful role in all aspects of process. Insolvency practice can also open up a new field of activity for service professionals while improving the quality of intervention at all levels during rehabilitation\/&#8221; winding up\/ liquidation proceedings. Law should encourage and recognize the concept of Insolvency Practitioners, Greater responsibility and authority should be given to them under the supervision of the Tribunal to maximize resource use and application of skills.<\/p>\n<p>The committee observed that by incorporating this recommendation, there would be a revolutionary change in the Indian Insolvency System by bringing it at par with the international standards and provide opportunities to participate and perform various roles in the insolvency process.<\/p>\n<p><img loading=\"lazy\" decoding=\"async\" src=\"https:\/\/gstguntur.com\/wp-content\/uploads\/2021\/10\/GST-Guntur.png\" alt=\"Cross Border Insolvency - CS Professional Study Material\" width=\"123\" height=\"13\" \/><\/p>\n<p>Question 10.<br \/>\nWhat are the procedural requirements for recognition of foreign proceedings under the UNCITRAL Model Law? (Dec 2013, 6 marks)<br \/>\nAnswer:<\/p>\n<ul>\n<li>Article 15 of the UNCITRAL Model Law, contains the procedural requirement for an application by a foreign representative for recognition.<\/li>\n<li>A foreign representative may apply to the Tribunal for recognition of foreign proceeding in which the foreign representative has been appointed.<\/li>\n<li>An application shall be accompanied by:\n<ul>\n<li>a certified copy of the decision commencing the foreign proceeding . and appointing the foreign representative or,<\/li>\n<li>a certificate from the foreign court affirming the existence of foreign proceeding and of the appointment of the foreign representative or,<\/li>\n<li>\u00a0in the absence of evidence, referred to in sub paragraph above any other evidence acceptable toihe Tribunal of the existence of foreign proceeding and of the appointment of foreign representatives.<\/li>\n<\/ul>\n<\/li>\n<li>An application for recognition shall be accompanied by a statement identifying all foreign proceeding in respect of the debtor that are Known to the foreign representative.<\/li>\n<li>The Tribunal may require a translation of documents supplied in support of the application for recognition into an official language of State.<\/li>\n<\/ul>\n<p><img loading=\"lazy\" decoding=\"async\" src=\"https:\/\/gstguntur.com\/wp-content\/uploads\/2021\/10\/GST-Guntur.png\" alt=\"Cross Border Insolvency - CS Professional Study Material\" width=\"123\" height=\"13\" \/><\/p>\n<p>Question 11.<br \/>\n\u201cIt is cardinal principle of law that a person can be insolvent but a company cannot be adjudged insolvent\u201d. Comment. (Dec 2013, 6 marks)<br \/>\nAnswer:<br \/>\nYes, a person can be insolvent but a company cannot be adjudged insolvent. Company can go into winding-up.<\/p>\n<p>Winding up of company is different from insolvency of the individual in following respect:<br \/>\n1. In case of insolvency the whole of the property is taken out of his hand and rests in Tribunal or the official assignee. Whereas in case of winding up the property remains with the company but it is administered by official liquidator.<\/p>\n<p>2. Administration of property of the individual occurs only if the individual is declared insolvent by the Tribunal whereas assumption of power of director by official liquidator can also occur even if company is not insolvent, that is even a fully Solvent company can wind up.<\/p>\n<p>3. In case of insolvency, the insolvent, on payment of his dues can obtain discharge from his insolvency and continue working free from burden of his debt whereas a company in liquidation cannot obtain discharge.<\/p>\n<p><img loading=\"lazy\" decoding=\"async\" src=\"https:\/\/gstguntur.com\/wp-content\/uploads\/2021\/10\/GST-Guntur.png\" alt=\"Cross Border Insolvency - CS Professional Study Material\" width=\"123\" height=\"13\" \/><\/p>\n<p>Question 12.<br \/>\nWhat are the risks associated with cross border insolvency? (Dec 2014, 5 marks)<br \/>\nAnswer:<br \/>\nRisks of cross-border insolvency<br \/>\nOne of the risks that all businesses face is that of a trading partner&#8217;s failure. Most domestic laws provide for the handling of an insolvent enterprise.<\/p>\n<p>Typically, in the case of corporate insolvency, domestic laws will prescribe procedures for:<\/p>\n<ul>\n<li>Identifying and locating the debtors\u2019 assets;<\/li>\n<li>\u2018Calling in\u2019 the assets and converting them into a monetary form;<\/li>\n<li>Identifying and reversing any voidable or preference transactions which occurred prior to the administration;<\/li>\n<li>Identifying creditors and the extent of their claims, including determining the appropriate priority order in which claims should be paid; and<\/li>\n<li>Making distributions to creditors in accordance with the appropriate priority.<\/li>\n<\/ul>\n<p>In a cross-border insolvency context, additional complexities that may arise include:<\/p>\n<ul>\n<li>The extent to which an insolvency administrator may obtain access to assets held in a foreign country;<\/li>\n<li>The priority of payments: whether local creditors may have access to local assets before funds go to the foreign administration or whether they are to stand in line with all the foreign creditors;<\/li>\n<li>Recognition of the claims of local creditors in a foreign administration;<\/li>\n<li>Whether local priority rules (such as employee claims) receive similar treatment under a foreign administration;<\/li>\n<li>Recognition and enforcement of local securities over iocal assets, where a foreign administrator is appointed; and<\/li>\n<li>Application of transaction avoidance provisions.<\/li>\n<\/ul>\n<p>The additional complexities surrounding cross-border insolvencies necessarily result in uncertainty, risk and ultimately costs to businesses.<\/p>\n<p><img loading=\"lazy\" decoding=\"async\" src=\"https:\/\/gstguntur.com\/wp-content\/uploads\/2021\/10\/GST-Guntur.png\" alt=\"Cross Border Insolvency - CS Professional Study Material\" width=\"123\" height=\"13\" \/><\/p>\n<p>Question 13.<br \/>\n(i) \u201cThe effects provided by Article 20 of the UNCITRAL model law in respect of recognition of a foreign main proceeding are discretionary in nature.\u201d Comment whether the statement is correct or not and state the effects of recognition of a foreign main proceeding as per Article 2C. (June 2015) (5 marks)<br \/>\n(ii) Explain the salient features of Chapter 11 dealing with the US Bankruptcy Code. (5 marks)<br \/>\nAnswer:<br \/>\n(i) The effects provided by Article 20 are not discretionary in nature. These flow automatically from recognition of the foreign main proceeding.<\/p>\n<p>Once foreign proceeding is recognized which is a foreign main proceeding, the following are the effects:<br \/>\n(a) Commencement or continuation of individual actions or individual proceedings concerning the debtor\u2019s assets, rights, obligations or liabilities is stayed;<br \/>\n(b) Execution against the debtor\u2019s assets is stayed; and<br \/>\n(c) The right to transfer, encumber or otherwise dispose of any assets of the debtor is suspended.<\/p>\n<p>(ii) Chapter 11 of US Bankruptcy code, entitled Reorganization, ordinarily is used by commercial enterprises that desire to continue operating a business and repay creditors concurrently through a Court\/Tribunal approved plan of reorganization.<\/p>\n<p>Section 363 under Chapter 11 of US Bankruptcy law is an established procedure which enables companies to sell assets free of debts and encumbrances to preserve the value of the enterprise. A company under Chapter 11 can choose to sell off particular assets. A bankrupt company, the &#8220;debtor,\u201d might use this Code to &#8220;reorganize\u201d its business and become profitable again.<\/p>\n<p><img loading=\"lazy\" decoding=\"async\" src=\"https:\/\/gstguntur.com\/wp-content\/uploads\/2021\/10\/GST-Guntur.png\" alt=\"Cross Border Insolvency - CS Professional Study Material\" width=\"123\" height=\"13\" \/><\/p>\n<p>Salient Features of Chapter 11 .<\/p>\n<ul>\n<li>Chapter 11 is not a declaration of insolvency.<\/li>\n<li>Companies don\u2019t file Chapter 11 to liquidate; they do so in order to continue operating and to take the necessary steps to emerge as a financially stronger business, reorganizing their operations or balance sheet or in some cases by selling substantially all its assets.<\/li>\n<li>Management remains in control of the business during the Chapter 11 rehabilitative process. Trustees, administrators.and monitors typically are not appointed.<\/li>\n<li>Chapter 11 normally does not cause interruption to business operations.<\/li>\n<li>The company is given breathing room during the process &#8211; an \u201cautomatic stay\u201d generally prevents parties from taking legal action against the company or taking the company\u2019s assets.<\/li>\n<li>Most publicly-held companies prefer to file under Chapter 11 rather than Chapter 7 because they can still run their business and control the bankruptcy process. Chapter 11 provides a process for rehabilitating the business of the company.<\/li>\n<\/ul>\n<p><img loading=\"lazy\" decoding=\"async\" src=\"https:\/\/gstguntur.com\/wp-content\/uploads\/2021\/10\/GST-Guntur.png\" alt=\"Cross Border Insolvency - CS Professional Study Material\" width=\"123\" height=\"13\" \/><\/p>\n<p>Question 14.<br \/>\nMention the effects of recognition of foreign main proceedings under the UNCITRAL Model Law. (Dec 2015, 5 marks)<br \/>\nAnswer:<br \/>\nOnce foreign proceeding is recognized which is a foreign main proceeding, the following are the effects:<br \/>\n(a) Commencement or continuation of individual actions or individual proceedings concerning the debtor\u2019s assets, rights, obligations or liabilities is stayed;<br \/>\n(b) Execution against the debtor\u2019s assets is stayed; and<br \/>\n(c) The right to transfer, encumber or otherwise dispose of any assets of the debtor is suspended.<\/p>\n<p>The effects provided by Article 20 are not discretionary in nature. These flow automatically from recognition of the foreign main proceeding. The automatic effects under Article 21 apply only to main proceedings.<\/p>\n<p><img loading=\"lazy\" decoding=\"async\" src=\"https:\/\/gstguntur.com\/wp-content\/uploads\/2021\/10\/GST-Guntur.png\" alt=\"Cross Border Insolvency - CS Professional Study Material\" width=\"123\" height=\"13\" \/><\/p>\n<p>Question 15.<br \/>\nConstitution of National Company Law Tribunal (NCLT) will usher a new era as far as insolvency issues are concerned and will also open up new professional opportunities for Company Secretaries. Comment. (June 2016, 5 marks)<br \/>\nAnswer:<br \/>\nThe Companies (Second Amendment) Act, 2002 provides for setting up of a National Company Law Tribunal (NCLT) and its Appellate Tribunal. The purpose of creation of the Tribunal is to avoid multiplicity of litigation before various courts or quasi-judicial bodies or forums regarding revival or rehabilitation or merger and amalgamation, and winding up of companies. NCLT will have:<\/p>\n<ul>\n<li>The power to consider revival and rehabilitation of companies &#8211; a mandate which was entrusted to Tribunal under SICA.<\/li>\n<li>The jurisdiction and power relating to winding up of companies presently vested in the Tribunal.<\/li>\n<\/ul>\n<p>The National Company law tribunal has also been empowered to pass an order for winding up of a company by the Companies (Second Amendment). Act, 2002. Therefore, Practicing Company Secretaries may represent the winding up case in the tribunal. Hitherto, only government officers could act as Official Liquidators. Now professionals like Practicing Company Secretary can act as Liquidator in case of winding up by the tribunal as well as voluntary winding up.<\/p>\n<p><img loading=\"lazy\" decoding=\"async\" src=\"https:\/\/gstguntur.com\/wp-content\/uploads\/2021\/10\/GST-Guntur.png\" alt=\"Cross Border Insolvency - CS Professional Study Material\" width=\"123\" height=\"13\" \/><\/p>\n<p>Question 16.<br \/>\nDescribe the World Bank\u2019s Insolvency Law System. (Dec 2016, 5 marks)<br \/>\nAnswer:<br \/>\nCommercial Insolvency: The World Bank\u2019s Principles for Effective Insolvency and Creditors\/Debtors Rights Systems sets out a range of benchmarks, based on international best practices for evaluating the effectiveness of domestic Insolvency and Creditor\/Debtor rights (ICR) systems. Though, approaches vary effective insolvency systems have a number of aims and objectives. Systems should aspire to:<\/p>\n<ol>\n<li>integrate with a country\u2019s broader legal and commercial systems;<\/li>\n<li>maximize the value of a firm\u2019s assets and recoveries by creditors;<\/li>\n<li>provide for both efficient liquidation of nonviable businesses and those where liquidation is likely to produce a greater return to creditors and reorganization of viable businesses;<\/li>\n<li>strike a careful balance between liquidation and reorganization, allowing for easy conversion of proceedings from one proceeding to another;<\/li>\n<li>provide for equitable treatment of similarly situated creditors, including similarly situated foreign and domestic creditors;<\/li>\n<li>provide for timely, efficient and impartial resolution of insolvencies;<\/li>\n<li>prevent the improper use of the insolvency system;<\/li>\n<li>prevent the premature dismemberment of a debtor\u2019s assets by individual creditors seeking quick judgments;<\/li>\n<li>provide a transparent procedure that contains, and consistently applies, clear risk allocation rules and incentives for gathering and dispensing information;<\/li>\n<li>recognize existing creditor rights and respect the priority of claims with a predictable and established process; and<\/li>\n<li>establish a framework for cross-border insolvencies, with recognition of foreign proceedings.<\/li>\n<\/ol>\n<p>Where an enterprise is not viable, the main thrust of the law should be swift and efficient liquidation to maximize recoveries for the benefit of creditors. Liquidations can include the preservation and sale of the business, as distinct from the legal entity. On the other hand, where an enterprise is viable, meaning it can be rehabilitated, its assets are often more valuable if retained in a rehabilitated business than if sold in a liquidation.<\/p>\n<p>The rescue of a business should be promoted through formal and informal procedures. Rehabilitation should permit quick and easy access to the process, protect all those involved, permit the negotiation of a commercial plan, enable a majority or creditors in favor of a plan or other &#8216; ourse of action to bind all other creditors (subject to appropriate protections) and provide for supervision to ensure that the process is not subject to abuse.<\/p>\n<p><img loading=\"lazy\" decoding=\"async\" src=\"https:\/\/gstguntur.com\/wp-content\/uploads\/2021\/10\/GST-Guntur.png\" alt=\"Cross Border Insolvency - CS Professional Study Material\" width=\"123\" height=\"13\" \/><\/p>\n<p>Question 17.<br \/>\nDiscuss the provisions of UNCITRAL Model Law regarding co-ordination of more than one foreign proceeding. (Dec 2016, 5 marks)<br \/>\nAnswer:<br \/>\nArticle 30 deals with cases where the debtor is subject to insolvency proceedings in more than one foreign State and foreign representatives of more than one foreign proceeding seek recognition or relief in the enacting State. The provision applies whether or not an insolvency proceeding is pending in the enacting State. If, in addition to two or more foreign proceedings, there is a proceeding in the enacting State, the court will have to act pursuant to both Article 29 and Article 30.<\/p>\n<p>In respect of more than one foreign proceeding regarding the same debtor, the court shall seek cooperation and coordination under Articles 25,26 and 27, and the following shall apply:<\/p>\n<p>(a) Any relief granted under Article 19 or 21 to a representative of a foreign non-main proceeding after recognition of a foreign main proceeding must be consistent with the foreign main proceeding;<\/p>\n<p>(b) If a foreign main proceeding is recognized after recognition, or after the filing of an application for recognition, of a foreign non-main proceeding, any relief in effect under Article 19 or 21 shall be reviewed by the court and shall be modified or terminated if inconsistent with the foreign main proceeding;<\/p>\n<p>(c) If, after recognition of a foreign non-main proceeding, another foreign non-main proceeding is recognized, the court shall grant, modify or terminate relief for the purpose of facilitating coordination of the proceedings;<\/p>\n<p>The objective of Article 30 is similar to that of Article 29 in that the key issue in the case of concurrent proceedings is to promote cooperation, coordination and consistency of relief granted to different proceedings. Unlike Article 29, which, as a matter of principle, gives primacy to the local proceeding, Article 30 gives preference to the foreign main proceeding if there is one.<\/p>\n<p><img loading=\"lazy\" decoding=\"async\" src=\"https:\/\/gstguntur.com\/wp-content\/uploads\/2021\/10\/GST-Guntur.png\" alt=\"Cross Border Insolvency - CS Professional Study Material\" width=\"123\" height=\"13\" \/><\/p>\n<p>Question 18.<br \/>\nWhat is meant by Principle of Supremacy of International Obligations as enunciated in Article 3 of Model Law. (Dec 2017, 5 marks)<br \/>\nAnswer:<br \/>\nPrinciple of Supremacy of International Obligations (Article 3)<br \/>\nArticle 3 provides that to the extent the Model Law conflicts with an obligation of the State enacting the Model Law arising out of any treaty or other form of agreement to which it is a party with one or more other States, the requirements of the treaty or agreement prevail.<\/p>\n<p><img loading=\"lazy\" decoding=\"async\" src=\"https:\/\/gstguntur.com\/wp-content\/uploads\/2021\/10\/GST-Guntur.png\" alt=\"Cross Border Insolvency - CS Professional Study Material\" width=\"123\" height=\"13\" \/><\/p>\n<p>Question 19.<br \/>\nState the procedure for serving notice to foreign creditors under UNICITRAL Model Law. (Dec 2017, 5 marks)<br \/>\nAnswer:<br \/>\nNotification to foreign creditors of a proceeding (Article 14)<br \/>\nArticle 14 of the Model Law provides that whenever under laws of the enacting State relating to insolvency, a notification is to be given to creditors, such notification shall also be given to the known creditors that do not have addresses in the State. The court may order that appropriate steps be taken with a view to notifying any creditor whose address is not yet known. The main purpose of notifying foreign creditors is to inform them of the commencement of the insolvency proceeding and of the timelimit to file their claims.<\/p>\n<p>Such notification shall be made to the foreign creditors individually, unless the court considers that, under the circumstances, some other form of notification would be more appropriate. No letters rogatory or other, similar formality is required.<\/p>\n<p>When a notification of commencement of a proceeding is to be given to foreign creditors, the notification shall:<br \/>\n(a) Indicate a reasonable time period for filing claims and specify the place for their filing;<br \/>\n(b) Indicate whether secured creditors need to file their secured claims; and<br \/>\n(c) Contain any other information required to be included in such a notification to creditors pursuant to the law of this State and the orders of the court.<\/p>\n<p><img loading=\"lazy\" decoding=\"async\" src=\"https:\/\/gstguntur.com\/wp-content\/uploads\/2021\/10\/GST-Guntur.png\" alt=\"Cross Border Insolvency - CS Professional Study Material\" width=\"123\" height=\"13\" \/><\/p>\n<p>Question 20.<br \/>\n\u201cVasudev Kutumbakam or one world one family is the motto of any business entity in addition to political and cultural togetherness. This has prompted to the formation of United Nations Organisation (UNO) to ensure smooth universal trade\u201d. Comment on the statement with special emphasis on efforts being made with respect to Cross Border Insolvency. (June 2018, 5 marks)<br \/>\nAnswer:<\/p>\n<ul>\n<li>The United Nations Commission on International Trade Law (UNCITRAL) was established in 1966 as a subsidiary body of the General Assembly of the United Nations with the general mandate to further the progressive harmonization and unification of the law of international trade.<\/li>\n<li>The UN General Assembly is the main deliberative, policymaking and<br \/>\nrepresentative organ of the United Nations.<\/li>\n<li>Comprising all 193 Members of the United Nations, it provides a unique forum for multilateral discussion of the full spectrum of international issues covered by its Charter.<\/li>\n<li>India is a member of UN General Assembly and UNCITRAL.<\/li>\n<li>The General Assembly recognised that differences in national laws regarding international trade were barriers to the effective flow of trade.<\/li>\n<li>The purpose of UNCITRAL was to harmonize and unify the law of international trade. As part of this programme of harmonization, the UNCITRAL has developed a Model Law on Cross-Border Insolvency (\u201cthe Model Law\u201d).<\/li>\n<li>In December 1997, the General Assembly endorsed the Model Law on Cross Border Insolvency, developed and adopted by the UNCITRAL.<\/li>\n<li>The Model Law was accompanied by a Guide to Enactment that provided background and explanatory information to assist those preparing the legislation necessary to implement the Model Law and judges and others responsible for its application and interpretation.<\/li>\n<li>The Model Law is not a law in its own right and has no force; rather it provides a legal text for incorporation into national law.<\/li>\n<\/ul>\n<p><img loading=\"lazy\" decoding=\"async\" src=\"https:\/\/gstguntur.com\/wp-content\/uploads\/2021\/10\/GST-Guntur.png\" alt=\"Cross Border Insolvency - CS Professional Study Material\" width=\"123\" height=\"13\" \/><\/p>\n<p>Question 21.<br \/>\nUNICITRAL Model Law is binding on member countries but at the best obiter dicta for Courts of the member countries dealing in disputes relating to cross border insolvency and international trade. Elucidate. (June 2018, 5 marks)<br \/>\nAnswer:<br \/>\nThe United Nations Commission on International Trade Law (UNCITRAL) has a mandate from the General Assembly of the United Nations to harmonize and unify the law of international trade. As part of this programme of harmonization, the Commission has developed a Model Law on Cross-Border Insolvency (\u201cthe Model-Law\u201d) in order to create and maintain harmony in regulatory aspects of insolvency mechanism across countries.<\/p>\n<p>The Commission approved the text of the UNCITRAL Model Law on Cross-Border Insolvency (the Model Law) in May 1997. The Model Law respects the differences among national procedural laws and does not attempt a substantive unification of insolvency law. It offers solutions that help in several significant ways to have harmony among regulatory frameworks.<\/p>\n<p>The purpose of the Model Law is to provide effective mechanisms for dealing with cases of cross-border Insolvency.<\/p>\n<p>Question 22.<br \/>\nThe purpose of the Model Law is to provide effective mechanism for dealing with cases of cross-border insolvency. Comment. upon the statement. (Dec 2018, 5 marks)<\/p>\n<p>Question 23.<br \/>\nWrite a note on \u201cEffect of recognition of a foreign main proceeding\u201d under the UNCITRAL Model law. (Dec 2018, 5 marks)<\/p>\n<p><img loading=\"lazy\" decoding=\"async\" src=\"https:\/\/gstguntur.com\/wp-content\/uploads\/2021\/10\/GST-Guntur.png\" alt=\"Cross Border Insolvency - CS Professional Study Material\" width=\"123\" height=\"13\" \/><\/p>\n<p>Question 24.<br \/>\nA model Law is a legislative text that needs legislative guide to outline the core issues to be incorporated in the substantive law &#8211; Discuss the relevance in having Legislative Guide by United Nations Commission for International Trade Law (UNCITRAL) to supplement UNCITRAL Model Law on cross border insolvency. (June 2019, 5 marks)<br \/>\nAnswer:<br \/>\nA model law is generally used differently than a legislative guide. Specifically, a model law is a legislative text recommended to States to enact as part of national law, with or without modification. As such, model laws generally propose a comprehensive set of legislative solutions to address a particular topic and the language employed supports direct incorporation of the provisions of the model law into a national law.<\/p>\n<p>On the other hand, legislative guide focuses upon providing guidance to legislators and other users and for that reason guides generally include a substantial commentary discussing and analysing relevant issues. It is not intended that the recommendations of a legislative guide be enacted as part of law as such. Rather, they outline the core issues that is would be desirable to address in that law, with some recommendations providing specific guidance on how certain legislative provisions might be drafted.<\/p>\n<p>The purpose of the Legislative Guide on Insolvency Law is to assist the establishment of an efficient and effective legal framework to address the financial difficulty of debtors. The Legislative Guide provides a comprehensive statement of the key objectives and principles that should be reflected in a State&#8217;s insolvency laws.<\/p>\n<p><img loading=\"lazy\" decoding=\"async\" src=\"https:\/\/gstguntur.com\/wp-content\/uploads\/2021\/10\/GST-Guntur.png\" alt=\"Cross Border Insolvency - CS Professional Study Material\" width=\"123\" height=\"13\" \/><\/p>\n<p>Question 25.<br \/>\nDiscuss the provisions dealing with cases involving cross -border insolvency und\u00f5r the Insolvency and Bankruptcy Code, 2016. (Dec 2019, 5 marks)<br \/>\nAnswer:<br \/>\nSections 234 and 235 of the Insolvency and Bankruptcy Code, 2016 make provisions to deal with cases involving cross border insolvency. Section 234 empowers the Central Government to enter into an agreement with other countries to resolve situations pertaining to cross border insolvency.<\/p>\n<p>Section 235 of the Code lays down that notwithstanding anything contained in this Code or any law for the time being in force if, in the course of insolvency resolution process, or liquidation or bankruptcy proceedings, as the case may be, under this Code, the resolution professional, liquidator or bankruptcy trustee, as the case may be, is of the opinion that assets of the corporate debtor or debtor, including a personal guarantor of a corporate debtor, are situated in a country outside India with which reciprocal arrangements have been made under section 234, he may make an application to the Adjudicating Authority that evidence or action relating to such assets is required in connection with such process or proceeding. [Section 235(1)].<\/p>\n<p>The Adjudicating Authority on receipt of an application and, on being satisfied that evidence or action relating to assets is required in connection with insolvency resolution process or liquidation or bankruptcy proceeding, may issue a letter of request to a court or an authority of such country competent to deal with such request. [Section 235(2)].<\/p>\n<p><img loading=\"lazy\" decoding=\"async\" src=\"https:\/\/gstguntur.com\/wp-content\/uploads\/2021\/10\/GST-Guntur.png\" alt=\"Cross Border Insolvency - CS Professional Study Material\" width=\"123\" height=\"13\" \/><\/p>\n<p>Question 26.<br \/>\nUnited Nations Commission on International Trade (UNCITRAL) demonstrated as Guiding Role in respect of Insolvency Laws in Member Nations\u2014Comment. (Dec 2020, 5 marks)<br \/>\nAnswer:<br \/>\n(i) \u2018The United Nations Commission on International Trade\u2019 (UNCITRAL) is a subsidiary body of the United Nations General Assembly, established in 1966. The Body is responsible for preparing international legislative texts for use by different Nations to have uniform and harmonious legislations to promote International Trade.<\/p>\n<p>(ii) UNCITRAL has prepared the Legislative Guide on Insolvency Law with the objective to amicably settle the business deals. The Guide is divided into four parts.<\/p>\n<p>(iii) Part One discusses the key objectives of an insolvency law, structural issues such as relationship between insolvency law and other law, the type of mechanisms available for resolving a debtor&#8217;s financial difficulties, etc.<\/p>\n<p>(iv) Parts Two to four deal with core features of an effective insolvency law, treatment of enterprise groups in insolvency and focus on the obligation that might be imposed upon those responsible for making decisions with respect to the management of an enterprise when such unit is facing insolvency or insolvency is inevitable.<\/p>\n<p>(v) All Cross &#8211; border insolvency issues are thus, tackled by the UNCITRAL as a guiding role.<\/p>\n<p><img loading=\"lazy\" decoding=\"async\" src=\"https:\/\/gstguntur.com\/wp-content\/uploads\/2021\/10\/GST-Guntur.png\" alt=\"Cross Border Insolvency - CS Professional Study Material\" width=\"123\" height=\"13\" \/><\/p>\n<p>Question 27.<br \/>\nGanga Infrastructure Ltd. is an Indian Company with its Registered office at New Delhi. Michle Inc is an incorporated company in New York. Ganga Infrastructure Ltd. proposes to merge the business of Michle Inc with its business in India\u2014Brief your opinion with reference to merger and amalgamations with a foreign entity under Companies Act, 2013. (Dec 2020, 5 marks)<br \/>\nAnswer:<\/p>\n<ol>\n<li>Section 234 of the Companies Act, 2013 enables merger or amalgamation with a foreign company.<\/li>\n<li>All the provisions relating to merger or amalgamation as in the case of domestic companies shall apply with required modifications.<\/li>\n<li>A foreign company may be a company or body corporate incorporated outside India irrespective whether a place of business in India.<\/li>\n<li>A foreign company incorporated outside India can be merged with in India only with prior permission from Reserve Bank of India (RBI). Thus, in the instant case the prior permission of RBI is required for merging the business entity of Michelle Inc with Ganga Infrastructure Ltd.<\/li>\n<\/ol>\n<p><img loading=\"lazy\" decoding=\"async\" src=\"https:\/\/gstguntur.com\/wp-content\/uploads\/2021\/10\/GST-Guntur.png\" alt=\"Cross Border Insolvency - CS Professional Study Material\" width=\"123\" height=\"13\" \/><\/p>\n<p>Question 28.<br \/>\nElucidate briefly the process of Notification to Foreign Creditors as per United Nations Commission on International Trade (UNCITRAL) Model Law. (Dec 2020, 5 marks)<br \/>\nAnswer:<\/p>\n<ol>\n<li>Article 14 of the UNCITRAL Model suggests the procedure for States (Member Nations) enacting Insolvency Law the manner of notification to be given to creditors.<\/li>\n<li>Such notification shall also be given to the known creditors that do not have addresses in the state.<\/li>\n<li>Notifications shall be made to the foreign creditors individually, unless the Authority\/ Court that under the circumstances, some other form of notification would be more appropriate.<\/li>\n<li>Notice shall indicate a reasonable time for filing claims, whether secured creditors need to file their secured claims and other information as required either by law or authority.<\/li>\n<li>The main purpose of notifying foreign creditors is to inform them of the commencement of insolvency proceedings and of the time limit to file their claims.<\/li>\n<li>Contain any other information required to be included in such a notification to creditors pursuant to the law of this State and the orders of the Court.<\/li>\n<\/ol>\n<p><img loading=\"lazy\" decoding=\"async\" src=\"https:\/\/gstguntur.com\/wp-content\/uploads\/2021\/10\/GST-Guntur.png\" alt=\"Cross Border Insolvency - CS Professional Study Material\" width=\"123\" height=\"13\" \/><\/p>\n<p>Question 29.<br \/>\nRDX International Ltd. is undergoing Corporate Insolvency Resolution Process. The Resolution Professional noticed large chunk of plant and machinery of the company are situate in a foreign country with which Government of India has bilateral relation. Resolution Professional seeks your guidance for the recovery of assets situated in the foreign country. Give your views. (Aug 2021, 5 marks)<br \/>\nAnswer:<br \/>\nAttention of the Resolution Professional can be drawn to the provisions of Section 234 and 235 of the Insolvency and Bankruptcy Code, 2016 (IBC). Section 234 envisages the Central Government to notify to recover properties of the Corporate Debtor or any such Guarantor situated in a country, with which there is a reciprocal arrangement subject to specified conditions.<\/p>\n<p>Section 235 of the IBC enables the Resolution Professional to apply to Adjudicating Authority in such situations. On filing such application, the authority after being satisfied as to the evidences produced, may issue a letter of request to the Court or other authority of the other country for a suitable action.<\/p>\n<p>The current cross border insolvency framework in India is depend on entering in to Bilateral agreements with other countries. In the instant case, exists bilateral relation with the foreign nation and Resolution Professional may avail the provisions of Section 235.<\/p>\n<p><img loading=\"lazy\" decoding=\"async\" src=\"https:\/\/gstguntur.com\/wp-content\/uploads\/2021\/10\/GST-Guntur.png\" alt=\"Cross Border Insolvency - CS Professional Study Material\" width=\"123\" height=\"13\" \/><\/p>\n<p>Question 30.<br \/>\nDescribe the whole gamut of reliefs that may be granted upon recognition of a foreign proceedings whether main or non-main. (Dec 2021, 5 marks)<br \/>\nAnswer:<br \/>\nUpon recognition of a foreign proceeding, whether main or non-main, where it is necessary to protect the assets of the debtor or the interests of the creditors, the court may, at the request of the foreign representative, grant any appropriate relief, including:<\/p>\n<ol>\n<li>Staying the commencement or continuation of individual actions or individual proceedings concerning the debtor&#8217;s assets, rights, obligations or liabilities, to the extent they have not been stayed under paragraph 1 (a) of Article 20;<\/li>\n<li>Staying execution against the debtor&#8217;s assets to the extent it has not been stayed under paragraph 1 (b) Article 20;<\/li>\n<li>Suspending the right to transfer, encumber or otherwise dispose of any assets of the debtor to the extent this right has not been suspended under paragraph 1 (c) of Article 20;<\/li>\n<li>Providing for the examination of witnesses, the taking of evidence or the delivery of information concerning the debtor&#8217;s assets, affairs, rights, obligations or liabilities;<\/li>\n<li>Entrusting the administration or realization of all or part of the debtor&#8217;s assets located in this State to the foreign representative or another person designated by the court;<\/li>\n<li>Extending relief granted under paragraph 1 of Article 19; and<\/li>\n<li>Granting any additional relief that may be available to a person or body administering a reorganization or liquidation under the law of the enacting State under the laws of that Status.<\/li>\n<\/ol>\n<p>Question 31.<br \/>\n&#8220;UNCITRAL Model Law is not a law in its own right and has no force.&#8221; Comment. (June 2022, 5 marks)<\/p>\n<p><img loading=\"lazy\" decoding=\"async\" src=\"https:\/\/gstguntur.com\/wp-content\/uploads\/2021\/10\/GST-Guntur.png\" alt=\"Cross Border Insolvency - CS Professional Study Material\" width=\"123\" height=\"13\" \/><\/p>\n<p><strong>Cross Border Insolvency Notes<\/strong><\/p>\n<p>Introduction<br \/>\nCross-border insolvency (sometimes called international insolvency) regulates the treatment of financially distressed debtors where such debtors have assets or creditors in more than one country.<\/p>\n<p>Key Objectives of Effective and Efficient Insolvency Law<\/p>\n<ol>\n<li>Maximization of value of assets :<\/li>\n<li>Ensuring equitable treatment of similarly situated creditors<\/li>\n<li>Provision for timely, efficient and impartial resolution of insolvency<\/li>\n<li>Preservation of the insolvency estate to allow equitable distribution to creditors<\/li>\n<li>Ensuring a transparent and predictable insolvency law that contains incentives for gathering and dispensing information<\/li>\n<li>Recognition of existing creditor rights and establishment of clear rules for ranking of priority claims<\/li>\n<li>Establishment of a framework for cross-border insolvency<\/li>\n<\/ol>\n<p>The United Nations Commission on International Trade (UNCITRAL)<br \/>\nThe United Nations Commission on International Trade Law (UNCITRAL) is a subsidiary body of the General Assembly. It was established by the General Assembly in 1966 [Resolution 2205 (XXI) of 17 December 1966]. The United Nations Commission on International Trade Law prepares international legislative texts for use by States in modernizing commercial law and non-legislative texts for use by commercial parties in negotiating transactions<\/p>\n<p><img loading=\"lazy\" decoding=\"async\" src=\"https:\/\/gstguntur.com\/wp-content\/uploads\/2021\/10\/GST-Guntur.png\" alt=\"Cross Border Insolvency - CS Professional Study Material\" width=\"123\" height=\"13\" \/><\/p>\n<p>UNCITRAL Legislative Guide on Insolvency Laws<br \/>\nThe final negotiations on the draft legislative guide on insolvency law were held during the thirty-seventh session of UNCITRAL in New York from 14 to 21 June 2004 and the text was adopted by consensus on 25 June 2004. Subsequently, the General Assembly adopted resolution 59\/40 of 2 December 2004<\/p>\n<p>Organization, Purpose and Scope of the Legislative Guide<br \/>\nThe Legislative Guide on Insolvency Law is intended to be used as a reference by national authorities and legislative bodies when preparing new laws and regulations or reviewing the adequacy of existing laws and regulations. The purpose of the Legislative Guide on Insoivency Law is to assist the establishment of an efficient and effective legal framework to address the financial difficulty of debtors<\/p>\n<p>Key Provisions<br \/>\nThe Legislative Guide is divided into four parts.<\/p>\n<ol>\n<li>key objectives, relationships with other law, methodology and framework of an insolvency law:<\/li>\n<li>core features of an effective insolvency law,\n<ul>\n<li>standardized commencement criteria<\/li>\n<li>stay to protect the assets of the insolvency estate that includes actions by secured creditors<\/li>\n<li>post-commencement finance<\/li>\n<li>participation of creditors<\/li>\n<li>provision for expedited reorganization proceedings<\/li>\n<li>simplified requirements for submission and verification of claims<\/li>\n<li>conversion of reorganization to liquidation when reorganization fails<\/li>\n<li>clear rules for discharge of the debtor and closure of insolvency proceedings.<\/li>\n<\/ul>\n<\/li>\n<li>treatment of enterprise groups in insolvency, both nationally and internationally<\/li>\n<li>obligations that might be imposed upon management when that enterprise faces imminent insolvency or insolvency becomes unavoidable<\/li>\n<\/ol>\n<p><img loading=\"lazy\" decoding=\"async\" src=\"https:\/\/gstguntur.com\/wp-content\/uploads\/2021\/10\/GST-Guntur.png\" alt=\"Cross Border Insolvency - CS Professional Study Material\" width=\"123\" height=\"13\" \/><\/p>\n<p>UNCITRAL Legislative Guide on Insolvency Law vis-a-vis UNCITRAL Model Law on Cross-Border Insolvency<br \/>\nA model law is a legislative text recommended to States for enactment as part of national law, with or without modification, Whereas focus of legislative guide is upon providing guidance to legislators and other users and for that reason guides generally include a substantial commentary discussing and analysing relevant issues.<\/p>\n<p>It is not intended that the recommendations of a legislative guide be enacted as part of national law as such.<\/p>\n<p>UNCITRAL Model Law on Cross Border Insolvency<br \/>\nPurpose<br \/>\nThe UNCITRAL Model Law on Cross-Border Insolvency, adopted in 1997, is designed to assist States to equip their insolvency laws with a modern, harmonized and fair framework to address more effectively instances of cross-border insolvency.<\/p>\n<p>Relevance to International Trade<br \/>\nThe UNCITRAL Model Law has been adopted in 44 countries and, forms part of international best practices in dealing with cross border insolvency issues.<\/p>\n<p>Principles\/ provisions\/ purpose of cross-border insolvency:<\/p>\n<ul>\n<li>Direct access to foreign insolvency professionals and foreign creditors to participate in or commence domestic insolvency proceedings against a defaulting debtor;<\/li>\n<li>Recognition of foreign proceedings &amp; provision of remedies<\/li>\n<li>Cooperation between domestic and foreign courts &amp; domestic and foreign insolvency practioners;<\/li>\n<li>Coordination between two or more concurrent insolvency proceedings in different countries. The main proceeding is determined by the concept of centre of main interest (\u201cCOMI&#8221;).<\/li>\n<li>Relief (assistance): As considered necessary for the orderly and fair conduct of cross-border insolvencies should be available to assist foreign proceedings<\/li>\n<li>Greater legal certainty for trade and investment;<\/li>\n<li>Fair and efficient administration of cross-border insolvencies that protects the interests of all creditors and other interested persons, including the debtor;<\/li>\n<li>Protection and maximization of the value of the debtor\u2019s assets<\/li>\n<\/ul>\n<p><img loading=\"lazy\" decoding=\"async\" src=\"https:\/\/gstguntur.com\/wp-content\/uploads\/2021\/10\/GST-Guntur.png\" alt=\"Cross Border Insolvency - CS Professional Study Material\" width=\"123\" height=\"13\" \/><\/p>\n<p>Scope of application<br \/>\nUNCITRAL Model Law on Cross-Border Insolvency applies where:<br \/>\n(a) Assistance is sought in this State by a foreign court or a foreign representative in connection with foreign proceeding; or<\/p>\n<p>(b) Assistance is sought in a foreign State in connection with a proceeding under [identify laws of the enacting State relating to insolvency]; or<\/p>\n<p>(c) A foreign proceeding and a proceeding under [identify laws of the enacting State relating to insolvency] in respect of the same debtor are taking place concurrently; or<\/p>\n<p>(d) Creditors or other interested persons in a foreign State have an interest in requesting the commencement of, or participating in, a proceeding under [identify laws of the enacting State relating to insolvency].<\/p>\n<p>UNCITRAL Model Law on Cross-Border Insolvency does not apply to a proceeding concerning [designate any types of entities, such as banks or insurance companies, that are subject to a special insolvency regime in this State and that this State wishes to exclude from this Law], [Article 1]<\/p>\n<p>Principle of Supremacy of International Obligations<br \/>\nTo the extent the Model Law conflicts with an obligation of the State enacting the Model Law arising out of any treaty or other form of agreement to which it is a party with one or more other States, the requirements of the treaty or agreement prevail<\/p>\n<p>Competent Court or Authority<br \/>\nThe functions under the Model Law relating to recognition of foreign proceedings and cooperation with foreign courts shall be performed by the court, courts, authority or authorities as specified in the Model Law who are competent to perform those functions in the enacting State. [Article 4]<\/p>\n<p><img loading=\"lazy\" decoding=\"async\" src=\"https:\/\/gstguntur.com\/wp-content\/uploads\/2021\/10\/GST-Guntur.png\" alt=\"Cross Border Insolvency - CS Professional Study Material\" width=\"123\" height=\"13\" \/><\/p>\n<p>United States Bankruptcy Code<br \/>\nIn the United States of America, all bankruptcy cases are handled in federal courts under rules outlined in the \u201cBankruptcy Code\u201d, a federal law.<br \/>\nSix basic types of bankruptcy cases are provided for under the Bankruptcy Code.<\/p>\n<ul>\n<li>Chapter 7: \u201cLiquidation\u201d. A court-appointed trustee or administrator takes possession of non- exempt assets, liquidates these assets and then uses the proceeds to pay creditors.<\/li>\n<li>\u201cAdjustment of Debts of a Municipality\u201d. Municipality get protection from creditors and a municipality can pay back debt through a confirmed payment plan.<\/li>\n<li>\u201cReorganization\u201d. The debtor remains in control of its business operations and repay creditors concurrently through a court-approved reorganization plan.<\/li>\n<li>It allows a family farmer or fisherman to continue to operate the business while the plan is being carried out.<\/li>\n<li>enables individuals with regular income to develop a plan to repay all &#8216; or part of their debts.<\/li>\n<li>It provides mechanism for dealing with insolvency cases involving debtors, claimants and other interested parties involving more than one country.<\/li>\n<\/ul>\n<p>Salient Features<\/p>\n<ul>\n<li>is not a decl\u00e3ration of insolvency.<\/li>\n<li>Management remains \u00a1n control of the business during rehabilitative process. Trustees, administrators and monitors typically are not appointed.<\/li>\n<li>normally does not cause interruption to business operations.<\/li>\n<li>An \u201cautomatic stay\u201d generally prevents parties from taking legal action against the company or taking the company\u2019s assets.<\/li>\n<\/ul>\n<p><img loading=\"lazy\" decoding=\"async\" src=\"https:\/\/gstguntur.com\/wp-content\/uploads\/2021\/10\/GST-Guntur.png\" alt=\"Cross Border Insolvency - CS Professional Study Material\" width=\"123\" height=\"13\" \/><\/p>\n<p>Insolvency Law Committee on Cross Border Insolvency<br \/>\nThe Insolvency Law Committee (ILC) has recommended the adoption of the UNCITRAL Model Law of Cross Border Insolvency, 1997 as it provides for a comprehensive framework to deal with cross border insolvency issues.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Chapter 23 Cross Border Insolvency &#8211; Corporate Restructuring Insolvency Liquidation &amp; Winding Up Notes is designed strictly as per the latest syllabus and exam pattern. Cross Border Insolvency &#8211; Corporate Restructuring Insolvency Liquidation &amp; Winding Up Study Material Question 1. Write note on the following: Corporate insolvency (Dec 2012, 2 marks) Answer: Corporate insolvency By &hellip;<\/p>\n<p class=\"read-more\"> <a class=\"\" href=\"https:\/\/gstguntur.com\/cross-border-insolvency-cs-professional-study-material\/\"> <span class=\"screen-reader-text\">Cross Border Insolvency &#8211; CS Professional Study Material<\/span> Read More &raquo;<\/a><\/p>\n","protected":false},"author":2,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"spay_email":"","footnotes":""},"categories":[165],"tags":[],"jetpack_featured_media_url":"","_links":{"self":[{"href":"https:\/\/gstguntur.com\/wp-json\/wp\/v2\/posts\/21966"}],"collection":[{"href":"https:\/\/gstguntur.com\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/gstguntur.com\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/gstguntur.com\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/gstguntur.com\/wp-json\/wp\/v2\/comments?post=21966"}],"version-history":[{"count":1,"href":"https:\/\/gstguntur.com\/wp-json\/wp\/v2\/posts\/21966\/revisions"}],"predecessor-version":[{"id":21969,"href":"https:\/\/gstguntur.com\/wp-json\/wp\/v2\/posts\/21966\/revisions\/21969"}],"wp:attachment":[{"href":"https:\/\/gstguntur.com\/wp-json\/wp\/v2\/media?parent=21966"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/gstguntur.com\/wp-json\/wp\/v2\/categories?post=21966"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/gstguntur.com\/wp-json\/wp\/v2\/tags?post=21966"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}