Dear Muskan,

We have provided our specific responses to the queries by you, as follows:

Your Query:
How do you see the move? What would be the implications of incorporating UNCITRAL Model
Law on existing companies holding foreign assets and foreign companies having Indian assets?

Our response:
Considering India remains an investment destination, the adoption of UNCITRAL Model Law (“UML”)
for cross-border insolvency into the framework of the Insolvency and Bankruptcy Code, 2016 (“IBC”),
the modifications suggested in the recommendations would be step ahead. Today, 44 jurisdictions
across the globe have adopted the UML in various forms and shapes, and the numbers should continue
to rise through the years. It has the potential of creating an effective ecosystem for cross-border
resolution of insolvency. This would not only create ease in handling insolvency proceedings across
borders for insolvency professionals / foreign representatives, but also provide access to the foreign
creditors to effectively prosecute such proceedings in India. The latter marking a significant move in the
direction of further improving the business ecosystem for international businesses.

As to the issue of implication on an Indian company holding foreign assets, the adoption may have
limited relevance in as much as it provides for insolvency at the individual entity level and not the whole
enterprise. Generally, assets in other countries are held by a distinct entity (due to tax and other such
implications), and as such the same may not be directly affected by the insolvency proceedings under
IBC. Though, if indeed any Indian corporate also holds physical assets in an off-shore jurisdiction, then
the adoption of the recommendations would mean that such assets would be amenable to Indian
Corporate Insolvency Resolution Process in a more effective way. The courts in such jurisdiction if the
country recognizes the concept of Centre of Main Interest (“COMI”), would implement the restrictions
and curative action taken in respect of the Indian Debtor in their jurisdiction as well.

As to the implications on a foreign company holding assets in India, the concept of COMI is relevant
here as well. The UML provides for the determination of COMI in relation to proceedings of insolvency
of an entity being conducted simultaneously in two different jurisdictions. The UML follows the principle
of universality as opposed to territoriality. The insolvency proceedings conducted in the jurisdiction
where the COMI of such an entity is established, would become the main proceeding and the insolvency
proceedings being conducted in the other jurisdiction would be non- main proceeding. Thus, if Indian
proceedings amount to non-main proceedings, then the Indian assets of the foreign corporate will also
be subject to insolvency proceedings albeit by an Indian Insolvency Resolution Professional (“IRP”), in
conjunction with the foreign resolution professional

Your Query:
What are the current problems in dealing with the insolvencies of companies having foreign
assets?

Our response
The issue in any such proceedings relates to effective execution of the order of an Indian Adjudicating
Authority.

Your query:
Would there be any impact on Mergers & Acquisitions across borders?

Our response:
In theory, yes there will be an impact on mergers acquisitions and restructuring. The impact could
relate to the due diligence carried out prior to the Merger & Acquisition as well as the restructuring
that may occur as a part of the resolution plan. At a more practical level, the impact would depend on
the jurisprudence developed by the courts in India, as well as any such country. For instance, there
are examples of certain courts, most notably the UK Courts refusing to recognize an action under UML
on the ground of “territoriality” – (Rubin v Euro Finance (2012) UKSC 46)

Your query:
If the Model Law is to be incorporated into Indian law, then Indian representatives (resolution
professionals or interim trustees) cannot seek access to foreign insolvency proceedings of a
country that has not adopted the Model Law. Does this restrict the scope of cross-border
insolvencies under the suggested law?

Our response:
On the contrary, it allows India to access those countries which have adopted the UML and recognized
COMI as a principal for adjudication in insolvency proceedings. Further countries, the impediment
currently applicable continues.

Your query:
What could be the possible hindrances in its implications?

Our response:
Primarily, the courts / forum dealing with IBC are over burdened with cases, and as such the time
limit prescribed under the IBC have not been generally adhered to leading to drawn out proceedings.
This poses a challenge. Secondly, the interpretation of COMI would need to evolve in a constructive
manner consistent with principles of universalism. Thirdly, the smooth implementation of the UML
could be a factor of the prevailing relationship with the other countries. In international law, inter-
sovereign relations often dictate the effectiveness of legislations having cross-border implications.

Your query:
The draft is silent on the rights and duties of an insolvency professional in a foreign
proceeding. What will be the status of concerned companies that are already under the
insolvency process till the time a thorough draft comes?

Our response:
The rights and duties of an IRP in a foreign proceeding would be determined by the insolvency
legislation of such foreign jurisdiction.

Your query:
The suggested draft does not provide for the bankruptcies of individuals. Further the
proposed framework is meant for individual companies and not enterprise groups. What is
the road ahead for such excluded entities?

Our response:
Currently, the IBC does not provide for the insolvency of the entity at the enterprise level. This has
been continued under the proposed framework for cross border insolvency under the
recommendations. However, there may be case where the entity under insolvency may have a
considerable asset in an associated enterprise operating out of a foreign country, which would
render such proceedings non-comprehensive.

The flip side is in case insolvency framework is extended to the entities under the same enterprise,
then that would may lead to a situation where in the minority shareholders would want an exit option
and / or protection from the application of moratorium declared under the IBC.

The intent is clearly to bring individuals under the bankruptcy framework as per the IBC. However,
whether IBC would apply at an enterprise level is still anyone’s guess.

Trust the above answers your queries. Should you need any further assistance from us in this
regard, please feel free to get in touch with us.