Cross-border insolvency
Topic: Banking Regulation, NPAs and Financial Stability · NCERT: Beyond NCERT
Meaning
Cross-border insolvency is a case where an insolvent debtor has assets or creditors in more than one country. Courts in different countries then have to cooperate. They need to decide which court leads the case and how foreign assets are collected and shared out. Without agreed rules, creditors in each country may rush to grab local assets. That leaves other creditors with less. The UNCITRAL Model Law is a global template for such cooperation. India has not yet adopted it.
Example
When Jet Airways went into insolvency in India, parallel proceedings also ran in the Netherlands. Indian and Dutch officials had to coordinate over the airline's assets.
Don't confuse with
- Group insolvency: this deals with several companies in the same business group, which may all be in one country. Cross-border insolvency is about one debtor whose case spans more than one country.
Related concepts
- Insolvency
- Bankruptcy
- Corporate Insolvency Resolution Process
- Committee of Creditors
- Resolution professional
- Liquidation waterfall
- Haircut
- Pre-packaged insolvency
- Financial and operational creditors