COVID 19: Revised Default Trigger Under The Insolvency And Bankruptcy Code

Pursuant to a notification dated March 24, 2020 (the "Notification")¹, the Ministry of Corporate Affairs, the Government of India has increased the threshold for default by corporate debtors under Section 4 of the Insolvency & Bankruptcy Code, 2016, as amended (the "Code") from INR 100,000 to INR 10,000,000. In terms of the Notification, potential financial and operational creditors will not be able to initiate the corporate insolvency process under the Code on and after March 24, 2020 in cases where defaults are less than INR 10 million.

As indicated by prior announcements² by Government of India, the Notification has been issued in an effort to safeguard Micro, Small-scale and Medium Enterprises ("MSMEs") in India from insolvency proceedings in the wake of the country-wide shutdown to combat spread the COVID-19 virus.