India ups insolvency default threshold increased for MSMEs

Bringing relief to the cash strapped Indian MSME sector amid the Coronavirus pandemic, Finance Minister Nirmala Sitharaman on Tuesday raised the threshold of default to 132762 dollars from the existing 1327 dollars to prevent triggering of insolvency proceedings against MSMEs. The threshold has been implemented with immediate effect. The Finance Minister said that the ministry will be watchful of the present situation and will consider suspending Section 7, 9 and 10 of the Insolvency and Bankruptcy Code if the situation persists. This can stop companies from being forced into insolvency proceedings in such force majeure causes of default. Previously, a default of 1327 dollars alone was enough to initiate Corporate Insolvency Resolution Process against the said defaulters. Experts say that at a time when Covid-19 has been choking businesses, it is a good move by the Finance Minister that the threshold of default has been extended. The move preventing insolvency proceedings against MSMEs will help thousands of small firms that are spread across the length and breadth of the country. It has been a particularly hard pressed time for the many SMEs and small businesses across the country who have been reeling under the impact of the Covid-19, facing severe losses and shutdowns in uncertain times that loom large for their ilk.

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