The Finance Nirmala Sitharaman today announced that, Due to the emerging financial distress faced by most companies on account of the large-scale economic distress caused by COVID-19, it has been decided to raise the threshold of default under section 4 of the IBC 2016 to ₹ 1 crore (from the existing threshold of ₹ 1 lakh).
This will by and large prevent triggering of insolvency proceedings against MSMEs.
It was also announced that the government was considering the suspension of Sections 7, 9 and 10 of the Insolvency and Bankruptcy Code (IBC) for six months, if the current situation continues beyond 30th of April 2020. These provisions lay down the procedure for initiation of the corporate insolvency resolution process by the financial creditor, by the operational creditor and by the corporate applicant respectively.
Although nothing has been clearly specified, it seems that the notification will be effective from the date of its publication.