Govt eyes bankruptcy early-warning system

Holds discussions on tracking signals of distress ahead of a default

- Gireesh Chandra Prasad

The Insolvency and Bankruptcy Code is currently focused on firefighting after bankruptcy proceedings are initiated either by the creditors or the firm itself.

A system prompting businesses totakestepsto mitigate financial distress before it gets out of hand could become a feature of India’s corporate and bankruptcy law if early discussions in the government fructify, according to two persons familiar with the discussions.

The idea is to enable company executives and lenders to watch signals of financial distress that precedeapayment default and to preempt insolvency, the people said on the condition of anonymity.

It could take some time before formal proposals are framed, as the matter requires broad-based consultations, they added.