15 April, 2020
What you need to know
- The Singapore Government has proposed sweeping temporary measures to support businesses and individuals
- These measures include temporary relief from contractual obligations such as payment of liquidated damages or forfeiture of deposits
- Banks and finance companies may not enforce security granted over business assets for certain types of loans
On 1 April 2020, the Ministry of Law (MinLaw) announced that it intended to introduce the COVID-19 (Temporary Measures) Bill in Parliament this week (Bill). The bill was passed by Parliament on 7 April 2020. The Bill seeks to alleviate the pressures caused by the COVID-19 pandemic by (i) offering temporary relief to businesses and individuals who are unable to fulfil their contractual obligations; (ii) providing for the prescription of temporary alternatives for the conduct of meetings; (iii) allowing court proceedings to be conducted using remote communication technology; and (iv) imposing an obligation on property owners who benefit from a prescribed remission of property tax to pass the benefit on to a tenant of the property.
Background
The Bill seeks to offer temporary relief to businesses and individuals by:
- providing temporary cash-flow relief for affected businesses and individuals who may be in breach of their contractual obligations and may therefore have to pay damages or risk having their deposits or assets forfeited; and
- increasing the monetary thresholds and time limits for bankruptcy and insolvency proceedings.
These measures will apply retroactively and cover contractual obligations that are to performed on or after 1 February 2020, for contracts that were entered into or renewed before 25 March 2020. The Bill does not invalidate parties' contractual obligations, but suspends them for an initial period of six months from the commencement of the Act. This period may be extended subsequently, for up to a year from the date of commencement of the COVID-19 (Temporary Measures) Act (Act).
In addition, the Bill allows for alternative arrangements to be prescribed by the Minister of Law (Minister) where personal attendance at a meeting or class meetings is required in written law and certain legal instruments (such as a company's constitution), but is inexpedient or impracticable to be convened in view of the Infectious Diseases (Measures to Prevent Spread of COVID-19) Regulations 2020 (Regulations).
Further, the Bill allows for court proceedings to be conducted using remote communication technology approved by the Chief Justice if certain conditions are met.
Temporary Relief from Legal Action
The Bill covers five categories of contracts:
- Non-residential leases or licenses;
- Construction or supply contracts;
- Event contracts involving the provision of goods and services;
- Tourism-related contracts; and
- Certain secured loan facilities granted by a bank or a finance company to businesses with turnover of not more than S$100 million in the latest financial year.
Under the Bill, contracting parties will be prohibited from commencing court and insolvency proceedings against non-performing parties, or proceedings to enforce security over business assets, if the non-performing party serves a notification for relief. Specific to the construction industry, construction companies will not be liable for liquidated damages or delays if the inability to perform the relevant contractual obligation is to a material extent caused by a "COVID-19 event", which is broadly defined as: (a) the COVID-19 pandemic; and (b) the operation of or compliance with any law in Singapore or another country or territory, or an order or direction of the Singapore or foreign Government or authority that is made by reason of or in connection with COVID-19. This would include, for example, work from home orders and the mandatory workplace shutdown in Singapore from 7 April to 4 May 2020 and may potentially include border control measures implemented by other countries.
In addition, relief will also be given in respect of forfeiture of deposits for events and tourism-related contracts. For instance, the Bill provides that a venue provider cannot forfeit a deposit if the event is postponed because of COVID-19 restrictions; and must refund the deposit if it was forfeited earlier. However, a deposit could still be forfeited in whole or in part, if the provider obtains a determination from an assessor that it would be just and equitable to do so.
Pertinently, the Bill makes it an offence for any person to contravene specified temporary relief measures and that person is liable on conviction to a fine not exceeding $1,000.
Assessors as Safeguards
The Bill will propose an affordable, fast and simple framework for parties to resolve disputes arising from the application of this Act. Assessors will decide if the inability to perform contractual obligations was due to COVID-19, and will have the powers to grant relief that is just and equitable in the circumstances. The parties may not be represented by lawyers, are to bear their own costs and decisions made will not be appealable and will be final.
Measures Relating to Bankruptcy and Insolvency
The individual bankruptcy threshold will be increased temporarily from S$15,000 to S$60,000 while the monetary threshold for corporate insolvencies will be increased from S$10,000 to S$100,000. The statutory period to respond to creditors’ demands will be temporarily lengthened from 21 days to six months. Directors will also be temporarily relieved from the obligation to prevent their companies from trading while insolvent, if debts are incurred in the ordinary course of business during the relevant period and before the appointment of a judicial manager or liquidator.
Temporary Measures for Conduct of Meetings
Unlike the measures above, the temporary measures for the conduct of meetings are deemed to have come into operation on 27 March 2020.
Examples of meetings where personal attendance is provided for in written law or legal instruments includes:
- Meetings held under the Companies Act and each company's constitution;
- Meetings held by management corporation strata title (“MCST”) under the Building Maintenance and Strata Management Act;
- Creditor's meetings; and
- Meetings in relation to the winding up or liquidation of entities.
Where it is inexpedient or impracticable for such meetings to be convened, held or conducted in view of the Regulations, the Minister may, by order, prescribe alternative arrangements for the conduct of meetings.
The alternative arrangements that may be prescribed include:
- Provision for a meeting to be convened, held or conducted, either wholly or partly by electronic means;
- Provision for the quorum for a meeting to be reduced to a specified number;
- Provision for voting at a meeting to be made by proxy and for the number of proxies to be limited to a specified number;
- Provision for questions to be tabled at a meeting in writing or by electronic means; and
- Provision for a meeting to be deferred.
However, it should be noted that if entities are able to comply with the prevailing safe distancing measures and convene, hold or conduct the meetings in accordance with the provisions in written law or legal instruments, they should do so. The prescribed alternative arrangements are intended to assist those who face challenges in complying with the prevailing safe distancing measures, and are not intended to be mandatory.
Temporary Measures for Court Proceedings
The appearance or evidence of witnesses or accused persons, can be made or given through live video or live television link respectively if certain conditions are met. The temporary measures for court proceedings are valid for the period in which a control measure relating to COVID-19 is in force, or any further period determined by the Chief Justice.
The Bill also lists certain matters that the court might specify in making such an order, such as the persons who may be present at the place of evidence giving. The court further retains its flexibility to revoke, suspend or vary such orders made on certain specified grounds including, for example, where it is necessary in the interests of justice, which would accord judges with a degree of flexibility in making these orders.
However, parties should note that the Bill expressly prohibits such orders being made by the court if this would be inconsistent with its duty to ensure the fair conduct of proceedings.
Comments
The Bill is a pragmatic and necessary approach to dealing with certain commercial transactions in light of the present circumstances. It is hoped that these unprecedented measures would assist and support businesses, individuals and relevant contracting parties in arriving at a fair and equitable outcome in respect of their transactions.
Please note that this update has been prepared on the basis of draft provisions of the Bill released by the Ministry of Law. The Bill is expected to be tabled in Parliament this week and may be subject to change.
For further information, please contact:
Dawn Tan, Partner, Ashurst
Dawn.Tan@ashurst-adtlaw.com
