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9 April, 2020
Relief Packages
The key concern for businesses is to minimise operational costs during this period of severe operational and economic disruption. The Singapore Government has responded swiftly and within the course of approximately 2 months, the Government has rolled out three relief packages – the Unity, Resilience, and most recently, the Solidarity budget, in a bid to mitigate the severe economic fallout caused by COVID-19.
Two key measures introduced through the relief packages are the Job Support Scheme and the Property Tax Rebate. With these measures, the Government will co-pay the salaries of local employees as well as provide property tax rebates to landlords with a view that these relief measures will trickle down to tenants.
Additionally, Parliament has also passed the COVID-19 (Temporary Measures) Bill which is meant to supplement the relief measures by staving off litigation, bankruptcy and winding up proceedings.
The Job Support Scheme & Clawback provisions
In the latest Solidarity Budget, it was announced that the Job Support Scheme will be enhanced to 75% for the month of April 2020 and then it would revert to 25% for the remaining 8 months. For businesses in the food services and the aviation/tourism sectors, the reliefs are higher. In all cases, the relief will apply to the first S$4,600 of the gross monthly wages of the local employee.
The payment of 75% of employee salary for the month of April 2020 is computed based on that employee’s salary in October 2019. As employers would only receive a bump in relief for the month of April 2020, there was a risk that employees would collect the higher relief and then move to reduce employee salaries or retrench them post April 2020. To address this, the Government has included a control measure in the computation for relief in the second tranche of payouts. This will effectively allow the Government to clawback the initial increase in relief in April 2020 if employers move to reduce wages post April 2020.
Employers should therefore bear this in mind when deliberating any retrenchment exercises, implementing no-pay leave policies or reductions in salaries.
COVID-19 (Temporary Measures) Bill
The COVID-19 (Temporary Measures) Bill seeks to shield parties who are unable to perform their contractual obligations under certain specified contracts from litigation or insolvency. The list of specified contracts include:
- Event contracts
- Tourism related contracts
- Construction contracts
- Hire purchase agreements for plants, machinery, fixed assets used for manufacturing and/or commercial vehicles
- Lease or licence of non-residential immovable property
- Certain loan/facility contracts
This bill, which has just been passed by Parliament on 7 April 2020 will prevent contracting parties from, amongst other things, commencing litigation or insolvency proceedings against the other contracting party for a specific period (6 months in the first instance, but this may be extended). In other words, this bill will provide a moratorium for legal proceedings.
In order for a business or individual to avail themselves of the relief under the Bill, there are two threshold requirements:
- First, the reason for the failure to discharge their contractual obligation must be material due to the COVID-19 situation; and
- The party must issue a notification for relief to the other contracting party (further details on the period for issuing the notification for relief and the particulars it must contain will be made in further regulations which are yet to be announced).
Once the notification has been served, the moratorium will commence. There is however recourse for the other contracting party to make an application for an assessor to determine whether the contract falls within the schedule or whether the inability to perform the contract was caused materially by the COVID-19 situation.
Event & Tourism Contracts
There are also special provisions dealing with contracts for events or tourism related contracts. As it is common for these types of contracts to require the collection of deposits, these provisions within the bill prohibit the forfeiture of any deposit collected. Any deposit which has already been forfeited prior to the commencement of the Bill, must be refunded.
However, notwithstanding the regulations on the non-forfeiture of deposits, this Bill also allows for parties to reach a compromise or settlement. Therefore, if parties have, prior to the issuance of any notification for relief, already compromised or settled the claim, then the provisions on the non-forfeiture of deposits will no longer apply. In short, parties are free to resolve the issue of the deposit privately so long as neither party has issued a notification for relief.
Increase in Insolvency Thresholds & Requirements
This bill also implements the following changes to the insolvency regime:
- threshold for bankruptcy will increase from S$15,000 to S$60,000;
- The time period to satisfy a statutory demand will increase from 21 days to six months;
- The threshold for the Debt Repayment Scheme increases from S$100,000 to S$250,000.
- The threshold for winding up applications will increase from S$10,000 to S$100,000; and
- The time period to satisfy a statutory demand will increase from 3 weeks to six months.
Property Tax Rebate
Under the Solidarity Budget, the Government announced an increase in the Property Tax Rebate (“PTR”) Scheme. Qualifying Non-Residential property will now get 100% relief from paying property tax. Based on the Government’s calculations, this should amount to more than 1 month’s rent for most properties.
Despite announcing this additional relief, the real issue is whether these costs will trickle down to the tenants. Under the COVID-19 (Temporary Measures) Bill, landlords will be legally required to pass the benefit to the tenant.
The Bill also spells out that the landlord may pass on the relief to the tenant in lump sum payment or by way of instalments or to set-off against any rent or licence fee payable by the tenant.
Landlords are prohibited from imposing any other conditions for passing on the relief. Landlords should also take note that they are legally required to keep records evidencing the fact that they have passed on the relief to their tenants for a period of 3 years.
A special Valuation Review Panel will be set up to deal with any disputes between the owner and the tenants relating to:
- The requirement to pass benefits to the tenant;
- The manner, amount, extent or time of the passing of such benefit; and
- Any non-compliance by the owner
The proposed Bill also sets up an appeal mechanism. Appeals against any decision by the Valuation Review Panel can be made to the High Court within 21 days from the determination.
Further regulations in support of this Bill are also expected to be enacted subsequently.
