15 April, 2020
The COVID-19 (Temporary Measures) Bill of Singapore is expected to be introduced in Parliament in the second week of April 2020. It seeks to offer temporary relief to businesses and individuals who are unable to fulfil their contractual obligations because of COVID-19.
Update: The COVID-19 (Temporary Measures) Act 2020 was passed by the Singapore Parliament on 7 April 2020. Supplementary to this Act, alternative arrangements for company meetings were also prescribed in subsidiary legislation on 13 April 2020. Please refer to our update on these alternative arrangements for company meetings here.
The COVID-19 pandemic has brought about an unprecedented and unforeseen socio-economic fallout. Businesses and individuals now face the risk of being unable to fulfil contractual obligations due to disruptions associated with the COVID-19 pandemic. It also seeks to ease some of thresholds for insolvency proceedings and directors duties for trading while insolvent.
In response, the Singapore Ministry of Law ("MinLaw") announced on 1 April 2020 its intention to introduce the COVID-19 (Temporary Measures) Bill (the "Bill") in Parliament. The Bill is likely to be introduced at Parliament in the second week of April 2020.
The Bill aims to protect individuals and businesses and provide temporary relief from the impact of the COVID-19 pandemic on contractual obligations. Measures under the Bill would apply retrospectively to certain contractual obligations that are to be performed on or after 1 February 2020, for contracts entered into or renewed before 25 March 2020.
It is intended that the measures will be in place for 6 months from the commencement of the Act, but may subsequently be extended by up to a further 6 months.
The Bill seeks to provide temporary relief through the following means:
1. Temporary relief from legal action
Specified Contracts
Temporary relief from legal action may be available if the contract in question falls into one of the categories specified in the Bill, which include:
- Leases or licenses for non-residential immovable property (such as lease for factory premises)
- Construction contracts or supply contracts (such as contracts for the supply of materials)
- Certain loan facilities granted by a bank or finance company to qualifying small and medium enterprises (which refer to, amongst other conditions, businesses in Singapore with turnover of not more than $100 million in the latest financial year)
- Certain contracts for the provision of goods and services (such as venue, catering) for events (such as weddings, business meetings)
- Certain contracts for goods or services for visitors to Singapore, domestic tourists or outbound tourists, or promotion of tourism (such as cruises, hotel accommodation bookings)
Certain legal actions for non-performance would be temporarily prohibited, such as the commencement of court and insolvency proceedings, termination of certain leases, enforcement of security over certain property or calls on performance bonds given pursuant to construction contracts.
Targeted measures for specific contracts
Contractors should further note that relief from liability in construction and supply contracts is subject to the non-performance being caused to a material extent by COVID-19.
Additional relief is also provided for in respect of forfeiture of deposits for event and tourism-related contracts. For instance, deposit forfeiture (whether whole or in part) where an event is postponed due to COVID-19 restrictions is not allowed unless an assessor determines that it would be just and equitable to do so.
Body of Assessors
MinLaw will appoint a body of assessors to resolve disputes arising from the application of the Act. The process is envisioned to be affordable, quick and easy. Assessors' decisions are unappealable, and parties cannot be represented by lawyers in these application processes.
2. Measures relating to Bankruptcy and Insolvency and Directors' Duties
Under the Bill, monetary thresholds for declaring insolvency or bankruptcy have been temporarily increased as follows:
- from $15,000 to $60,000 for individuals; and
- from $10,000 to $100,000 for companies and limited liability partnerships.
The statutory period to respond to demands from creditors will also be temporarily lengthened.
The Bill would also temporarily relieve directors from their obligations to prevent their companies from trading while insolvent if the debts are incurred in the company's ordinary course of business, although they remain criminally liable if the debts are incurred fraudulently.
For further information, please contact:
Michelle Phang, Partner, Ashurst
michelle.phang@ashurst-adtlaw.com
