This article was first published on 2 April 2020 and has been updated to reflect more details about the COVID-19 (Temporary Measures) Act.
On April 1, the Ministry of Law introduced the COVID-19 (Temporary Measures) Act 2020 to provide temporary relief for businesses and individuals who are unable to fulfil their contractual agreements due to COVID-19.
Here are 5 key details you need to know about this new Bill and how it affects you.
#1 What Contracts Are Covered Under This New Bill?
According to the Ministry of Law, the following categories of contracts can qualify for this new bill:
- License agreements or leases for non-residential immovable property
- Construction or supply contracts
- Contracts for the provision of goods and services (e.g. venue, catering) for events (e.g. weddings, business meetings)
- Certain contracts for goods or services for visitors to Singapore, domestic tourists or outbound tourists, or promotion of tourism (e.g. cruises, hotel accommodation bookings)
- Certain loan facilities granted by a bank or a finance company to small and medium-sized enterprises
Important note: This new Bill only applies to the appropriate contractual obligations that are to be met on or after 1st February 2020, as well as for contracts that were entered into or renewed before 25th March 2020.
If you entered into an agreement on 25th March 2020 or later, then this Bill will not apply. This is because if you made an agreement recently, you are likely to have taken the appropriate measures to negotiate your contract, knowing the extent of how COVID-19 is impacting the business environment.
The period of relief will be for six months, from 20 April 2020 to 19 October 2020. The Government may adjust this period depending on the situation.
Remember that this Bill does not remove the contractual obligations businesses and individuals have to face. It merely suspends and provides an additional time frame for the fulfilment of responsibilities.
Ultimately, all obligations have to be carried out after the temporary relief period of six months is over.
For example, if you are contractually obligated to supply building materials to a property developer but have been unable to do so in the past few weeks due to worldwide supply chain disruptions , this Bill provides you with additional buffer time to carry out your supply obligations while not absolving you of your responsibilities.
Read Also: 5 Easy Hacks To Make Your Next (Remote) Meeting Less Painful And More Productive
#2 How Does The Relief Work And How Do You Apply?
With this act in place, it prohibits one party from taking legal action against the other party in the contract if obligations are unable to be fulfilled due to COVID-19.
By temporarily suspending legal action, it gives businesses and individuals the time to negotiate and resolve the matter, instead of being weighed down by costly and time-consuming legal proceedings.
If one still wishes to obtain temporary relief under the act, a Notification for Relief should be served to the other party in the contract, with this form. This notification is meant to set out the obligation that was supposed to be performed, how COVID-19 has resulted in an inability to do so, and any proposed alternative solution.
Upon receiving this Notification of Relief, the other party is not allowed to take certain types of legal actions to enforce the obligation during this period or relief. This includes commencing or continuing an action in court or with arbitral proceedings.
Examples of how the relief works:
- Non-residential property tenants: If your restaurant cannot afford to pay rent from 1 Feb or later due to COVID-19, and has relief given, the landlord cannot terminate your lease or evict you on the basis of unpaid rent, or start court/insolvency proceedings against the restaurant
- Events and tourism-related contracts: If you booked a venue that falls within the period of relief, and postpone it due to COVID-19, the vendor cannot automatically forfeit your deposit or force you to pay cancellation fees
- Construction and supply contracts: As a contractor, you will be relieved from liability for liquidated damages or delays arising from non-performance if it was due to COVID-19, and the other party cannot take legal action against you in this period
- Hire-purchase agreements: As a private-hire car driver, if you are unable to pay monthly instalments during this period due to COVID-19, the financing company cannot repossess your vehicle or take legal action against you in this period.
- Secured loan agreements to SMEs: As an SME, if you take a secured loan from banks/finance companies, and are unable to repay due to COVID-19, the relief means that your creditor cannot enforce the security located in Singapore, or start court/insolvency proceedings against you
Read Also: Red Flags To Watch Out For When Signing Business Contracts
#3 Resolving Potential Disputes Between Parties
Should there be disagreements on whether there is an inability to fulfil obligations or whether it is due to COVID-19, the ministry advises parties to first discuss and try to reach a mutual agreement.
If a compromise cannot be reached, either party may make an Application for an Assessor’s Determination, currently at no additional cost. The outcome of this application is final, and no appeals are accepted after the assessor’s determination.
You must submit a copy of the Notification for Relief, a copy of the contract, and any other supporting documents for this application. To submit the application, click here.
The assessors are appointed from the ministry and come from sectors such as legal, accountancy, finance and other industries.
Read Also: COVID-19: F&B Operators Are Badly Hit. Here’s What It’s Really Like For A Well-Loved Local Brand
#4 Increase Of Bankruptcy And Insolvency Thresholds
Individuals and businesses in financial distress (bankruptcy and insolvency risks) because of the COVID-19 pandemic can look forward to a slew of temporary relief measures, effective since 20 April 2020 and last up to 19 October 2020.
- For individuals: The monetary threshold for bankruptcy will be raised from $15,000 to $60,000
- For businesses: The monetary threshold for insolvency will be raised from $10,000 to $100,000 (for companies/partnerships)
- The statutory period to respond to demands from creditors will be increased from 21 days to 6 months.
#5 Property Tax Remission
Property owners who benefit from a rebate on property tax must pass the benefit on to a tenant of the property. Non-compliance without a reasonable excuse will result in an offence, and have to pay a fine not exceeding $5,000.
The property owner must not impose conditions when passing on the rebates, and proper records to show that the rebate has been passed on must be kept.
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