Legal Update:
COVID-19 (Temporary Measures) Bill

On 1 April 2020, the Ministry of Law announced that it intends to introduce the COVID-19 (Temporary Measures) Bill (the “Bill”) in Parliament next week, which seeks to offer temporary relief to businesses and individuals from their contractual obligations because of COVID-19.
This update discusses what we can expect from the Bill.

Are you COVID?
The Bill is intended to provide temporary and targeted protection for businesses and individuals who are unable to fulfil certain contractual obligations because of COVID-19. It seeks to provide temporary cash-flow relief for these businesses and individuals, who may otherwise have to pay damages or risk having their deposits or assets forfeited due to their inability to fulfil their contractual obligations during this period.

The Bill will cover contractual obligations that are to be performed on or after 1 February 2020 for the following contracts that were entered into or renewed before 25 March 2020:

(a) Leases or licences for non-residential immovable property (e.g. lease for factory premises);

(b) Construction contract or supply contract;

(c) Contracts for the provision of goods and services for events;

(d) Certain contracts for goods or services for visitors to Singapore, domestic tourists or outbound tourists, or promotion of tourism; and

(e) Certain loan facilities granted by a bank or a finance company to small medium enterprises with turnover of not more than S$100 million in the latest financial year.

(collectively, the “Protected Contracts”)

The measures will be in place for a prescribed period, which will be six months from the commencement of the Act at first instance. Subsequently, it may be extended, for up to a year from the commencement of the Act.

What it means to be COVID
The Bill will prohibit a contracting party from taking the following legal actions against a non-performing party in the context of any non-performance of the Protected Contract:

(a) Commencement of court and insolvency proceedings;

(b) Enforcement of security over immovable property as well as movable property that is used for the purposes of business or trade;

(c) Call on a performance bond given pursuant to a construction contract;

(d) Termination of leases of non-residential premises;

(e) Relief in respect of forfeiture of deposits for events and tourism-related contracts; and

(f) In the case of construction and supply contracts, a contractor will be relieved from liability for non-performance if this was materially caused by COVID-19.

To trigger the above reliefs, a party will have to notify that it is unable to meet its contractual obligations materially due to the COVID-19 situation.

Upon receiving notification for relief:

(a) A party to the contract cannot take any prohibited action against the other party during the prescribed period; or

(b) Proceedings relating to a prohibited action that have already commenced must be stayed.

Non-compliance in relation to a prohibited action will be an offence.

Dispute framework COVID by the bill
The Bill will also set out an affordable, fast and simple framework for parties to resolve disputes arising from these measures.
A key feature of the framework is the role of the Assessor. Any dispute as to whether a party is entitled to relief will be referred to the Assessor.

The Assessor has the ability to decide if the inability to perform contractual obligations was due to COVID-19 and will have the power to grant relief that is just and equitable in the circumstances. Parties will not be allowed to be represented by lawyers, and there will be no costs orders.

The decision of the Assessor will be final and non-appealable.

Temporarily COVID against financial distress
The Bill also seeks to provide temporary relief for individuals and businesses in financial distress by increasing the monetary thresholds and time limits for bankruptcy and insolvency. This is achieved by:
(a) For individuals: Increasing the monetary threshold for bankruptcy from $15,000 to $60,000,
(b) For businesses: Increasing the monetary threshold for insolvency from $10,000 to $100,000 (for companies/partnerships); and
(c) Lengthening the statutory period to respond to demands from creditors from 3 weeks to 6 months.

Directors will be temporarily relieved from their obligations to prevent their companies trading while insolvent if the debts are incurred in the company’s ordinary course of business. However, Directors remain criminally liable if the debts are incurred fraudulently.

Main relief COVID: Moratorium
While the Bill will undoubtedly grant relief to individuals and businesses affected by the pandemic, it has to be borne in mind that the Bill is intended to act as a moratorium and not to extinguish legal obligations. Put differently, it is designed to help with one’s cash flow and not a cure for insolvency.

Parties should carefully analyse the Bill (and the resulting Act) to see if they (or their counterparties) are affected by it. As the Bill is expected to pass quickly, despite the far reaching impact it has and the myriad of potential issues, do make a note of the Protected Contracts you are dealing in and be alive to the reasons for or against granting of reliefs. As highlighted above, the Assessors will carry out their task expeditiously and you only have one chance to convince them.

For further information, please contact:

Mr Tito Isaac, Managing Partner
TEL: +65 6730 6011, EMAIL: [email protected]

Mr Hariz Lee, Senior Associate
TEL: +65 6730 6008 , EMAIL: [email protected]

Ms Chong Yi Mei, Senior Associate
TEL: +65 6730 6017 , EMAIL: [email protected]

This message or publication does not necessarily deal with every important topic nor cover every aspect of the topics with which it deals. Its contents are intended to provide general information only and do not contain or convey any legal or other advice. Although we endeavour to ensure that the information contained herein is accurate, we do not warrant its accuracy or completeness or accept liability for any loss or damage arising from any reliance thereon.

Friday 3 April 2020

How may we help you?

With a responsive team of 30 lawyers, your case is safe in our hands.

LLP Reg. No. T07LL1728C  |  GST Reg. No. M9-0359250-C

We are a Limited Liability Law Partnership registered in Singapore under the Limited Liability Partnerships Act (Chapter 153A).