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Knowledge Highlights 5 September 2024
On 1 April 2020, the Ministry of Law (“MinLaw”) announced that it intends to introduce the Covid-19 (Temporary Measures) Bill (“Bill”) in Parliament next week. The Bill seeks to offer temporary relief to businesses and individuals who are unable to fulfil their contractual obligations because of Covid-19.
1. Who is affected by the Bill?
Parties to certain commercial undertakings (e.g. construction projects), landlords and tenants under commercial and industrial tenancies, and parties to certain individual consumer transactions (e.g. bookings for events). The Bill will also contain measures that affect individuals or companies who are unable to meet their obligations, who are facing the prospect of paying damages or forfeiting deposits, and/or who are in financial distress.
2. Why is the Singapore government announcing this now?
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. The Bill 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.
3. When will these measures come into effect?
The proposed Bill was announced on 1 April 2020. The Bill is expected to be passed in Parliament by early-April 2020, and is expected to come into force within the same month. The measures will be in place six months from the commencement of the Act (“Act”). Subsequently, it may be extended for up to a year from the commencement of the Act.
The measures will cover relevant contractual obligations that are to be performed on or after 1 February 2020, and contracts that were entered into or renewed before 25 March 2020.
4. What types of relief(s) are provided by the Bill?
The Bill will prohibit a relevant contracting party from taking legal actions against a non-performing party. The Bill will also introduce temporary relief for individuals and businesses in financial distress.
5. Which types of contracts are protected from legal action?
The Bill will provide temporary relief from legal action over the following contracts:
6. What kinds of legal actions are prohibited?
In applicable cases, the Bill will prohibit the following types of legal actions:
7. How does the relief work in practice?
The party seeking relief as a result of Covid-19 must serve a notification for relief on the other party. Upon receiving the notification for relief, a party cannot take any prohibited action against the other party during the prescribed period. 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.
Some practical illustrations of these reliefs
8. What if parties cannot agree on whether relief under the Bill applies or not?
As a safeguard against unfair outcomes, assessors will be appointed by the Minister for Law to resolve disputes arising from the application of the Act. These 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 process is intended to be affordable, fast and simple. Parties will not be allowed to be represented by lawyers, and there will be no costs orders. Assessors’ decisions will be final and not appealable. Details of the application process will be released in due course.
9. What about bankruptcy and corporate insolvency?
The Bill will also introduce temporary relief for individuals and businesses in financial distress:
10. Can my company still trade while insolvent?
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.
Reference materials
The press release is available on the MinLaw website www.mlaw.gov.sg or by clicking here.
Further information
Allen & Gledhill has a Covid-19 Resource Centre on our website www.allenandgledhill.com that contains published knowhow on legal and regulatory aspects of the Covid-19 crisis.
In addition, we have a cross-disciplinary Covid-19 Legal Task Force consisting of Partners across various practice areas to provide rapid assistance. Should you have any queries, please do not hesitate to get in touch with us at .covid19taskforce@allenandgledhill.com.