In response to the developing COVID-19 crisis in Singapore, the COVID-19 (Temporary Measures) Act was introduced on 7 April 2020. Here are some of the key features:
When does it apply?
The Act applies retrospectively to contractual obligations to be performed on or after 1 February 2020, for contracts entered into or renewed before 25 March 2020 (the ‘Relevant Time Period’).
Temporary Protection from Legal Action
The Act offers temporary protection from legal action, for parties to contracts within the Relevant Time Period, where non-performance is caused materially by COVID-19. The protection runs for six month period, and may be extended.
Does the Act cover all contracts?
Presently, the Act covers these contracts:
- Specific loan facilities granted by banks and finance companies to small and medium enterprises;
- Performance bonds and equivalent instruments relating to construction contracts and supply contracts;
- Hire-purchase agreements for commercial vehicles or certain fixed assets located in Singapore and used for business purposes;
- Event contracts;
- Tourism-related contracts;
- Construction contracts and supply contracts; and
- Non-residential leases and licenses.
However, other types of contracts could be added later.
What protection does the Act offer?
The Act can give defaulting parties temporary protection from:
- Court proceedings;
- Insolvency proceedings;
- Enforcement of securities over immovable property and movable property used for business or trade;
- Calls on performance bonds issued for construction contracts and supply contracts; and
- Termination of non-residential leases and licenses.
The Act provides additional relief where non-performance is caused materially by COVID-19, for:
- Construction and supply contracts, where a party unable to perform its contractual obligations may not be liable for liquidated damages; and
- Event and tourism-related contracts, where a party forced to postpone events may be granted additional protection from forfeiting deposits.
Does the protection apply automatically?
Under the Act, a party must first serve a notification for relief on all other parties to the contract, within the stipulated time frame (which will be set out in subsequent regulations). The other parties in the contract can either consent to or contest the relief.
If the other parties consent, no further action is required and the party seeking relief will be entitled to protection under the Act for six months.
If one or more parties contest the notification for relief, they must file an application with the Registrar of Assessors, to appoint an assessor within the stipulated time frame. The assessor will then make a final and binding decision, and no further appeal may be made. Until the assessor makes their decision, the party seeking relief will enjoy temporary protection under the Act.
If the other parties do not respond through the proper channel before the end of the stipulated period, the party seeking relief will be automatically entitled to the protection offered by the Act.
Temporary Increase in Statutory Limits for Insolvency
The Act also provides relief through temporary increases in debt thresholds and time limits for insolvency.
- For businesses, the debt threshold has been raised from S$10,000.00 to S$100,000.00.
- For individuals, the debt threshold has been raised from S$15,000.00 to S$60,000.00.
For both businesses and individuals, the time for responding to statutory demands has been extended from 21 days to six months.
Mandatory Transfer of Non-residential Property Tax Rebates
To ease financial pressure on commercial tenants, the Act also compels landlords to transfer the full amount of non-residential property tax rebates (up to 100% for qualifying commercial properties) introduced in the government’s recent Resilience Budget. Failing to do so could lead to a fine of up to S$5,000.
For more information about the Act and other COVID-19 measures recently introduced in Singapore, please get in touch.