Knowledge Highlights 21 April 2020
On 20 April 2020, Part 3 of the Covid-19 (Temporary Measures) Act 2020 (“Act”) providing for increased thresholds for bankruptcy and insolvency for financially distressed individuals and businesses entered into force and will last for a period of six months in the first instance up to and including 19 October 2020 (“prescribed period”). The prescribed period of such relief may be extended up to a year.
These provisions have come into force in tandem with provisions for temporary relief from legal action for the inability to perform certain contracts, which similarly apply during the prescribed period. For further details, please see our article titled “Covid-19 (Temporary Measures) Act 2020: Provisions on temporary relief from legal action for inability to perform contracts in force from 20 April 2020”.
Relief from bankruptcy and insolvency
Under the Act, the following measures will be in force during the prescribed period (“measures”):
- For individuals:
- Monetary threshold for bankruptcy increased from S$15,000 to S$60,000;
- Statutory period to respond to demands from creditors lengthened from 21 days to six months;
- Monetary threshold for Debt Repayment Scheme increased from S$100,000 to S$250,000; and
- Bankrupts temporarily relieved from obligations to prevent their businesses trading while insolvent if the debt is incurred in the ordinary course of the bankrupt’s business, during the prescribed period, and before application for voluntary arrangement or bankruptcy.
- For businesses:
- Monetary threshold for corporate insolvency increased from S$10,000 to S$100,000;
- Statutory period to respond to demands from creditors lengthened from 21 days to six months; and
- Officers of companies temporarily relieved from obligations to prevent their companies trading while insolvent if the debts are incurred in the company’s ordinary course of business, during the prescribed period, and before the appointment of a judicial manager or liquidator of the entity. However, directors remain criminally liable if the debts are incurred fraudulently.
For background and further details, please see our article titled “Expedited passage of Covid-19 (Temporary Measures) Act 2020: Overview of measures”.
- Press release: Covid-19 (Temporary Measures) Act provisions relating to temporary reliefs to commence on 20 April 2020
- Covid-19 (Temporary Measures) Act 2020 (Commencement) (No. 2) Notification 2020
- Covid-19 (Temporary Measures) (Prescribed Period) Order 2020
- Bankruptcy (Amendment) Rules 2020
- Covid-19 (Temporary Measures) Act 2020
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 firstname.lastname@example.org.