Knowledge Highlights 1 April 2020

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:

  • Leases or licences for non-residential immovable property (e.g. lease for factory premises);
  • Construction contracts or supply contracts (e.g. contract for the supply of materials);
  • 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 SMEs (businesses with turnover of not more than S$100 million in the latest financial year) where loans are fully or partially secured against commercial or industrial immovable property, plant, machinery or other equipment used for business purposes in Singapore; and
  • Certain hire-purchase agreements (e.g. where good hired is a commercial vehicle).

6.  What kinds of legal actions are prohibited? 

In applicable cases, the Bill will prohibit the following types of legal actions:

  • Court and insolvency proceedings;
  • Enforcement of security over immovable property as well as movable property that is used for the purposes of business or trade;
  • Call on a performance bond given pursuant to a construction contract; and
  • Termination of leases of non-residential premises.

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

  • Leases or licences for non-residential property: For example, if a restaurant cannot afford to pay rent for February and March 2020, the tenant can seek relief. If relief is given, then it will be a criminal offence for the landlord to terminate the lease, repossess the premises, or start or continue court or insolvency proceedings against the restaurant. 
  • Events and tourism-related contracts: There will be additional relief in respect of forfeiture of deposits. For example, if a person who booked a venue for an event (e.g. for a wedding) postpones the event because of Covid-19 restrictions, the venue provider cannot forfeit the person’s deposit unless the provider obtains a determination from an assessor that it would be just and equitable to forfeit either the whole deposit or a part of it (e.g. if the person cancels the booking entirely). 
  • Construction and supply contracts: A contractor will be relieved from liability for liquidated damages or delays arising from non-performance if this was caused to a material extent by Covid-19. 
  • Hire-purchase agreements: Take, for example, a private-hire car driver who bought his car on hire-purchase loan in 2019. Due to fewer passengers leading to reduced income, he is unable to afford the monthly instalments for February and March 2020. If relief is given, the finance company cannot repossess the car or start or continue insolvency proceedings against the driver. Depending on the circumstances, the assessor may make further determinations (e.g. requiring the driver to pay one or more instalments).

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:

  • For individuals:
    • Increasing the monetary threshold for bankruptcy from S$15,000 to S$60,000.
    •  Lengthening the statutory period to respond to demands from creditors from 21 days to six months.
    •  Increasing the monetary threshold for the Debt Repayment Scheme from S$100,000 to S$250,000.
  • For businesses:
    • Increasing the monetary threshold for insolvency from S$10,000 to S$100,000 (for companies/partnerships).
    •  Lengthening the statutory period to respond to demands from creditors from 21 days to six months.

 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 or by clicking here.

Further information

Allen & Gledhill has a Covid-19 Resource Centre on our website 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


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