How Are SMEs Protected Under The COVID-19 (Temporary Measures) Act? (Updated)

(Updated)

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The Singapore government has introduced additional measures to protect SMEs in the COVID-19 (Temporary Measures) (Amendment) Bill in Parliament on 5th June 2020.

On the 1st of April, the Ministry of Law (MinLaw) stated that they intend to introduce laws to offer temporary relief for those who are unable to fulfill their contractual obligations because of COVID-19. 

These measures commenced on 20th April 2020 and will last 6 months (until 19th October 2020) in the first instance.

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Measures Implemented (Including Amendment Bill)

SMEs will be protected via:

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1. Temporary Relief from Legal Action 

- For contractual obligations that are to be performed on or after 1st February 2020 and;

- Only for contracts that were entered into before 25th March 2020.

- Measures will last 6 months, from 20th April 2020 to 19th October 2020. This may be extended to up to a year.

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2. Measures relating to Bankruptcy and Insolvency

- For individuals

1. Increase threshold for bankruptcy from $15,000 to $60,000
2. Extend statutory demand time limit from 21 days to 6 months

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- For businesses

1. Increase threshold for insolvency from $10,000 to $100,000
2. Extend statutory demand time limit from 21 days to 6 months

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3. Rental Relief Framework for SMEs (Amendment) (for qualifying SME tenants of non government-owned / managed properties, Infographic)

- Commercial Properties

1. Government provides 2 months rental waiver (Apr - May 2020)
2. Landlord provides 2 months rental waiver (Jun - Jul 2020)

- Industrial / Office Properties

1. Government provides 1 month rental waiver (for Apr 2020)
2. Landlord provides 1 month rental waiver (for May 2020)

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‍- Repayment Scheme for Rental Arrears (Amendment)

1. Tenants can opt for a restructuring of accumulated rental arrears
2. Maximum rental arrears range from 4 months (industrial / office) to 5 months (commercial properties) of base rent
3. To be paid in equal instalments, with interest capped at 3% p.a., over the remainder of the lease (max 9 months)
   

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- Cap on late payment interest or charges for specific contracts (Amendment)

1. Businesses and individuals that were unable to meet certain obligations due to COVID-19 were previously granted a moratorium on legal action.
2. However, high late interest and charges can continue to accumulate.
3. MinLaw will introduce a cap on these fees with the Amendment Bill, to be released at a later date.
   

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- Relief for contracts affected by construction delay (Amendment)

1. Includes renovation obligations that fall within the COVID-19 circuit breaker
2. Full description of the measure

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Contracts Covered Under the Temporary Relief from Legal Action

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There are the 6 types of contracts covered by the act, as listed on MinLaw’s website.

1. Secured loan agreements to SMEs
2. Your creditor cannot enforce the security (i.e. over commercial or industrial property, plant or machinery used for business) located in Singapore
3. Your creditor cannot start or continue court or insolvency proceedings against you (during the prescribed period)
4. Construction contracts and supply contracts
5. The inability to supply goods or materials due to COVID-19 is a defence to a claim for breach of contract, damages or liquidated damages
6. The other part cannot call on any performance bond granted pursuant to the contract for the prescribed period
7. The other party cannot start or continue court or insolvency proceedings against you for the prescribed period
8. Event and tourism-related contracts
9. The vendor cannot automatically forfeit the client’s deposit
10. The deposit will be treated fairly, taking into account any expenses incurred by the vendor and alternative arrangements for the booking
11. The client cannot be made to pay cancellation fees (if provided in the contract) if the event / tour was to occur between 1st  February 2020 to 19th October 2020 (dates inclusive)
12. Hire-purchase and conditional sales agreements
13. The financing company cannot repossess your plant, machinery or vehicle
14. The financing company cannot start or continue court or insolvency proceedings against you
15. Leases and licences of non-residential property
16. Your landlord cannot terminate your lease or evict you, on the basis that you have not paid rent
17. Your landlord cannot start or continue court of insolvency proceedings against you
18. Option to purchase & sale and purchase agreements with housing developers (Amendment Bill)
19. Booking fees or other consideration paid under Option To Purchase (OTP) cannot be forfeited
20. Sale & Purchase (S&P) and Agreement for Lease (AFL) cannot be terminated
21. The developer cannot impose new charges, increase charges or interest rates beyond what is provided for in the contract

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Are You Eligible for Relief?

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MinLaw has introduced a Self-Assessment Tool for anyone who may have doubts about their eligibility.

About the author

Eric Koh is passionate about helping SMEs grow and has spent years interacting with business owners at OCBC and IFS Capital. He is interested in 70s rock ‘n roll, the odd novel and copious amounts of historical trivia.

SMEs

COVID-19

Relief

Self-Assessment Tool