How Are SMEs Protected Under The COVID-19 (Temporary Measures) Act? (Updated)
Eric Koh
May 11, 2020
(Updated)
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.
Measures Implemented (Including Amendment Bill)
SMEs will be protected via:
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.
2. Measures relating to Bankruptcy and Insolvency
- For individuals
Increase threshold for bankruptcy from $15,000 to $60,000
Extend statutory demand time limit from 21 days to 6 months
- For businesses
Increase threshold for insolvency from $10,000 to $100,000
Extend statutory demand time limit from 21 days to 6 months
3. Rental Relief Framework for SMEs (Amendment) (for qualifying SME tenants of non government-owned / managed properties, Infographic)
- Commercial Properties
Government provides 2 months rental waiver (Apr - May 2020)
Contracts Covered Under the Temporary Relief from Legal Action
There are the 6 types of contracts covered by the act, as listed on MinLaw’s website.
Secured loan agreements to SMEs
Your creditor cannot enforce the security (i.e. over commercial or industrial property, plant or machinery used for business) located in Singapore
Your creditor cannot start or continue court or insolvency proceedings against you (during the prescribed period)
Construction contracts and supply contracts
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
The other part cannot call on any performance bond granted pursuant to the contract for the prescribed period
The other party cannot start or continue court or insolvency proceedings against you for the prescribed period
Event and tourism-related contracts
The vendor cannot automatically forfeit the client’s deposit
The deposit will be treated fairly, taking into account any expenses incurred by the vendor and alternative arrangements for the booking
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)
Hire-purchase and conditional sales agreements
The financing company cannot repossess your plant, machinery or vehicle
The financing company cannot start or continue court or insolvency proceedings against you
Leases and licences of non-residential property
Your landlord cannot terminate your lease or evict you, on the basis that you have not paid rent
Your landlord cannot start or continue court of insolvency proceedings against you
Option to purchase & sale and purchase agreements with housing developers (Amendment Bill)
Booking fees or other consideration paid under Option To Purchase (OTP) cannot be forfeited
Sale & Purchase (S&P) and Agreement for Lease (AFL) cannot be terminated
The developer cannot impose new charges, increase charges or interest rates beyond what is provided for in the contract
Are You Eligible for Relief?
MinLaw has introduced a Self-Assessment Tool for anyone who may have doubts about their eligibility.
Category
Eligible
Not Eligible
1. Guide for SMEs with Secured Loans
Loans from banks/finance companies to SMEs, which are secured against:
Commercial or industrial immovable property located in Singapore; or
Plant, machinery or fixed assets
Entered into loan before 25 March 2020
Unable to repay secured loan from 1 February 2020 or later, due to COVID-19
Unsecured loans (e.g. credit card loans, unsecured business term loans) or loans from moneylenders
Inability to repay loan for reasons unrelated to COVID-19
Loan payments before 1 February 2020
Security enforced before 20 April 2020
2. Guide for Construction Contractor and Suppliers
Construction and supply contracts
Within the meaning of section 2 of the Building and Construction Industry Security of Payment Act (Cap. 30B)
Entered into contract before 25 March 2020
Unable to perform obligations (e.g. meet delivery deadline) on or after 1 February 2020, due to COVID-19
Inability to perform obligations for reasons unrelated to COVID-19
Unfulfilled obligations before 1 February 2020
3. Guide for Event and Tourism-related Contracts
Event or tourism-related contract (e.g. venue or catering for wedding; tour or cruise package)
Entered into contract before 25 March 2020 (e.g. made booking before 25 March 2020)
Event/tour held or scheduled to be held on or after 1 February 2020
Unable to proceed with event/tour due to COVID-19
Inability to proceed with event/tour for reasons unrelated to COVID-19
Contracts not governed by Singapore law (e.g. with overseas tour agency or photographer)
Contracts for air travel such as airline tickets
4. Guide for Hirers in Hire-Purchase or Conditional Sales Agreements
Hire-purchase agreement or conditional sales agreement for:
Plant or machinery in Singapore used for commercial purposes (e.g. manufacturing)
Commercial vehicle (e.g. used as goods vehicle, private bus, private hire car)
Entered into contract before 25 March 2020
Unable to pay instalments from 1 February 2020 or later, due to COVID-19
Goods purchased for personal purposes
Vehicle rental agreements (approach the rental company for assistance)
Inability to pay instalments for reasons unrelated to COVID-19
Unpaid instalments before 1 February 2020, or goods repossessed before 20 April 2020
5. Guide for Non-Residential Property Tenants
Lease or licence for non-residential property
Entered into lease or licence before 25 March 2020
Unable to pay rent or charges from 1 February 2020 or later, due to COVID-19
Residential leases, even if used for business purposes
Inability to pay rent for reasons unrelated to COVID-19
Unpaid instalments before 1 February 2020, or goods repossessed before 20 April 2020
6. Buyers in contracts with housing developers (Amendment)
In a contract with a housing developer
Option to Purchase (OTP)
Sale and Purchase (S&P) Agreement; or
Agreement for Lease (AFL)
Entered into contract before 25 March 2020
Unable to make payment on 1st February due to COVID-19
Payment required unpon exercising the OTP; or
Payment due under the S&P Agreement / AFL
Contracts where seller is not a housing developer (e.g. reseller)
Non-residential property
Inability to make payment for reasons unrelated to COVID-19
Lendingpot.sg operates a Business Loan Marketplace that allows an SME to connect to multiple lenders with just one application, allowing the SME to know who its prospective lenders are and the rates that they offer, in a very short time.
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.