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The Singapore Ministry of Law will introduce the COVID-19 (Temporary Measures) Bill (the Bill) in Parliament next week to address the impact of COVID-19 on businesses and individuals’ ability to fulfil their contractual obligations. The Bill will also make some temporary changes relating to bankruptcy and insolvency.

The Bill will apply to various categories of contracts, including:

  • Construction and supply contracts;
  • Leases or licenses for non-residential property;
  • Contracts for the provision of goods and services for events;
  • Certain contracts for goods or services for visitors in Singapore, domestic tourists or outbound tourists, or promotion of tourism; and
  • Certain loan facilities granted by a bank or a finance company to SMEs.

Given the extraordinary circumstances caused by COVID-19, the Bill will have retrospective effect and apply to contractual obligations that are to be performed on or after 1 February 2020 in contracts that were entered into or renewed before 25 March 2020.

The Bill will prohibit contracting parties from taking certain legal actions against counterparties who have breached their obligations due to the COVID-19 pandemic. This includes court and insolvency proceedings and the termination of leases.

For construction contracts and supply contracts, the Bill will relieve contracting parties from the liability to pay liquidated damages in the event of a delay or failure in performance that was caused to a material extent by COVID-19. This statutory protection will override any contractual agreement between parties relating to the payment of liquidated damages.

The Bill will also provide additional relief in respect of forfeiture of deposits for events and tourism-related contracts. For example, a venue provider cannot forfeit a person’s deposit for an event that is postponed because of COVID-19 restrictions without obtaining a determination from an assessment that it was just and equitable to forfeit the whole or part of the deposit.

Another key aspect of the Bill is the temporary relief for individuals and businesses in financial distress. The monetary threshold for insolvency for businesses will be increased ten-fold, from SGD 10,000 to SGD 100,000. For individuals, the monetary threshold for bankruptcy will be increased from SGD 15,000 to SGD 60,000. The period for a debtor to satisfy a creditor’s statutory demand will also be extended.

Company directors will also be temporarily relieved from the prohibition from trading while the company is insolvent, if debts are incurred in the ordinary course of business. However, directors remain criminally liable if the debts are incurred fraudulently.

We will provide further details on the Bill and how it will affect businesses after the Bill is presented in Parliament next week. If you have any questions on the Bill or the potential impact that this upcoming Bill will have for your business, please do not hesitate to reach out to the authors listed on the right.

Author

Nandakumar (Kumar) Ponniya is a principal in the Dispute Resolution Practice Group in Singapore. Kumar is seasoned in international arbitration with a focus on building, infrastructure and construction law. He regularly advises on infrastructure projects such as rail systems, oil and gas facilities, and utilities plants, as well as commercial and residential developments across the Asia Pacific region. Kumar is listed as a leading dispute resolution lawyer in Singapore, with Chambers Asia Pacific 2012 noting that he "has a full and comprehensive knowledge of international arbitration and good analytical skill in dealing with cross-border commercial disputes." Chambers Global 2013 has described him as "extremely technically proficient and commercially savvy." He has been listed in the Guide to the World's Leading Construction Lawyers 2013 and further identified as a "rising star" in the Guide to the World's Leading Experts in Commercial Arbitration 2013. Benchmark Asia Pacific 2013 has recognized him as a "leading disputes star" and "leading litigation star" in Singapore.

Author

Tjen Wee is an Associate Principal in the Dispute Resolution Practice Group in Singapore. His practice covers international arbitration, commercial litigation, and adjudication under the Singapore Security of Payment Act. Tjen Wee is particularly noted for his work relating to infrastructure and construction. Apart from construction disputes, he also handles a broad range of commercial, MCST, shareholder, and employment disputes. Tjen Wee is a recommended lawyer in Construction on Legal 500.