COVID-19 (Temporary Measures) Act

Sweeping across the globe is the COVID-19 pandemic, which poses not just a threat to human life, but also impairs the economy due to the necessary imposition of lockdowns to contain the spread of the disease.

The Singapore Government has recognised this impact, particularly on certain areas of industry, and acted swiftly by passing the COVID-19 (Temporary Measures) Act into law in the early stages of April 2020.

Temporary Relief under the COVID-19 (Temporary Measures) Bill

With the introduction of the COVID-19 (Temporary Measures) Act, temporary protection and relief from legal action is offered for a 6-month duration in relation to the following types of contracts:

• Secured loans against commercial or industrial property
• Secured loan facilities against plant, machinery or fixed assets in Singapore
• Performance bonds in relation to construction or supply contracts
• Hire-purchase agreements for plants, machinery or vehicles used for business purposes
• Construction contracts (including the supply of construction materials)
• Events or tourism-related contracts
• Lease or license of non-residential property

Differing from an absolution, the COVID-19 (Temporary Measures) Act does not remove contractual obligations, rather, it modifies them by suspending/placing a moratorium on those obligations for an initial period of 6 months from 20 April 2020 to 19 October 2020. This is designed to create breathing space for contracting parties to negotiate and work out an acceptable solution without the fear of litigations/legal proceedings or the enforcement of any security.

Additional relief measures detailed in the COVID-19 (Temporary Measures) Act are provided for certain types of scheduled contracts. For instance, one such measure is the inability to forfeit any deposit (or part thereof) for event/tourism-related contracts. This protection is applicable to contractual obligations due to be performed on or after 1 February 2020. However, the party leaning on this relief must convincingly demonstrate that their inability to perform, to a material extent, resulted from a COVID-19 event and that they have served a notification for relief in accordance with the requirements of the COVID-19 (Temporary Measures) Act.

In terms of executing the relief, the Notification of relief is typically filed by individuals or corporate bodies and includes certain prescribed information. For reinforcement, it is recommended that this document is supported by other documentation illustrating how the contract has been materially affected by COVID-19. Any party that infringes on the relief without reasonable excuse will be susceptible to criminal/prosecutable offence with their actions (like enforcement of security or termination of a lease of immovable property) being voided.

Temporary Relief for Financially Distressed Individuals and Businesses

Further actions taken by the COVID-19 (Temporary Measures) Act include modifications to the statutory requirements to initiate bankruptcy or insolvency proceedings for the next 6 months (up to and including 19 October 2020).

It increases the stipulated amount for bankruptcy from SGD $15,000.00 to SGD $60,000.00, and for corporate insolvency from SGD $10,000.00 to SGD $100,000.00. Simultaneously, it increases the Debt Repayment Scheme threshold from SGD $100,000.00 to $250,000.00.

More so, the COVID-19 (Temporary Measures) Act extends the statutory period to respond to demands from creditors from just 21 days to six months, also granting bankrupts or company officers the ability to continue trading while insolvent under specified conditions. Allowing companies and individuals to persist in their businesses even amidst trying times, the COVID-19 (Temporary Measures) Act modifies other related acts such as the Bankruptcy Act and Insolvency, Restructuring, and Dissolutions Act, Companies Act, Limited Liability Partnerships Act, and Business Trusts Act.

Employees and Employment Contracts under the COVID-19 (Temporary Measures) Bill

Significantly, the COVID-19 (Temporary Measures) Act does not explore employment contracts between companies and their employees.

One common query arising in this context is whether companies have the liberty to “ask” their employees to take a pay cut during the COVID-19 pandemic. While COVID-19 clearly dominates media and international consciousness, there isn’t any similar legislation being passed, thus the contractual obligations of each party generally remain unchanged.

This underscores that an employer is obliged to make full payment of the contractually stipulated salary, and the employee is still obliged to perform his or her duties.

As such, while an employer can offer to renegotiate an employee’s salary for, let’s say, the next 3 months, they cannot force the employee to accept a lower salary. However, the employer does have the option to execute their contractual right to terminate an employment contract according to its provisions.

Moreover, the Ministry of Manpower of Singapore periodically issues guidelines and notices on whether an employer is entitled to cancel a work or employment pass and it will be worthwhile for employers to stay updated on these developments.