20 Apr 2020 Posted in Press releases
- The provisions in the COVID-19 (Temporary Measures) Act ("the Act") relating to temporary relief from legal action for inability to perform certain contracts, as well as increased thresholds for bankruptcy and insolvency for financially distressed individuals and businesses, will commence on 20 April 2020.
A. Temporary Relief for Inability to Perform Contracts
- The Coronavirus Disease 2019 (COVID-19) has created an unprecedented economic shock. Many individuals and businesses have been unable to perform contractual obligations because of COVID-19 and the resulting safe distancing measures.
- The provisions in the Act provide temporary relief from legal action for those who are unable to perform certain types of contracts because of COVID-19. The measures apply to contractual obligations that are to be performed on or after 1 February 2020 and only for contracts that were entered into before 25 March 2020. Details on the categories of contracts covered and the relief provided under the Act are in the Annex.
- The period of relief will be for six months, from 20 April 2020 to 19 October 2020, in the first instance. The period of relief may be extended to up to a year.
How to Obtain Relief
- Those who are unable to perform their contracts because of COVID-19 are encouraged to negotiate with the other party to resolve the matter.
- If they require protection from legal proceedings and wish to obtain temporary relief under the Act, they should:
- First, confirm that they are eligible for relief. They may visit http://www.mlaw.gov.sg/covid19-relief for more information.
- Second, serve a Notification for Relief on the other party or parties to the contract, using the form at http://www.mlaw.gov.sg/covid19-relief/notification-for-relief. The Notification for Relief sets out the obligation that is or was supposed to be performed, how the inability to perform the obligation was materially caused by a COVID-19 event, and any proposed alternative solution. The Notification for Relief must also be served on any guarantor or surety for the obligation in the contract, and/or the issuer of any related performance bond (if any).
- The Act imposes a moratorium on legal action, so that parties have time to negotiate and work out their differences. This helps them focus on reviving their business rather than be mired in costly and time-consuming litigation or insolvency proceedings.
- The other party or parties to the contract on whom the Notification for Relief is served are prohibited from taking certain types of actions to enforce the obligation during the period of relief. These include commencing or continuing an action in court.
Application for an Assessor's Determination
- There may be disagreements on whether there is an inability to perform the contract or whether that inability is materially caused by COVID-19. In such cases, parties should first discuss, understand each other’s positions, and try to reach a mutual agreement.
- If the parties are unable to reach a compromise on their own, after a Notification for Relief is served, either party can make an Application for an Assessor's Determination. The application will be made to the Panel of Assessors for COVID-19 Temporary Relief (PACT), appointed by the Minister for Law. An Application for an Assessor's Determination may be made to PACT via http://www.mlaw.gov.sg/covid19-relief/application-for-assessor.
- The Assessor will decide whether the case is one to which the relief under the Act applies and will seek to achieve an outcome that is just and equitable in the circumstances. The determination by the Assessor is binding on the parties and is not appealable. Parties will not be allowed to be represented by lawyers in proceedings. The application is currently free and costs will not be awarded
against any party.
- Hearings will generally be conducted by exchange of emails, unless the Assessor is of the view that there is a need for a hearing to be conducted over video-conference or in person. The Registrar will inform the relevant parties of the determination when ready.
- Further information on obtaining relief and the process of application to PACT is available at http://www.mlaw.gov.sg/covid19-relief.
B. Temporary Relief for Financially Distressed Individuals and Businesses
- Measures in the Act relating to bankruptcy and insolvency will also commence on 20 April 2020, and last up to and including 19 October 2020. The Act will increase the monetary threshold for bankruptcy from $15,000 to $60,000, and that for corporate insolvency from $10,000 to $100,000. The time period to satisfy a statutory demand from creditors will also be increased from 21 days to six months.
MINISTRY OF LAW
20 APRIL 2020
Categories of Contracts Covered and Relief Available (110KB)
Last updated on 20 Apr 2020