In Focus

How the Temporary Measures Act provides a lifeline for hard-hit contracts

The act covers agreements made before 25 March.

In light of the economic impact of the pandemic across various sectors, the parliament passed a wide-ranging bill on 7 April to provide temporary relief from certain types of legal action to those who are unable to fulfill contractual obligations for an initial period of six months. It also introduces provisions in holding meetings whilst abiding with the safe distancing measures.

Following the Unity, Resilience, and Solidarity Budgets, the COVID-19 (Temporary Measures) Act of 2020 covers agreements made before 25 March as well as obligations to be performed on or after 1 February. Amongst other things, the act prohibits landlords from terminating a lease due to non-payments and protects those who have placed deposits for events.

The act will only apply to contracting parties that are unable to perform their contractual obligations due to the pandemic.

The act covers six types of contracts in summary— (1) leases and licenses of non-residential property, (2) construction related contracts, (3) event or tourism related contracts, (4) hire purchase or conditional sales agreements, (5) certain secured loan facilities for local enterprises (at least 30% owned by Singapore citizens and/or permanent residents with a group turnover of not exceeding $100m in the previous financial year), and (6) options, sale, and purchase agreements for the purchase of housing accommodation, according to Rajah and Tann’s partner and head of restructuring and insolvency practice, Sim Kwan Kiat.

Under the act, the benefit of any property tax remission granted to property owners must also be passed on to their tenants or licensees. The relief provided is for a prescribed period of six months until 19 October, unless extended.

Q. How can this law address the possible implications of the measures to landlords and event and tourism-related contracts?

As the measures provided under the act alleviates the financial difficulties of tenants, Geraldine Ong, Baker McKenzie Wong & Leow head of the real estate practice, principal, notes that rent deferment measures under the act are a necessary intervention to the business ecosystem in this unprecedented time of crisis and economic disruption.

However, qualifying landlords are correspondingly protected under the 2020 Supplementary Budgets as well as other government measures. The rent deferment measures under the act are also only temporary, and do not offer all tenants a free pass to absolve contractual obligations, she added.

In relation to event and tourism-related contracts, if a party is unable to fulfill its contractual obligation due to a material extent by a COVID-19 event, and has served a notification for relief in accordance with the act, the other party cannot take or continue certain types of legal action against it during the relief period, notes Joint Head - Energy, Projects & Construction Practice Tay Peng Cheng from WongPartnership LLP.

The act provides that these deposits placed with vendors cannot be automatically forfeited on the basis of the customer’s inability to perform due to a COVID-19 event, once a notification for relief is received. Companies which are unable, due to a material extent by a COVID-19 event, to provide refunds of deposits paid can serve a notification for relief to buy themselves time during the relief period.

However, if a notification for relief is served by the service provider and the contracting parties are in disagreement over the deposit or refund, either party may make an application to an assessor appointed under the act to make a determination on the issue.

Q. What is the limit to the flexibility in holding meetings?

“A physical meeting is not permitted unless the meeting is critical to the operations of the permitted enterprise business or for the professional or vocational training, testing, certification or accreditation of its permitted enterprise employee,” said Vivien Yui, Joint Head - Employment Practice, WongPartnership LLP.

However, when a physical meeting is necessary, the attendees should abide with safety measures such as wearing masks, keeping a distance of at least one metre between participants, staggered arrival and departure timings. Meeting places should also be cleaned and disinfected before and after every meeting.

In addition, employees deployed to work in two or more groups should not meet to minimise physical interaction, whilst any participant who exhibits symptoms should not attend the meeting and should be immediately isolated or leave the workplace.

Meanwhile, Rajah and Tann’s Sim added that meetings in relation to insolvency matters of a company, variable capital company or limited liability partnership, bankruptcy matters of an individual, as well as general meetings and meetings of companies, business trusts, management corporation, subsidiary management corporation, and governing bodies of a registered society or union are prescribed to be conducted by electronic means between 27 March to 30 September.

Q. What other issues does this law cover?

Apart from the temporary suspension of contractual obligations of specific contracts, the COVID-19 Act has also made temporary changes to the bankruptcy and corporate insolvency regime, according to Rajah and Tann’s Sim, extending the time frame to set aside statutory demands from 21 days to six months.

Threshold amounts for insolvency actions have also increased under the act, whilst the monetary threshold for a court application for the winding up of a company has increased to $100,000 from $10,000. Meanwhile, the threshold for an application for the bankruptcy of an individual has increased from $15,000 to $60,000.

Temporary measures for court proceedings were also introduced where witnesses and accused persons may be able to give evidence remotely if certain conditions are satisfied.

Further, the act empowers the Minister of Health to make control orders, including restricting movement of and contact between people, and the prohibition of gatherings in any premises. The Minister is also able to restrict the operating hours and the business operations of companies.

By Janine Ballesteros

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