Business Loans

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

  1. Increase threshold for bankruptcy from $15,000 to $60,000
  2. Extend statutory demand time limit from 21 days to 6 months

- For businesses

  1. Increase threshold for insolvency from $10,000 to $100,000
  2. 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

  1. Government provides 2 months rental waiver (Apr - May 2020)
  2. Landlord provides 2 months rental waiver (Jun - Jul 2020)

- Industrial / Office Properties

  1. Government provides 1 month rental waiver (for Apr 2020)
  2. Landlord provides 1 month rental waiver (for May 2020)


- Repayment Scheme for Rental Arrears (Amendment)

  1. Tenants can opt for a restructuring of accumulated rental arrears
  2. Maximum rental arrears range from 4 months (industrial / office) to 5 months (commercial properties) of base rent
  3. To be paid in equal instalments, with interest capped at 3% p.a., over the remainder of the lease (max 9 months)

- Cap on late payment interest or charges for specific contracts (Amendment)

  1. Businesses and individuals that were unable to meet certain obligations due to COVID-19 were previously granted a moratorium on legal action.
  2. However, high late interest and charges can continue to accumulate.
  3. MinLaw will introduce a cap on these fees with the Amendment Bill, to be released at a later date.

- Relief for contracts affected by construction delay (Amendment)

  1. Includes renovation obligations that fall within the COVID-19 circuit breaker
  2. Full description of the measure


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.

  1. Secured loan agreements to SMEs
  2. Your creditor cannot enforce the security (i.e. over commercial or industrial property, plant or machinery used for business) located in Singapore
  3. Your creditor cannot start or continue court or insolvency proceedings against you (during the prescribed period)
  4. Construction contracts and supply contracts
  5. 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
  6. The other part cannot call on any performance bond granted pursuant to the contract for the prescribed period
  7. The other party cannot start or continue court or insolvency proceedings against you for the prescribed period
  8. Event and tourism-related contracts
  9. The vendor cannot automatically forfeit the client’s deposit
  10. The deposit will be treated fairly, taking into account any expenses incurred by the vendor and alternative arrangements for the booking
  11. 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)
  12. Hire-purchase and conditional sales agreements
  13. The financing company cannot repossess your plant, machinery or vehicle
  14. The financing company cannot start or continue court or insolvency proceedings against you
  15. Leases and licences of non-residential property
  16. Your landlord cannot terminate your lease or evict you, on the basis that you have not paid rent
  17. Your landlord cannot start or continue court of insolvency proceedings against you
  18. Option to purchase & sale and purchase agreements with housing developers (Amendment Bill)
  19. Booking fees or other consideration paid under Option To Purchase (OTP) cannot be forfeited
  20. Sale & Purchase (S&P) and Agreement for Lease (AFL) cannot be terminated
  21. The developer cannot impose new charges, increase charges or interest rates beyond what is provided for in the contract

                   

via MinLaw
   via MinLaw

         


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
  • Payment due before 1 February 2020
  • OTP booking fee already forfeited, or S&P Agreement / AFL already terminated

Source: MinLaw, Secured loan agreements to SMEs, Construction contracts and supply contracts, Event and tourism-related contracts, Hire-purchase and conditional sales agreements, Leases and licences of non-residential property, Options to purchase and sale and purchase agreements with housing developers

Source: MinLaw, Secured loan agreements to SMEs, Construction contracts and supply contracts, Event and tourism-related contracts, Hire-purchase and conditional sales agreements, Leases and licences of non-residential property, Options to purchase and sale and purchase agreements with housing developers


How to Get Relief?

According to MinLaw, you are required to serve a Notification for Relief on your creditor, landlord, vendor or client using MinLaw’s form (http://www.mlaw.gov.sg/covid19-relief/notification-for-relief).


What Happens If The Other Party Does Not Agree?

You may encounter a situation when the other party does not agree to the relief.

Your creditors may feel that your inability to fulfil the contract is not due to the outbreak of COVID-19, but for other reasons.

In such instances, MinLaw encourages you to negotiate with your creditors and reach an agreement.

However, if you cannot agree, either of you may apply for an Assessor from the Ministry of Law to make a determination.

Please note that the outcome of the Assessor’s determination will be final. There will be no appeals allowed.

Steps to take:

  1. Applicant applies for an Assessor’s Determination
  2. Registrar reviews application for an Assessor’s Determination
  3. Applicant serves documents on respondent
  4. Applicant Submits Declaration of Service
  5. Respondent submits response
  6. Registrar sets appointment for hearing
  7. Assessor conducts hearing and makes Determination
  8. Registrar Informs applicant and respondent of Assessor’s Determination

You may find the full list of details here.


Hear Directly from Minister K Shanmugam

[ COVID-19 (Temporary Measures) Act – Helping Businesses & Individuals ]Spoke with Dasmond Koh on key points of the...

Posted by K Shanmugam Sc on Monday, April 27, 2020

SMEs play a critical role in Singapore’s economy. A new rental relief framework aims to give more time and support to...

Posted by Ministry of Law, Singapore on Saturday, June 6, 2020


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About the author

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.

SMEs
COVID-19
Relief
Self-Assessment Tool

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