Ministry of Law rolls out temporary relief for contractual obligations

This applies to bank loans incurred by local SMEs.

Companies can now apply for temporary relief from legal action for inability to perform certain contracts due to the pandemic starting 20 April, the Ministry of Law announced in a press release.

The measures apply to contracts to be performed on or after 1 February and only for contracts entered into before 25 March.

It covers loans by banks to local SMEs secured against a commercial or industrial property, construction or supply contracts, event or tourism-related contracts, agreements for plant or machineries, and leases of non-residential property.

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The provisions will hike 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.

The period of relief will be for six months, from 20 April to 19 October, but may be extended to up to a year.

Those who wish to obtain the relief are required to send a notification on relief to the other party to the contract. The notification will set out the obligation, how the inability to perform the obligation was materially caused by the pandemic, and any proposed alternative solution.

However, parties who are unable to reach a compromise on the relief, after a notification has been served, can apply for an assessor's determination made to the Panel of Assessors for COVID-19 Temporary Relief (PACT), appointed by the Minister for Law.