Update to the Re-Align Contractual Obligations under COVID-19

Update to the Re-Align Contractual Obligations under COVID-19

Published On: January 18, 20212.9 min read

We had previously commented on the Re-Align Framework here. The Framework has since come into effect on 15 January 2021. The key takeaways are as follows:

  • 6 week effective Framework period: SMEs will have 6 weeks (from 15 January 2021 to 26 February 2021) to serve a Notice of Negotiation under the Framework. This will trigger a negotiation period of 4 weeks from the date of the Notice;
  • Eligible SMEs: Eligible businesses (“Affected Businesses”) must have:
  • An annual revenue of not more than S$30 million on a group global basis for FY2019 (ending 31 March 2020);
  • A 70% fall in monthly average gross income from July 2020 – December 2020 compared to the same period in 2019;
  • Only certain contracts negotiable: Please refer to our commentary on 4 November 2020 here;
  • Small Landlords: Small landlords may seek compensation for termination of a tenancy by lodging a Notice of Compensation – small landlords are generally sole proprietors / small property-holding companies owned by individuals for which rental income of the property in question makes up more than 50% of monthly gross income, and gross annual income does not exceed S$107,500.
  • Extension of H/P contracts: Eligible hirers / renters may either renegotiate H/P / rental contracts for commercial equipment / vehicles or serve a Notice of Revision and take up a statutory Repayment Scheme (which automatically extends repayment payments for 18 months at the contractual interest rate or 5% p.a., whichever is lower);
  • Moratorium: Counterparties are not allowed to commence legal action / enforce on a contract after a Notice of Negotiation is served. The moratorium does not prevent legal proceedings from being commenced for obligations falling due before the date the Notice of Negotiation is served.
  • Negotiation outcomes:

Negotiations Successful

Parties may proceed with the amended contract or terminate the contract (as agreed) – if contract is terminated, agreed or default termination terms will apply. If termination terms are not agreed or default terms not satisfactory, parties may serve Notice for Adjustment to determine terms of termination.

Negotiations fail and counterparty objects to Affected Business’s eligibility or is a small landlord seeking compensation

The counterparty must lodge a Notice of Objection and/or Notice of Compensation within the Objection Period.

Negotiations fail and counterparty does not object to Affected Business’s eligibility or serve Notice of Objection / Notice of Compensation

The contract is automatically deemed terminated 2 days after the Objection Period ends. Agreed or default termination terms or Notice for Adjustment will apply.

  • Objection Period – Within 2 weeks from the end of the negotiation period, counterparties may:

Object to a Notice of Negotiation on the basis that the affected business / contract is not eligible under the Framework or the Notice of Negotiation was not properly served; and/or Issue a Notice of Compensation if he is a small landlord seeking compensation.

An independent assessor will assess the objections / notices and make a determination.

  • Assessments are binding:

An independent assessor will be appointed to assess all Notices and make a determination. An assessor may conduct hearings via email or online / in person. Lawyers are not permitted. The assessor’s determination is final and binding, and not appealable.

The above content is for general information purposes only. It is not and does not constitute nor is it intended to provide or replace legal advice, a legal opinion or any information intended to address specific matters relevant to you or concerning individual situations. Should you require specific legal advice, please do not hesitate to contact the Partner listed or your regular contact at the firm. Copyright of Oon & Bazul LLP

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