Second Reading Speech by Minister for Law, Mr K Shanmugam, on the COVID-19 (Temporary Measures) Bill

07 APR 2020

07 Apr 2020 Posted in Parliamentary speeches and responses

Mr Speaker, I beg to move, ‘That the Bill be now read a second time’.

I. Introduction

  1. I will sketch out the background to the Bill, the reasons for state intervention in contracts, and then I will deal with Parts 1 to 3 of this Bill.
  1. I will add that this Bill is a little bit of a Noah’s Ark. It started with Parts 1 to 3; took about nine days from conception to delivery. Along the way, other Ministries have added various parts to it.

a. Senior Minister of State Edwin Tong, will deal with Parts 4 and 5, which deal with AGMs, general meetings, and the ability of courts to hear matters virtually. Those were requests from the Ministry of Finance as well as the Supreme Court.

b. Minister Lawrence Wong will speak on property tax which is in Part 6.

c. Minister Gan Kim Yong will deal with Part 7, where MOH needed certain orders to prevent further spread of the virus.

II. Backdrop

  1. Let me now start with the backdrop to this Bill, Sir, I think Members will only be too familiar with the background – both the health situation and the economic situation.
  1. This is the most serious crisis this country has faced since Independence.
  1. Many around the world are describing this as the most serious crisis since the Second World War. The human cost in terms of deaths, infections - you look at Europe. The economic cost all over the world, in terms of jobs, economies devastated. People’s lives, ruined. Businesses, shuttered. Investments, wiped out.

(A) Speed

  1. And the speed at which all of it has happened, has taken many by surprise. If you look at Singapore, on 18 February – DPM presented his Budget Speech with a support package. $5.6 billion, very substantive. At that time, there were 800 confirmed cases outside China.
  1. By 26 March, the situation had worsened. There was a second package presented by DPM. This time, $48 billion. At that time, there were 410,000 infections, 18,000 deaths.
  1. 11 days later, the situation had worsened again. Yesterday, 6 April, DPM presented the third package to help Singaporeans. We had 1.2 million infections, more than 67,000 dead worldwide. Almost certainly, that’s an understatement of the true figures.
  1. The virus is still tearing through the world. Africa, South Asia, so far have not been badly hit. We can only hope that it stays that way.

(B) Economic impact

  1. The economic impact has been devastating. On 19 March, the Secretary-General of the United Nations said, and I quote: a “global recession – perhaps of record dimensions – is a near certainty”.
  1. On 19 March, the International Labour Organisation (ILO) made an assessment that global unemployment could increase by 25 million. On 27 March, eight days later, ILO changed the assessment. Within 8 days, they said unemployment could be far bigger, far deeper, certainly more than 25 million.
  1. Last week, the director of the international department of the People’s Bank of China said, and I quote: “The possibility of a ‘Great Depression’ cannot be ruled out if the epidemic continues to run out of control, and the deterioration of the real economy is compounded by an eruption of financial risks”.
  1. The “Great Depression” – the phrase itself brings to mind one of the most desperate periods America, and the world, went through in the 20th Century. Most of us only know about the Great Depression through books, economic studies. The era, the mood, the desperation, have been vividly captured in literature by people like John Passos, Steinbeck, others.
  1. The world has more resources, better understanding, tools, to avoid a similar Great Depression now. But the idea itself, and what it can do to many people’s lives, is quite sobering.
  1. The figures are grim.

a. In the last two weeks of March, 10 million Americans filed for unemployment benefits. In contrast, during the 2008/2009 Global Financial Crisis, global unemployment rose by about 22 million. So you can see it in context.

b. The United Nations Conference on Trade and Development (UNCTAD) has said that the downward pressure on FDI could be 30% to 40% this year and next year. Aviation has collapsed.

c. And as of 2 April, nearly 4 billion people, half of the world’s population, were under some form of movement restriction. I think that doesn’t include Singapore’s figures, but that’s probably a rounding error!

  1. Other crises have affected economies. Spending goes down. Businesses, jobs are affected. But a lot of activity continues.
  1. Here: it’s a hard stop, immediate, by Government orders, to most economic activity, even movement of people. Overnight, as it were. And so the impact is that of an economy literally falling off a cliff in free-fall. That is the difference between this slowdown and others.
  1. And ours, a globalised economy, is especially hard-hit. Disruptions to supply chains, flow of manpower. External trade is three times our economy. And of course, large parts of the internal economy are also being closed down.

III. Response

  1. The response to all of this, to such a serious shock, has to try and meet the challenges.
  1. You first have the three Budgets between 18 February and 6 April. Close to $60 billion committed, 12% of our GDP. Wide-ranging measures: job protection, immediate cash to Singaporeans, measures to help stabilise businesses, including Government-supported loans.
  1. Second, on the banking and finance side, MAS has worked with the banks. They announced a series of voluntary initiatives by the financial institutions: deferment of payments on mortgages; principal and interest: where borrower wants it, can be deferred; other measures, on credit flow to businesses as well.
  1. This Bill is the third part of the response by the Government.

IV. Point of principle: Sanctity of contracts

  1. Before I deal with the provisions of the Bill, there is an important point of principle that should be set out.
  1. That is this: one of the foundations for our country is Rule of Law. And there are several key aspects to this, including sanctity of contracts. Parties are free to organise themselves, enter into whatever contracts they want, as long as they are not illegal. The general assumption is that the State will not intervene in such contracts.
  1. The reputation for upholding that is critical for Singapore as an international commercial centre with strong FDI. So for our financial, industrial and commercial sectors, the bedrock is really our reputation for rationality in Government policy, in economic management. Also, our integrity, absence of corruption, sanctity of contracts, Court system and more.
  1. They are all threaded together to form what I would call one larger Golden Thread. If you interfere with any of this, you risk unravelling the whole Golden Thread, so you don’t lightly intervene. Yet we are now seeking to intervene, in private contracts, to alter performance obligations.

(A) Intervening in private contracts to alter performance obligations

  1. Why are we intervening? Should we intervene?
  1. I will ask Members for forbearance, because I will take some time on this. It is important that we understand the principles so that everyone, including investors, understand when and how we might intervene, both now and in future.
  1. In order to look at the answers on principles of intervention, we can look at some situations when free market economies which protect the sanctity of contracts have intervened.
  1. I go back to the Great Depression. Laws were passed by various American states. Iowa passed laws in 1933. 27 other states followed suit within the next 18 months. The laws gave relief to mortgages: a moratorium on mortgage foreclosures And retroactive, like our Bill.
  1. This being America, the laws were challenged and went up to the Supreme Court, ended up in a famous case, Blaisdell. The court gave a long judgment which I can summarise in two points:

a. First, the State has a duty to safeguard the vital interests of its people.

b. Second, the State has the power to intervene, to safeguard the economic structure upon which the good of all depends.

  1. Strict enforcement of particular economic rights may not be desirable because of the damage that it will cause to the whole economy.
  1. Fast forward to the Global Financial Crisis, 2008/2009. Laws were passed in the US to provide protection to home owners and renters facing foreclosure. Those laws expanded the mandatory 90-day grace period to holders of all types of home loans.
  1. Third example, Hurricane Katrina. In 2005, Mississippi implemented a moratorium that altered creditors’ ability to foreclose in the two-year period after the storm.
  1. These are just some examples. There are many others in other countries. I have deliberately chosen examples from the US, because it is often seen as the ultimate capitalist free market economy, other than possibly Hong Kong.
  1. The situation we have today at this stage appears to be worse than the GFC. I will summarise the principles in this way.
  1. The starting point is sanctity of contracts. Agreements must be kept. This is fundamental, basic. It underpins our economy, free market. People must be able to make agreements, and know that they will be upheld and enforced. That must always be the unyielding principle.
  1. But freedom of contract is not an absolute; has never been an absolute. There are two types of interventions.

a. First, the law sets a framework, contracts are only valid if they don’t breach that framework.

b. The second, as we are seeking to do now: intervene after the contracts have been entered into, to alter performance obligations.

  1. For the first type of intervention, there are well-established exceptions in the law. Not just in Singapore, but also in the UK, US, Australia, elsewhere, for reasons of public policy.
  1. You see this in our law – Unfair Contract Terms Act, unlicensed moneylending contracts, other illegal contracts: they are not enforceable. Courts also have the right to invalidate contracts that have been entered into in that way.
  1. Our intervention through this Bill is somewhat different. It alters obligations under contracts which have already been formed.
  1. I gave examples from the US to this House. Do we have examples from Singapore? I went back for a quick look at our laws as to whether we have done something similar. The nearest equivalent I could find was the Frustrated Contracts Act passed on 22 January 1959, which applied retroactively to all contracts if discharge was on or after 1 January 1959.
  1. I was actually quite surprised that the then-Government had the time to do this given the general situation: the Malayan Emergency; and dealing with the young and irrepressible Mr Lee in Parliament, then in Opposition, which was probably enough to keep them occupied.
  1. The principles applicable for such retroactive legislation are:

a. First, the vital interests of the people at stake - a significant part of the economy is at stake.

b. Second, strict enforcement of particular contractual rights could damage the whole economy.

c. Third, the State can intervene to use reasonable means to safeguard the economic structure for common good.

d. To this end, fourth, the State can take reasonable steps, generally of limited duration.

  1. Turning then to COVID-19, the Government has had to impose border constraints, direct most businesses to shut down, get people to work from home and if that is not possible, no work can be done. And imposing a whole variety of restrictions on travel and movement.
  1. These were not foreseeable.
  1. Their impact on the supply chain: many businesses could not procure the supplies they needed. The impact on flow of manpower: sectors that depend heavily on foreign manpower, like construction, were seriously affected.
  1. Singapore Contractors Association Limited (SCAL) said some sites are experiencing up to a 40% shortage in workforce. The construction sector has shrunk 4.3% in the first quarter of this year on a year-on-year basis, and nearly 23% as compared to the previous quarter (i.e. 4Q2019).
  1. F&B outlets: footfall has dropped drastically, and according to one survey, nearly 80% won’t last longer than six months if the situation does not improve.
  1. You look at the tourism sector: severe impact as well, with hotel occupancy having fallen severely.
  1. Singapore Airlines: 96% of the fleet grounded.
  1. Taxi drivers and private-hire drivers: in February, taxi drivers were reporting a fall in earnings of up to 30%. In March, they were reporting a fall of up to 50% to 60%.
  1. Meanwhile, costs continue to run. Rents have to be paid. For F&B outlets that are SMEs, rents could make up nearly 30% of their business costs, and wages have to be paid as well. The earlier survey I cited on F&B outlets suggested that 80% were planning to reduce staff to cut costs.
  1. In this situation, we cannot say, leave it to the market, leave it to the contractual situation. It will be neither fair nor just.
  1. The bottom of the market has literally fallen off, and the normal assumptions of business are gone.
  1. Every business should plan for some severe shock, but almost none could have prepared for this.
  1. If we don’t intervene, the consequences of this will be:

a. Those in a position of advantage will make some money.

b. But most will suffer.

c. Bankruptcies, insolvencies, and complete destruction of the economic arena.

d. Lots of grief, lots of good companies and businesses going under.

  1. Even those in a stronger position, many landlords, don’t really want to see their tenants go bust. If I can quote Andrew Lim, CFO of Capitaland Group: “Tenants and landlords are in a long-term symbiotic relationship. It is in our interest to see our tenants ride through this with us. We are all in this together because everyone in the ecosystem has been impacted.”
  1. Yesterday’s Business Times had a report: “the coronavirus is turning Europe’s retail apocalypse into a nightmare for landlords and lenders”. The threat of coronavirus is not just to the retailers and restaurants. The ripple effect is across the real estate and banking sectors. Landlords will face shortfalls in income, making it harder for property companies to pay interest, to avoid breaching loan covenants. And those property companies have duties to their investors, which include pension funds. As for banks, they are “flat-out dealing with calls from existing borrowers asking for waivers”.
  1. So we decided to intervene. It is a major intervention.
  1. The three packages by DPM, you can compare them to an infusion of blood. This Bill seeks to stanch the flow of blood, like a reprieve for a certain period, a matter of months. It seeks to give much-needed liquidity to commercial parties. The immediate impact is a redistribution of monies between the parties to the affected contracts. Tenants who have to pay rentals, now they can keep the cash. Contractors who have to pay damages will be relieved from having to pay. Some other categories of contracts are also covered.
  1. We seek to give breathing space for these businesses – allow them to take stock, see what they can do, assess their position; and offer cash-flow relief meanwhile. We seek to be targeted and temporary.
  1. I would call this a legal circuit breaker. A time-out, until this virus dies out, and contracts, like life, can return to normal. If we were to insist on the letter of the law, the last, precise, minutest contractual obligation, we would be like Shylock, insisting on extracting the last pound of flesh, but at the expense of the life and spirit of this country.
  1. Better a circuit breaker so the spirit of the law, the essence of the contracts, which is trust, can live, and, in time to come, thrive again. I have no doubt it will do so.
  1. That is the rationale for our intervention. None of us in our lifetime have encountered an economic shock like this. Government has to do everything to intervene, to help keep some structure of the economy.

V. Relief for individuals and businesses who are unable to meet their contractual obligations because of COVID-19

  1. Let me now turn to the bill.

(A) What is the time period covered?

  1. We do not know how long this situation will last. In the first instance, the Bill will be valid for six months. The Minister for Law will be given power to extend it up to one year. Thereafter, if we want to extend it, we have to come back to Parliament.
  1. The measures under Part 2 of the Bill apply to obligations to be performed on or after 1 February 2020. This is when the impact of COVID-19 started to be significantly felt in Singapore. Supply chains connected to events occurring outside Singapore were being disrupted.
  1. At the same time, the measures do not apply to contracts that were entered into on or after 25 March 2020. On 24 March 2020, the Health Ministry enhanced the restrictions, promoted safe distancing. So parties with knowledge of those facts who entered into contracts in the last few days, they should not seek help from this Bill.

(B) What is the nature of relief?

  1. If a person wants to claim relief, how does he do so? He has got to give notice to the other party. Once a notification has been sent, certain types of actions are prohibited. These include:

a. Commencing or continuing legal action;

b. Making an application for winding up, bankruptcy; or for a Judicial Management Order;

c. Terminating a lease or licence of immovable property, for non-payment of rent. Landlords can, however, use the security deposit to offset rental payments due, because that doesn’t create additional cash-flow obligations on the tenant;

d. Enforcement of any security over immovable property;

e. Enforcement of any security over movable property used for the purpose of a trade, business or profession – you can’t repossess goods used for a trade, business or profession.

  1. Non-compliance is an offence, which is punishable with a fine. There may also be other consequences, depending on the nature of prohibited action that is taken. The action may be dismissed, voided, or invalidated.

(C) What are the categories of contracts covered?

  1. Five broad categories are covered. The Minister will be empowered to add further categories of contracts. The reason is, as I said, we did this in nine days. We took the contracts that we knew were clearly covered, but we wanted the ability to add in other categories should there be feedback on that. And we didn’t want to wait for a full assessment, and to let perfection become the enemy of what needs to be done immediately.

(1) First category: Leases and licences of non-residential property

  1. The first category covered: leases, licences of non-residential property. A tenant who seeks relief must show that he is unable to pay rent during the prescribed period, and that the inability to pay is to a material extent caused by a COVID-19 event.
  1. If he can show that, then the lease or licence cannot be terminated on the basis that rent has not been paid. Legal proceedings cannot be commenced against tenants on the basis that rent has not been paid.
  1. This helps in real terms as the tenants will get breathing space, to adjust their businesses, survive in the medium term. These measures, of course, should be seen together with other measures that the Government and the financial industry have announced.
  1. Take an F&B outlet, for example. As I said earlier, if it is an SME, nearly 30% of its business cost goes towards rental. It will have that liquidity now, in real terms. If they didn’t have the cash, at least they don’t have to look for the money now. And for those who meet the requirements under the Bill, they can then delay the payment of rent, if they wish, for some months. In addition, you’ve got the 75% salary support for April and the enhanced Government-supported loans at low interest, the various measures announced by MAS.
  1. The measures do not mean that all tenants do not have to pay rent. Those who have the ability to make rental payments must continue to do so. The Bill seeks to help those who are unable to pay. And the measures are only for a period. The landlord’s rights can be exercised after that. For example, if an MNC or a substantial company applies, it will probably not qualify because it has to show that it is unable to pay, not just that business has suffered.
  1. Let me cite a real-life example, to illustrate how this plays out. Two weeks ago, Germany passed emergency legislation to provide relief to individuals and businesses from the economic impact of COVID-19. The German legislation provides that anyone who is affected by COVID-19 does not need to pay rent between 1 April and 30 June, and they cannot be evicted.
  1. After the law came into force, several people said they would not be paying rent, including a stream of retailers – Adidas and H&M, for example. Adidas was reported to have made a net profit of nearly two billion euros last year. It faced massive criticism. German politicians urged that financially-sound companies should not take advantage of the situation, and they must show solidarity at a time of crisis. The officials clarified that the law was not meant to cover entities that were able to make rental payments.
  1. Our Bill is scoped to deal with this. So relief is only available where there is an inability to pay rent, and that inability to pay rent is, to a material extent, caused by COVID-19.
  1. This intervention is substantial because the total value of rental in our industrial and commercial sectors is estimated, in 2018, to be at about $21 billion. Of that, we look at the SME rentals – that is about $14 billion, and covers both services and manufacturing.

Landlords’ concerns

  1. Now, some REITs, some landlords, but REITs in particular, have written to my Ministry. They are concerned that this is going to affect their returns and that the Bill is heavily weighted in favour of tenants.
  1. REITAS has also issued a public statement today, not a coincidence. They say the transfer of cash-flow is a mismatch, that deferring rental obligations transfers cash-flow constraints from tenant to landlord. They say significant strain is placed on the S-REITs’ ability to service its own financial and operational obligations, and that the S-REITs have minimal financial flexibility to absorb cash-flow disruption, because of the requirement to pay out 90% of income to qualify for tax exemption.
  1. The first point, is that there is a deferral of rental payment obligations but the rental obligations do not go away. Rent will continue to accrue.
  1. Second, the relief only applies to those who are unable to perform due to COVID-19. They are not going to be able to pay you anyway. Many landlords in Singapore, and many others, have already suffered cash-flow disruptions even without this Bill. It’s not just REITs which face this. And the REITs are able, or landlords are able, to set off the security deposit they have, so in a sense, for the first couple of months at least, the landlords also do not have any cash-flow constraints as they set off against the deposits they have. During that period, parties are encouraged to work out a compromise. The Assessors will try to find just and equitable outcomes, including, for example, reviewing the moratorium after three months.
  1. Landlords also have to be realistic about the impact COVID-19 has had on the entire economy and cash-flow on all sectors. REITs are not the only ones affected. On the tax issues that are raised, REITAS can approach the Government and discuss precisely what the issues are.
  1. The second point that the REITAS statement made is that the enforced interruption of revenue has the potential to degrade key metrics, in turn impacting on their financial stability. I would say that it is the pandemic, and not the Bill, that has caused all these interruptions. The Bill gives parties a better opportunity to work out a compromise quickly, and without costly and long-drawn litigation or legal proceedings, which will be a drag on everyone.
  1. They also made the point that S-REITs are seen as a source of stable and predictable income. Many domestic retail investors have come to rely on the regular, stable and predictable distributions that the S-REITs provide. So the inability of the S-REITs to receive up to 100% of their rental income for up to six months will result in lower cash-flows to REITs, who will then be compelled to lower the distributions to unitholders.
  1. Now, let me make a few points. We are not anti-landlord. Landlords, REITs, have an important, highly valuable economic function. They make the market more efficient.
  1. Our task is to see how to protect as much of the business ecosystem as possible, from the banks, to the landlords, to the tenants, to the consumers. The welfare of Singaporeans, their jobs, depends on the economy being protected. We cannot give 100% protection. But we have to move quickly to give as much protection as is sensible.
  1. I have sought to explain how we have attempted to protect as much of the ecosystem as possible. For individuals: cash, training grants, vouchers and more. For SMEs and tenants: rental protection, credit flow, mortgage protection, MAS measures, JSS. And the landlords get most of this too. The Government is paying 75% of the employees’ salaries in April, and a portion of the salaries for the rest of the nine months when JSS applies. And you also get the benefit of the credit lines and the MAS initiatives.
  1. The SMEs and individuals are facing a lot of pain. If they are not helped, the entire business ecosystem could crash. Morally as well – some of this pain has to be shared.
  1. Landlords have benefitted tremendously from growth – the Government’s rational policies, good governance, low taxes in Singapore. Fairness and justice require that they share some of this pain, rather than leaving it to the smallest and weakest to bear it all.
  1. If a tenant applies under the Bill and the landlord and tenant can’t agree, they go to the Assessors. The Assessors will look at the previous year’s tax returns, the accounts, they may ask for additional information, and then will determine if a tenant is unable to pay.
  1. Generally, if a tenant is a small business and accounts show that it has been impacted by COVID-19, Assessors will likely accept that the tenant was unable to pay. And the Assessors could say, suspend rental payments for three months. Thereafter, if problems continue, come back to us.
  1. There are two appeals from REITs. First, that they cannot evict tenants, and this will affect their returns. Second, there will be other tenants who can make up the tenancies.
  1. Sir, most of the landlords and REITs we have spoken with accept the need for the Bill. If I may say so, when the whole house, meaning the whole economy, is under threat, we should try not to focus too much on our own individual rooms. We all need to pitch in, to save the economy as a whole.
  1. I would suggest that there are broader concerns beyond the rates of return. Everyone has to take a collective approach. Is it really going to be possible for you to get the previous rates of return for the next six months? Is it possible to have business as usual in the next few months? Not possible.
  1. And if it is truly the case that the landlord can find other tenants and the current tenant is taking advantage of the situation, let us know. That will be part of the assessment. So I would suggest that we don’t take the approach of circling the wagons, to focus only on our specific interests. The landlords will benefit quite a lot from the three packages that DPM has announced.
  1. SMEs accounted for 72% of employment in Singapore. Let’s remember that.
  1. We will make sure that the Assessors are able to take all the facts into account, when deciding what is just and equitable.

(2) Second category: Construction-related contracts

  1. The second category of contracts that is covered will be construction-related contracts. The built-environment sector has felt the impact of COVID-19 and continues to feel this impact on several fronts.
  1. First, supply disruption of construction materials. It started with building materials and equipment coming into Singapore from China. More recently, the disruption of precast, prefabricated, prefinished volumetric construction materials, other types of materials, coming into Singapore from Malaysia. They have all been disrupted.
  1. Second, manpower shortage. I talked about Singapore Contractors Association Limited (SCAL) saying sites were experiencing up to 40% shortage in workforce and a drop in progress payments. Such payments have dropped anywhere between 5% and 20%. And it will probably get worse. Travel restrictions are likely to continue worldwide, the situation may worsen. Many construction firms will likely face financial difficulties.
  1. The measures in this Bill will help the construction sector in the following ways.

a. First, if a contractor is not able to perform due to a COVID-19 event between 1 February 2020 and the end of the prescribed period, that period should be disregarded in determining what is the period of delay in the performance.

b. Second, the Bill provides for a defence to any claim for breach of contract. The defence will apply if the inability occurred on or after 1 February 2020 and before the end of the prescribed period, which we will have to determine, depending on how the situation evolves.

  1. This is a substantial intervention. The total value of construction contracts awarded last year amounted to $33 billion. That is the size of the industry as a whole.

(3) Third category: Event and tourism-related contracts

  1. The third category is event- and tourism-related contracts, for example, contracts to hold wedding banquets, business meetings, conferences. They include catering, provision of other goods and services for such events, and certain contracts for accommodation, entertainment, tourism.
  1. If the event was scheduled to be held on or after 1 February 2020 and could not proceed due to a COVID-19 event, any deposits forfeited must be restored as if they had not been forfeited. This is provided that the party seeking relief has served a notification for relief on the other party. Deposits that have not yet been forfeited must also not be forfeited. The same applies to tourism-related contracts. Non-compliance will be an offence.
  1. While many hotels and venue providers have been understanding and offered to hold on to deposits, there have been some which have simply forfeited the deposit, or insisted on the event being held.
  1. One example is a letter we received from a man who had made a booking with an event space provider. He had arranged for his daughter’s 21st birthday celebration to be held on 4 April. Booking had been done sometime in early March and more than 10 guests had been invited. The man had approached the event space provider to seek a refund or postponement until after the COVID-19 measures were introduced on 24 March. Part of the response received by this man from the event space provider read, “Per the agreement, any postponement can only be done 30 days in advance.” This is not reasonable.
  1. Another case that was highlighted to us involved a couple who had engaged an event planner for their wedding. The wedding banquet was meant for more than 500 guests and supposed to be held in June this year. When the couple approached the event planner, the event planner told them the event could not be postponed. The event planner also told them its obligations would be fulfilled even if the wedding did not take place on the date specified in the contract.
  1. The positions adopted by the event space provider, the event planner, were neither helpful nor reasonable.
  1. However, there are always two sides to every story.
  1. A group of bridal studios wrote a joint letter to me to highlight the challenges they are facing with unreasonable couples. The letter stated that couples had approached them “aggressively”, asking for a full refund of their packages. They talked about the cash-flow problems they are facing in the current climate. They also pointed out why it was unfair to provide a full refund.
  1. Their studios had provided services to the couples for up to a year before the wedding date, and they had collected staggered payments along the way. They had rendered services to the couples and they had made payment to other suppliers. These studios said that they would be “very glad” to work out a postponement for these couples with no penalties imposed.
  1. That is a reasonable, equitable position.
  1. The Bill does not mandate that deposits be refunded immediately. If we asked all companies to immediately refund, they could also be in serious trouble.
  1. In such situations, there are different solutions possible: to postpone the event, and the deposit is held back; cancel the event, and the deposit is repaid in full or partially, depending on expenses incurred, work done. Where the deposit is to be repaid in part or in full, and if the company needs time to repay the deposit, the Assessor will have to consider and decide if time needs to be given.
  1. These decisions can be made by the Assessors if the parties cannot agree. The Assessors will seek to make determinations that seek to provide a just and equitable outcome, looking at all the facts.

(4) Fourth category: Hire-purchase or conditional sales agreements

  1. The fourth category – hire-purchase agreements or conditional sales agreements. These are agreements where the goods hired or conditionally sold under the agreement are plant, machinery or fixed assets used for manufacturing, production, or other business purposes; or commercial vehicles.
  1. Over the course of the past week, we have received letters, petitions from a variety of people, including tour bus owners and drivers. They highlighted their financial plight. One letter we received stated that some excursion buses had been repossessed by financial companies. Repossession basically means immediate termination from jobs for those who have lost their vehicles. Many families’ lives, their well-being is at stake, where the driver or owner of the bus is the sole breadwinner. The aim of the Bill is to help them retain their businesses and their vehicles, where it makes sense to do so.
  1. The drivers, owners, will be assisted by the measures introduced in the Bill. If they are commercial vehicles, they cannot be repossessed during the prescribed period if relief is sought and relief is given. If the finance company, on the other hand, is of the view that it has reasons to justify repossession, it can state its position to the Assessor. The Assessor will consider the positions held by both sides and make a determination that is just and equitable.
  1. It is estimated that the outstanding value of hire-purchase agreements in respect of motor vehicles at the end of 2019 could be about $2 billion.

(5) Fifth category: Certain types of loan facilities

  1. The fifth and final category – certain types of loan facilities, secured loan facilities, given to SMEs. These SMEs are defined as entities where the turnover of the group does not exceed $100 million in its latest financial year.
  1. If such an SME is unable to repay its instalments to the financial institution due to a COVID-19 event, then some actions cannot be taken against it. For example, security that it has given over real property or immovable property located in Singapore, you cannot enforce against that. There can be no enforcement of security which is against movable property - plant, machinery, or fixed assets located in Singapore, and used for manufacturing, production, or other business purposes.
  1. Again, this is a very large sector. An estimate of the total value of loans outstanding to SMEs which might fall in this category is at about $76 billion.

(6) Determination of disputes by Assessors

  1. Let me now move on to determination of disputes by Assessors. I have repeatedly emphasised this is a crucial period, requires understanding from everyone. Some compromise and sacrifice is necessary from all sides to see us through this crisis.
  1. Our approach is that we strongly encourage parties to try and come to a common understanding.
  1. If a resolution is not possible, the Bill provides for disputes to be settled by Assessors, who will be appointed by my Ministry. The determinations made by these Assessors – there will be no appeal.
  1. Parties will not be allowed to have lawyers when going before the Assessors. Going before the Assessors is also free. No fees.
  1. We’ve designed the mechanism to provide for quick, inexpensive, and effective practical solutions. Subsidiary legislation will set out the procedure and practice for these proceedings.
  1. There will be 12 panels, each headed by a State Courts Judge. We expect to appoint about 100 Assessors. They will try and hold hearings as quickly as possible after submission of all relevant documents. There will be a guidance that they should hear such matters quickly. But it also depends on how many appeals they are faced with, and whether it’s a complex dispute requiring more documents.
  1. We are working hard to ensure that the necessary infrastructure is in place to facilitate this process.

VI. Relief for financially distressed individuals and businesses

  1. Sir, Part 3 of the Bill provides an additional safety net for individuals and businesses, by making temporary modifications to bankruptcy and insolvency laws.

(A) Relief for individuals

  1. First, for individuals under the Bankruptcy Act, we are going to increase the Debt Repayment Scheme to cover up to $250,000, as compared to $100,000 in the past. It’s a pre-bankruptcy scheme. The increase in the threshold means that more individuals can participate in the scheme to avoid bankruptcy.
  1. Second, in order to make a bankruptcy application, the amount owed must be a minimum of $100,000 instead of $10,000.
  1. We are extending the minimum number of days that must elapse from the service of a statutory demand. For those who don’t know, you’ve got to serve a statutory demand and then you’ve got to wait a number of days before you can serve a bankruptcy notice. That used to be 21 days. We are going to make it 6 months, which means you’ve got to serve a notice and you’ve got to wait for 6 months, and the person must owe you at least $100,000, before you can proceed for bankruptcy.

(B) Relief for businesses

  1. Likewise, we are going to deal with debts that companies owe for insolvency purposes – increase from $10,000 to $100,000. Companies cannot be made bankrupt unless they owe a minimum of $100,000.
  1. We are also going to increase the number of days for service of a statutory demand, from 21 days to 6 months.
  1. The Bill will also provide a defence to an offence under section 144 of the Bankruptcy Act, for a bankrupt who incurs debts without expectation of being able to pay for it. This is in the context of debts that were incurred during the period for which temporary measures apply. A similar defence will be provided for in relation to the Insolvency, Restructuring and Dissolution Act 2018; as well as the Companies Act.

VII. Conclusion

  1. Sir, let me now conclude this part of the speech for this Bill before my colleagues take over.

(A) The big picture: Three Budget packages + MAS measures + Reliefs in this Bill

  1. The measures in this Bill are one part of the wider effort to address the impacts of COVID-19.
  1. We will do all we can to alleviate the economic pain being felt. We cannot take away the pain completely. But we can help Singaporeans meet their immediate needs, and ensure that our economy as a whole receives some help.

(B) #SGUnited: We are all in this together, and everyone must play their part

  1. At the same time – and this is a message that we have consistently reiterated – this is not a crisis that the Government, acting on its own, can overcome. It needs the cooperation of all Singaporeans.
  1. The essence of this Bill reflects that spirit. If everyone looked out for their own narrow self-interest, we will not come through this crisis well.
  1. The Bill therefore provides a framework to hold the strict enforcement of certain legal rights in abeyance for a period of time. That buys time, for landlords and tenants, banks and lenders, other contracting parties, to focus their minds on how to get through the crisis.
  1. But the law can only go so far. It is also up to each individual Singaporean to have a sense of fairness. We hope that the spirit of SG United will underpin the many conversations to be had between contracting parties on how to move forward from this.
  1. If we are unable to pull together as a society, to have this sense of fairness, I am afraid that even the most interventionist of laws would not ensure that we can recover well.
  1. Let me end by coming back to how we put this Bill together.
  1. We decided in late March that an intervention of this type was going to be necessary. We set up a committee of private sector professionals and different Ministries.
  1. We had to be careful, because as Members will note, the total value of the sectors that are being dealt with is over $120 billion dollars.
  1. With the help of the Committee, we were able to both conceptualise the ideas and draft the legislation in nine days. The work involved many agencies – MOF, MTI, MND, MAS, AGC. Two private sector lawyers – Sushil Nair and Patrick Ang, recognised as amongst the leading experts in their field – worked with us to conceptualise the framework, almost full-time, over the course of nine days. Others in the Committee included:

(1) Mr Lim Sim Seng, Consumer Banking / Wealth Management Group Executive, DBS
(2) Mr Ong Yew Huat, Non-Executive and Independent Director, UOB
(3) Mr Andrew Lim, Group CFO, Capitaland
(4) Mr Keith Magnus, Co-Chairman, Asia and Senior MD, Evercore
(5) Mr Ganesh Soocelaraj, CEO, Soilbuild Construction Group
(6) Mr Melvin Ang, Chairman, Mm2 Asia

  1. And the Attorney-General, Mr Lucien Wong, himself supervised the drafting of the Bill, clause by clause, together with outstanding officers from AGC. We were lucky to have the AG himself personally involved. Some here will know he is recognised as world-class and the best corporate lawyer in Singapore when he was in practice. He gave us much valuable advice – what worked, what was doable, what was not doable. Because of him and his AGC team, and the private sector professionals, and the Government agencies, coming together, we were able to bring this Bill to Parliament so quickly.
  1. I wish to thank all of them. We owe them a lot in helping us with this Bill – a large number of Singaporeans who I hope will be helped by this Bill. We have made it such that we can add on to it, because, almost inevitably, issues will arise and we could not have foreseen all of them. We will come back to Parliament where necessary and deal with them.
  1. Thank you.

Last updated on 07 Apr 2020