betty November 4, 2020

Micro and small companies are generally defined as having annual revenue of less than $1 million and $10 million respectively.

SINGAPORE – Landmark measures to help smaller businesses exit contracts to cope with the fallout from Covid-19 and pivot to new sectors in a difficult economic climate were endorsed by MPs on Tuesday (Nov 3).

Under the Re-Align Framework, owners of micro and small businesses with a significant fall in revenue since the pandemic can renegotiate certain contracts.

And if they cannot agree on new terms, they can terminate these contracts early without penalty.

Second Minister for Law Edwin Tong told Parliament the latest measures are a needed response to a “once-in-a-lifetime event of unprecedented proportions”.

They should be seen as complementary to existing Government support schemes, he said, adding the Re-Align Framework will ensure “the cash infusions are not drained away because businesses are stuck in their contracts”.

“It will help substantially impacted businesses to avoid protracted disputes, re-strategise and, in DPM’s words, to rejuvenate,” he said, referring to Deputy Prime Minister Heng Swee Keat’s plans to rejuvenate the economy as Singapore emerges from the pandemic.

Under another scheme, the Simplified Insolvency Programme, micro and small companies in deeper financial distress will also be able to restructure their debts or wind up quickly to maximise returns to creditors and stakeholders.

Micro and small companies are generally defined as having annual revenue of less than $1 million and $10 million respectively, and account for 95 per cent of firms here.

The Re-Align Framework is part of changes to the Covid-19 (Temporary Measures) Act, while the debt programme comes under the Insolvency, Restructuring and Dissolution Act.

Parliament debated changes to both laws jointly on Tuesday.

Mr Tong, who is also Minister for Culture, Community and Youth, said the Framework adheres to principles for the state to intervene in contracts, set out when the Covid-19 (Temporary Measures) Act was introduced in April.

The law provided protection for individuals and businesses from legal and enforcement action for six months if they were unable to fulfil their contractual obligations, to “hold the line” while the Government tried to resuscitate the economy, said the minister.

In June, new legislation was introduced to help small- and medium-sized enterprises with their rentals, one of the biggest cost pressures tenants face, he added.

The latest changes, coming six months after the law was first passed, are meant to help businesses focus on their recovery.

“They should be allocating resources to more productive uses rather than being stuck in a prolonged, painful, unproductive struggle,” said the minister.

But neither does the Government want to introduce more measures that would keep otherwise non-viable businesses afloat. “That’s not going to be viable in the long term. It ties up resources, manpower as well as assets,” he added. “The overall momentum and direction of these amendments is to take the economy, businesses forward.”

Ten MPs spoke during the debate. Mr Murali Pillai (Bukit Batok) and Mr Derrick Goh (Nee Soon GRC) were among those who said the threshold for firms to qualify for the framework should not be set too high. The Law Ministry will announce details at a later date.

Mr Tong said: “We will look as far as possible at helping the majority of micro and small businesses.”

Parliament also approved measures to give contractors and property developers four more months to complete and deliver projects, while buyers will be able to seek reimbursement for out-of-pocket costs incurred from the delays.

Contractors will have to co-share half of additional non-manpower costs with their sub-contractors and suppliers, subject to caps.