Early end to contracts will be lifeline for struggling firms
Despite not being able to operate since March, the owner of a nightclub has been chalking up debts from a lease that will expire only in March next year.
Moving to another business model would be difficult as his workers have returned to their home countries.
Adding to his woes is the high cost of terminating the lease, with some nightlife businesses having early termination fees of roughly around $250,000.
Changes to the law approved by Parliament yesterday will be a lifeline for such businesses, which have been hit badly by the Covid-19 pandemic.
In addition, distressed micro and small companies will also be able to restructure their debts quickly to deal with the economic impact from the pandemic with help from another scheme, the Simplified Insolvency Programme, introduced as part of changes to the Insolvency, Restructuring and Dissolution Act yesterday.
Second Minister for Law Edwin Tong cited the example of the nightclub owner as an example of an appeal the ministry received in making the case for micro and small businesses to be allowed to terminate certain commercial contracts without penalty under the Re-Align Framework if they are unable to renegotiate new terms.
Such businesses have limited negotiating power and are most in need of help, he added.
Mr Tong, who is also Minister for Culture, Community and Youth, was making the case for the third set of amendments to the Covid-19 (Temporary Measures) Act.
The framework covers micro and small businesses with a prescribed annual revenue cap that have seen a significant fall in revenue. Details will be specified at a later date.
Once the amended Act commences, businesses will have only six weeks to enter into renegotiations by serving notice to the other contractual party or parties.
Parties will then have a mandatory four weeks to renegotiate the terms. If they fail to agree on new terms, contracts can be terminated without penalty. Any earlier debts and liabilities from the contract will still continue to stand.