Small firms that are struggling can now end contracts early
Minister says new measures will help small businesses that have suffered badly since the pandemic
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 yesterday.
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 that the 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.
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 yesterday.
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 passed, are meant to help businesses focus on their recovery.