About 300 small businesses seek to renegotiate contracts under Covid-19 relief scheme

SINGAPORE – The Government’s Re-Align Framework scheme to help eligible small and micro businesses cope with the fallout from the Covid-19 pandemic has drawn close to 300 filings in the three weeks since it was launched.

The Law Ministry said last Friday (Feb 5) that 292 notices had been filed between Jan 15 and last Thursday, comprising 177 Notices of Negotiation (NoN) and 115 Notices of Revision (NoR).

NoN is for renegotiation of certain business-to-business contracts, while NoR applies to eligible renters of commercial equipment or vehicles who may wish to take up the Repayment Scheme – an instalment plan that allows them to pay their accrued arrears within 18 months.

Law and Home Affairs Minister K. Shanmugam said last week that the framework “allows small and micro businesses that have been significantly impacted by Covid-19 to renegotiate selected types of contracts, so as to realign their contracts with the post-Covid-19 business environment”. He said then in a written response to a Parliamentary question: “Renegotiation is the primary relief, not termination.”

The framework kicked in on Jan 15 and affected businesses have until Feb 26 to submit a notice to seek relief under the scheme. Some 78 per cent of the 177 NoNs served through the online electronic system involved leases or licences for non-residential immovable properties, while the rest included contracts for the sale and purchase of goods and services.

Under the framework, the service of a NoN by an affected business on the other party triggers a four -week negotiation period, during which parties are urged to understand each other’s position, and work towards a mutually acceptable outcome.

A business is eligible if its annual revenue does not exceed $30 million at a global group level; and if it experienced at least a 70 per cent fall in monthly average gross income for the period July 1, 2020 to Dec 31, 2020, compared to the period July 1, 2019 to Dec 31, 2019.

Alternative periods of assessment are available for businesses which had not commenced business by July 1, 2019.

Only businesses that have an annual revenue for the financial year 2019 of up to $30 million on a global group basis are eligible under the framework.

In addition, the framework only covers certain business-to-business contracts such as leases and licences for non-residential immovable property not exceeding five years, while other contracts such as consumer contracts and employment contracts are excluded.

Industry players have weighed in on the scheme, pointing out that the framework complements a range of government support measures, like the Jobs Support Scheme and Rental Relief Framework, during this exceptional period.

“Together with existing legal remedies and other Covid-19 reliefs, as well as the Simplified Insolvency Programme, the framework will help release businesses from non-performing and unproductive endeavours more efficiently,” said leading law firm Allen & Gledhill in a post on its website. “This will allow the economy to unlock assets and resources more quickly and be better positioned for recovery.”

Rajah & Tann in a client update on its website said: “The Govt typically does not interfere in contractual obligations. However, these are unprecedented times and the framework provides a fair and fast avenue for smaller businesses to move forward with revised terms in a contract that IS adjusted to take into account the unprecedented changes brought about by Covid-19.”

More details on the Re-Align Framework can be found at this website.

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