Navigating loan obligations amidst the Singapore Covid-19 (Temporary Measures) Act 2020

How lenders and borrowers should navigate loan obligations following the Temporary Measures Bill. By Justin Yip, Partner, and Lam Zhen Yu, Associate, Withers KhattarWong LLP

In a bid to support businesses impacted by the COVID-19 pandemic, the Singapore Parliament has enacted the COVID-19 (Temporary Measures) Act 2020 (the "Act"), while the Monetary Authority of Singapore ("MAS") has set out certain support measures. It is crucial for companies and businesses to understand the impact of both these support measures on loan repayment obligations and insolvency regimes, in order to navigate the legal landscape in this period.

Certain parts of the Act are already in force, whereas the provisions of the Act discussed herein will be in force for six months commencing on a date to be prescribed by the Minister of Law, which period may be extended for up to one year (the "prescribed period").

Moratorium protection for scheduled contracts

The Act provides moratorium protection against legal action for certain "scheduled contracts" entered into or renewed before 25 March 2020. This moratorium protection prohibits the lender from taking certain actions against protected borrowers, including commencing or continuing legal action, eviction due to non-payment of rent, or repossession of goods used for business. Companies must therefore consider whether their loan facilities are scheduled contracts.

Identifying loan facilities which are scheduled contracts

The first question concerns the identity of the parties to the loan facility, under which both of the following have to be satisfied:

  1. The lender is a bank licensed under the Banking Act or a finance company licensed under the Finance Companies Act; and

  2. The borrower is an "enterprise" which: (i) had no more than S$100 million turnover in the latest financial year as a group; and (ii) has 30% of its shares or ownership interest held by Singapore citizens and/or permanent residents.

If both criteria are fulfilled, the loan facility will be considered a scheduled contract if it is secured (whether partially or wholly) against:

  1. A commercial or industrial immovable property (i.e. real estate); or

  2. Any plant, machinery or fixed asset located in Singapore, which is used for manufacturing, production or other business purposes.

Loan facilities are not scheduled contracts, and are not protected by the Act, if they are: (i) unsecured loans; or (ii) loans secured over other assets which do not fall into the above description (e.g. security over shares, deposit bank accounts, account receivables, residential properties).

Application and scope of moratorium

The company seeking relief will first have to give notice to all the other parties to the scheduled contract and the companies' guarantors (if any), upon which a moratorium will apply to (i) obligations which are to be performed on or after 1 February 2020, and which (ii) the company is unable to perform such inability being to a material extent caused by the COVID-19 pandemic.

Unless the lender successfully applies to an assessor to determine that the moratorium does not apply, the moratorium will last until the company withdraws its notification or until the expiry of the prescribed period.

The moratorium prohibits lenders from commencing or continuing a broad range of legal actions, including Court actions, domestic arbitral proceedings, enforcement of security (including appointment of receivers or managers), execution processes, and insolvency proceedings.

Lenders are however not prohibited from calling defaults and accelerations, issuing demand letters, resorting to self-help contractual set-off with other deposit accounts held by the borrower, and charging fees and interest for non-payment or late payment of loan obligations. MAS has therefore reminded borrowers seeking the Act's protection that they may end up paying more in the future.

Temporary modifications to insolvency regimes

The Act also modifies insolvency regimes during the prescribed period, whether the claims arise from a scheduled contract or not. These include:

  • Extension of time to satisfy statutory demands for payment (from 21 days to 6 months)

  • Increase of threshold amounts for insolvency actions

Statutory demands served before the prescribed period commences must still be satisfied within 21 days of service.

Where the loan facilities are not scheduled contracts, lenders are not precluded by the Act from taking the following actions:

  • Commencing insolvency proceedings without issuing statutory demands – the downside is that the lender will lose the benefit of the presumption of insolvency invoked by an unsatisfied statutory demand, and will have to produce direct evidence of the borrower's insolvency.

  • Pursuing debt recovery claims in civil proceedings, which could lead to execution processes against the borrowers'/guarantors' assets.

Companies should also be aware of possible delays in legal action. The Singapore Courts have directed that all hearings from 7 April 2020 to 4 May 2020 shall be adjourned, except for hearings of essential and urgent matters. Debt recovery claims and insolvency proceedings (save for specific extension of time applications) are not listed as essential and urgent matters.

MAS and Financial Industry Support Measures

Companies should also be cognisant of MAS' support measures, which include allowing eligible corporate borrowers to: (i) defer payment of principal on their loan and only pay interest up to 31 December 2020; and (ii) extend the loan tenure by up to the corresponding principal deferment period.

Corporate borrowers can apply for this measure if the following conditions are fulfilled:

  • The borrower must be an "SME", which would include companies with (i) an annual turnover not exceeding S$100 million; or (ii) not more than 200 employees.

  • The loan has to be (i) a term loan which is (ii) fully secured at the time of application for relief.

  • The loan cannot be more than 90 days past due as at 6 April 2020.

  • There is no need for the borrower to demonstrate impact from COVID-19 to be eligible.


Companies and businesses should keep themselves well advised and take advantage of the reliefs provided under the Act and MAS' support measures during these challenging periods. These measures are targeted and temporary, and are likely to evolve rapidly to fit the constantly changing financial and economic landscape during the COVID-19 crisis. It is recommended that companies seek professional advice on the applicability of these measures to their situation.