The Singapore Ministry of Law will introduce the COVID-19 (Temporary Measures) Bill (the Bill) in Parliament next week to address the impact of COVID-19 on businesses and individuals' ability to fulfil their contractual obligations. The Bill will also make some temporary changes relating to bankruptcy and insolvency.

The Bill will apply to various categories of contracts, including:

The Australian Federal Court has made orders relieving the administrators of retailer Colette from personal liability for rent in response to the COVID-19 crisis and the current uncertainty in respect of government policy about rent relief for tenants: see

What you need to know

The voluntary administration procedure in the Corporations Act was introduced in 1993. Prior to this, the only formal mechanism for a company to compromise with its creditors was by a creditors’ scheme of arrangement, a process often regarded as costly, time consuming and cumbersome.

The primary objective of voluntary administration is to provide for the business, property and affairs of an insolvent company to be administered in a way that:

The COVID-19 pandemic continues to affect the way financial institutions address organizational and legal challenges. FIs are in a rush to address the impact – both current and emerging.

Not for the first time in the current pandemic crisis, the UK government has found itself playing catch up with other countries. Over the weekend the UK followed the lead of governments in Germany and Australia by announcing plans to introduce a temporary relaxation of the existing wrongful trading regime for company directors. It has also taken the opportunity to revive the previous government's plans to add to the existing UK insolvency law "toolkit" by introducing a new debtor-friendly restructuring law.

Wrongful trading

Amendments to the Corporations Act 2001 (Cth) (Corporations Act) to implement the measures announced by Treasurer Josh Frydenberg on Sunday, 22 March 2020 to provide temporary relief for financially distressed businesses due to COVID-19 have now come into effect.

The Coronavirus Economic Response Package Omnibus Act 2020 (Cth) (CERPO Act) amendments were passed by the Parliament on 2 March 2020. They will apply for a 6 month period, but may be extended or have impacts beyond that timeframe.

Recent Development

In scope of the various response measures implemented by the Turkish government to prevent the spread of the coronavirus (COVID-19) in Turkey, the President of the Turkish Republic issued the "Decree to Suspend Enforcement and Bankruptcy Proceedings" on March 22, 2020, in accordance with Article 330, "Suspension In Case of Emergency", of the Enforcement and Bankruptcy Law ("EBL").

What Does the Decision Say?

The Treasurer, the Honourable Josh Frydenberg MP, has today announced proposed temporary changes to Australian corporate insolvency laws which will vary the minimum requirements for statutory demands and provide some relief for directors from insolvent trading. These announcements form part of the Australian Government's measures to support otherwise profitable and viable businesses due to the economic impacts of COVID-19.

What a director wanting to enter the safe harbour must do

Directors in Australia have long had a statutory duty to prevent insolvent trading. The duty is engaged where:

Directors of Australian companies face significant personal monetary − and potential criminal and adverse professional - consequences if they allow the company to trade whilst insolvent.

Australian insolvent trading laws are harsher, and more frequently utilised to prosecute directors personally, than in many other jurisdictions including in the US and the UK.

Accordingly, frequent assessment of a company's solvency by its directors is crucial, particularly in financially difficult times, as are active steps to address any potential insolvency.