On 15 June 2020, the Monetary Authority of Singapore (MAS) poll of 23 economists and analysts indicates that Singapore’s economy will likely shrink by 11.8% in Q2 2020 on a year-on-year basis. Overall, GDP is estimated to contract 5.8% in 2020. COVID-19 and trade tensions have upended the economy and put many corporations in survival mode. 3,800 companies closed down in April 2020 alone, a sign of the severe strain on the Singapore economy wrought by the virus. Hard times however, do not mean directors should easily disregard their duties and legal obligations to the company as a whole.
The COVID-19 pandemic has left many businesses badly affected, particularly those in industries such as leisure, travel and F&B, as consumer spending plummets. This article will discuss how companies can restructure businesses and operations to reduce costs. Companies facing financial difficulties or tremendous cost pressures may consider harnessing these out-of-court options to stay afloat and to possibly avoid insolvency proceedings.
The ongoing COVID-19 pandemic has profoundly reshaped the global business landscape. Some companies that only months ago seemed unstoppably profitable have been brought to an existential brink by extended lockdowns, supply chain failures, and other obstacles caused by the pandemic. Other companies who have experienced less disruption (or in some cases windfalls) stand at the threshold of opportunity even as they prepare themselves for the challenges of the 'new normal'.
At present, global businesses face huge amounts of uncertainty owing to the Covid-19 crisis that is influencing the global economy in an unprecedented manner. From contractual supply chain issues, which have led to the activation of force majeure clauses, among others, to employment issues, insurance disputes, and the real and imminent threat of insolvency of counterparties, businesses need to take quick, effective steps to avoid trouble in these difficult times.
The COVID-19 pandemic has placed significant pressure on businesses and the economy. Even fundamentally healthy and viable businesses are seeing their financial resources stretched thin due to factors such as weakening demand, increasing late payments, and disruptions in supply chains.
Directors will play an important role in ensuring that their companies emerge from the COVID-19 pandemic in a strong and sustainable position.
Recent decisions of the Hong Kong and Singapore courts show different approaches to the issue of when a winding-up petition will be allowed to proceed in circumstances where there is an arbitration agreement.
Market conditions and Covid-19
The Covid-19 pandemic and the response to it, including global lockdowns, has caused substantial disruption to business operations and trade which has resulted in significant cash flow and financial challenges for many businesses. As a result, in a number of cases, financing covenants have been breached which have triggered defaults under financing arrangements.
A Singaporean Court in Anan Group (Singapore) PTE Ltd v VTB Bank (Public Joint Stock Company) [2020] SGCA 33 has recently confirmed the Court’s approach in assessing arbitration clauses when an application has been brought to put a company into liquidation.
The parties in this case are parties to an arbitration agreement. The respondent applied to put the appellant into liquidation. The Court considered that the winding up proceeding should be stayed with the underlying dispute to be resolved through arbitration.
The COVID-19 pandemic has led to a significant strain in the global markets. As "stay-at-home" orders are implemented globally, many economies have closed off, which has severely impacted numerous businesses. Inevitably, some companies have liquidated and many others are at risk of insolvency.