The Re-Align Framework

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Pursuant to the Covid-19 (temporary measures) (Amendment No. 3) Bill which was tabled in Parliament on 2 November 2020, the Ministry of Law is intending to introduce the Re-Align Framework.

The Re-Align Framework focuses on helping businesses which are affected by Covid-19, to ease the burden of certain contractual obligations. It provides for renegotiation and/or exit paths without penalty or damages that they would normally incur.

In order for a business to be eligible for the re-alignment framework, first they will be subject to a revenue cap and second, the business must have gone through a significant decrease in revenue because of Covid-19. The framework will apply to agreements which is governed by Singapore law, was entered into before 25 March 2020, has at least one party who has a place of business in Singapore and falls within the five categories that are listed as the “scheduled contracts”.

The scheduled contracts will include leases/licences for non-residential property with a term of 5 years or less, hire purchase, conditional sales and rental agreement for commercial equipment/vehicles and contracts for sale and purchase of goods and services. There is also a list of contracts which will be excluded from the Re-Align framework even if they fall within the ambit of the scheduled contract. These are illustrated as the “excluded contracts” and they include consumer contracts, employment contracts etc.

The framework will allow a party to renegotiate or terminate the contract with notice provided. It provides that parties must first enter into renegotiations and if unable to renegotiate, the contract may be terminated without penalty.

The framework also provides support for small landlords in the form of an additional compensation for early termination that will be determined by an independent assessor. In addition, the framework will set out an alternative to termination, by way of a repayment scheme for eligible hirers and renters of commercial equipment/vehicles to settle their accumulated arrears in instalment.

The details of the Re-Align framework will be set out later in the subsidiary legislation.

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