The number of bankruptcy applications came down sharply last month after rising to a 40-month high the previous month, a change legal experts attribute to the new Covid-19 law.
Bankruptcy applications fell to 160 from 462, a drop of 65 per cent, according to the Insolvency Office website which shows monthly figures for the past 40 months.
It reverses a general uptrend that hit a 40-month peak in March.
Likewise, bankruptcy orders also plunged last month to 22 – falling below 50 for the first time in the 40 months.
The decline in these new orders is the lowest in recent years, a Ministry of Law spokesman told The Straits Times.
Industry players attribute the drop to the wide-ranging Covid-19 (Temporary Measures) Act, as well as the circuit breaker measures.
The Act was passed by Parliament on April 7 and took effect on April 20.
“By imposing a moratorium on certain legal actions or – as Minister for Law K. Shanmugam put it, a ‘legal circuit breaker’ – the Act provides temporary and targeted protection for businesses and individuals who cannot perform particular types of contractual obligations due to Covid-19,” the duo wrote.
“The Act, therefore, gives parties precious ‘breathing space’ to negotiate and resolve their differences, preserving their liquidity,” they said.
Underscoring the importance of interim relief provided by the Act for those commercially affected by the pandemic, they added that “the Minister for Law has rightly observed that we should be looking at equity and justice, rather than just the enforcement of strict contractual obligations”.
Mr Rajah, who is also a former Supreme Court judge of appeal, is now an international arbitrator. Professor Goh is dean of the School of Law, Singapore Management University.
The relief measures for bankruptcy include raising the threshold for issuing a statutory demand to an individual debtor, from $15,000 to $60,000.
The Act also raised the statutory period for debtors to respond to demands for repayment from 21 days to six months.
This will naturally lead to the filing of fewer bankruptcy applications, said insolvency lawyer Prakash Pillai.
He also cited other contributory factors, such as the circuit breaker measures, which led to the courts hearing only urgent or essential matters since April 7.
“Bankruptcy is not considered an essential matter, and all bankruptcy hearings other than those deemed urgent would have been adjourned to after June 1,” added Mr Pillai, who heads the dispute resolution and insolvency practices at Clyde & Co Clasis Singapore.
The Act offers temporary relief for six months until Oct 19 but this could be extended for another six months.
Said Mr Rajah at a recent SMU webinar: “If parties are sensible, the breathing space will allow them opportunity to renegotiate pragmatically and to come up with business arrangements they can live with.”
Updated from : The Straits Times, 19 May 2020