COVID-19: Economic relief Measures announced to date
By Allan Gold, lawyer, lecturer and author. (Part 4)
For Independent business; Small And Medium Enterprises / SME; Petites et Moyennes Entreprises / PME; Family business – From Governments (Canada, Quebec, Montreal,), Financial institutions, etc.
B. Summary of Selected Small Business Covid-19 Relief-Funding Measures-Initiatives (Quebec, Canada)
B.1 GOVERNMENT OF CANADA (FEDERAL)
When it comes to the federal government, I will start with the taxation relief area.
B.1.1 Relief from fulfilling taxpayer obligations: Administrative tax measures
The Canada Revenue Agency (CRA) has announced administrative relief- dispensations: As a follow up to what I posted earlier, kindly refer to the CRA at https://www.canada.ca/en/revenue-agency/campaigns/covid-19-update/covid-19-collections-audits-appeals.html…rules about objections delays etc. Insofar as Quebec (Revenu Quebec) is concerned, please see my next blog post.
B.1.2 The Federal Government is helping businesses through financial uncertainty- But I must ask, “Is your business impacted by COVID-19?” If so, look here!
B.1.2.1 Canada Emergency Response Benefit (CERB):
The Canada Emergency Response Benefit (CERB) is described as follows. “If you have stopped working because of COVID-19, the Canada Emergency Response Benefit (CERB) may provide you with temporary income support. If you have stopped working because of COVID-19, you should apply for the Canada Emergency Response Benefit, whether or not you are eligible for Employment Insurance. The Benefit is available for the period from March 15, 2020 to October 3, 2020.” (Source: https://www.canada.ca/en/services/benefits/ei/cerb-application/questions.html) This also applies to Self-employed individuals/independent contractors.
For your information, the CERB has a number of 4-Week Eligibility Periods. These are (a) CERB period #1: March 15, 2020, to April 11, 2020; (b) CERB period #2: April 12, 2020, to May 9, 2020; (c) CERB period #3: May 10, 2020, to June 6, 2020; (d) CERB period #4: June 7, 2020, to July 4, 2020; (e) CERB period #5: July 5, 2020, to August 1, 2020; (f) CERB period #6: August 2, 2020, to August 29, 2020; (g) CERB period #7: August 30, 2020, to September 26, 2020. This said, there is a maximum. The CERB will provide you with $500 a week for up to 16 weeks. As result, you may apply only for 4 CERB periods. And you must apply for each timeframe individually. Each installment is in increments of $2000. If you have not applied yet, you can apply as of April 15, 2020, for these two first sub-periods. I’m still unclear about CERB treatment of: (a) Income (before the making of an application), arising from work before March 15, but where payment has been received subsequent to March 15; (b) Income (after the making of an application), which the applicant is supposed to report to CERB, and the obligation to reimburse the $2000 in full or in part. Without being exhaustive, hereinafter is the published eligibility criteria for the CERB, notably to wit:-
“The benefit will be available to workers:
- Residing in Canada, who are at least 15 years old;
- Who have stopped working because of COVID-19 or are eligible for Employment Insurance regular or sickness benefits;
- Who had income of at least $5,000 in 2019 or in the 12 months prior to the date of their application; and
- Who are or expect to be without employment or self-employment income for at least 14 consecutive days in the initial four-week period. For subsequent benefit periods, they expect to have no employment or self-employment income.
The income of at least $5,000 may be from any or a combination of the following sources: employment and self-employment. For those who are not eligible for Employment Insurance you may also include maternity and parental benefits under the Employment Insurance program and/or similar benefits paid in Quebec under the Quebec Parental Insurance Plan as part of the calculation for income.” (Source: https://www.canada.ca/en/services/benefits/ei/cerb-application/questions.html)
IMPORTANT NOTICE: Please be informed:
- That in order to apply online for CERB, you will be required to register for a CRA My Account. For information from an agent, you can call 1-800-959-8281. To apply, you should call 1-800-959-2019 or 1-800-959-2041. Nota bene – This is an automated service.
- That you cannot receive the CERB and still collect a subsidized pay check from your employer receiving a subsidy under the program, titled, “COVID-19 Emergency Wage Subsidy (CEWS).” (For more on CEWS, please see below.)
- That the qualifications to apply for CERB are quite specific. Apparently, there are many people, who are falling through the cracks, as they do not satisfy all the criteria. As a result, there is some talk at the government level about doing some tweaking. Stay tuned, there may be some good news soon on this topic.
The Canada Emergency Business Account (CEBA) is designed to support small business owners in meeting their immediate cash flow needs. CEBA loans are being offered through a company’s financial institution, in cooperation with Export Development Canada (EDC). It will provide qualifying businesses with access to a loan up to $40,000 to help with its most pressing needs. It’s a government‑guaranteed loan. It’s an interest-free loan. As to eligibility requirements, and without being exhaustive, be advised that an applicant must:
- Be a small business or not-for-profit organization;
- Have an active business bank account as of March 1, 2020; (N.B. Sole proprietors who use a personal chequing account while operating in the name of a business are not eligible.)
- Have had their revenues temporarily reduced;
- Have paid between $50,000 and $1 million in payroll for 2019. (Commentary: As to this condition, the company owner must ask self if he/she had people on payroll and did such expenses (-I would say gross not net) exceed $50,000?” (N.B. It’s prudent to double check financial records in this regard in order to be absolutely certain of this.). If not, it may not be as cut and dry as that. For example, if the owner-operator takes a draw, especially in the instance of an unincorporated sole proprietorship or partnership, there might be some give in the interpretation and permit more enterprises to qualify.)
- Be “an operating business (i.e., not a holding company) in operation on March 1, 2020.” (Commentary: As to this condition, the enterprise must be an active business. In other words, the enterprise must not be one ‘primarily’ used for holding investments as opposed to one used for running an active business. The use of the word, “organization seems to suggest that it’s not limited to an incorporated corporation. In other words, it appears that it seems to be open to unincorporated establishments that are being operated as a sole proprietorship or a partnership. )
- Be current on (in other words not be behind in) their payments for an existing loan on March 1 of this year;
- Agree to use the funds from this loan to pay for operating costs that cannot be deferred, such as payroll, rent, utilities, insurance and property tax, as per the requirements of the program set out by the Government of Canada;
If understood, the $40,000 is the cap. Beyond that which already mentioned, I’m still unclear about: (a) How is “small business” defined? (b) What minimum length of time must revenues be reduced for to qualify? (c) By how much must revenues be reduced in order to qualify? Hereinbelow are further terms, notably to wit:
- Interest rate at 0% until Dec 31, 2022;
- No minimum monthly principal payments until December 31, 2022; and
- Loan forgiveness up to $10,000 provided balance is fully paid on or before Dec 31, 2022.
NOTICE. Please be informed:
- That CEBA Loans are to be obtained through your financial institution, in cooperation with Export Development Canada (EDC). Check with the Account Manager for your company. Many of these bankers are available by telephone and/or e-mail. (N.B. Kindly note the seemingly contradictory statement that once CEBA is available, applications will only be accepted online.)
- That the qualifications to apply are quite specific. For me, unless and until further notice of CEBA, if your enterprise doesn’t qualify, don’t apply. Of course, a failed application is no feather in your cap! But more, should you secure the funding through misrepresentations on your part, besides the reimbursement claim, you may also be subject to penalties, fines or worse.
- That for more information please visit https://www.canada.ca/en/department-finance/news/2020/03/additional-support-for-canadian-businesses-from-the-economic-impact-of-covid-19.html
B.1.2.3 Banks: Business Banking Principal Payment Deferral:
Principal payment deferrals are being offered by certain Canadian Banks. If your business is financially impacted by COVID-19 and where this is in place, in many instances, you can request to defer the equivalent of up to 4+- monthly principal payments on your business term loan and up to 6+- months on your real estate secured business term loan. It’s noteworthy of course, that when you defer loan payments, you are not paying the loan principal, and this means that you’ll pay even more interest in the end.
B.1.2.4 Canadian Banks: New Credit Requests:
Certain Canadian banks are declaring that they are open to consider new credit requests. If your business is financially impacted by COVID-19 and where you qualify, you can request new or additional credit for your business to help you with short term liquidity issues.
B.1.2.5 Loans to Small And Medium Enterprises (SMEs) through Export Development Canada (EDC):
The Export Development Canada (EDC) is offering a Business Credit Availability Program Guarantee. It’s being addressed to Small and Medium Enterprises (SMEs). It’s to provide working capital to help SMEs sustain operations impacted by COVID 19. This is different from the CEBA loans. SMEs shall be able to obtain operating credit and cash flow term loans up to $6.25M. Don’t go crazy – this is a cap! Loans would be guaranteed by EDC. I’m still unclear as to: (a) What qualifies as an SME? (b) What are the loan- repayment terms? and (c) When this program will be available? As to eligibility requirements, and without being exhaustive, be advised that an applicant must:
- Be Canadian-based business (new and existing Bank customers);
- Be asking for net-new funding;
- Attest that the proceeds will be used to sustain operations
NOTICE. Please be informed:
- That these loans would be obtained through the SME’s financial institution.
- That Export Development Canada (EDC) is “a financial Crown corporation dedicated to helping Canadian companies of all sizes succeed on the world stage. As international risk experts, we equip Canadian companies with the tools they need – the trade knowledge, financing solutions, equity, insurance, and connections – to grow their business with confidence. Underlying all our support is a commitment to sustainable and responsible business. For more information and to learn how we can help your company, call us at 1-800-229-0575 or visit www.edc.ca”.
- That the coordinates of EDC are: 150 Slater Street Ottawa ON K1A 1K3 Phone: 613-598-2500 Fax: 613-598-3811 Special Covid-19 number: Tel.: 1-800-229-0575 (Source: https://www.cdc.gov/csels/dsepd/ss1978/lesson1/section11.htmlExport https://www.edc.ca/en/about-us/newsroom/edc-coronavirus-business-support.html)
B.1.2.6 BDC- “Support for entrepreneurs impacted by the coronavirus COVID-19 Business Development Canada (BDC) Co-Lending Program
There is now a Co-Lending Program, which brings the BDC together with Canadian Banks, to co-lend term loans to Small and Medium businesses (SMEs) to help with operational cash flow requirements. Canadian businesses can obtain incremental credit amounts up to $6.25M. There will be up to 12 months interest only. I’m still unclear as to: (a) Which Canadian businesses would qualify? (b) What are the loan-and repayment terms? and (c) When this program will be available? As to eligibility requirements, and without being exhaustive, be advised that an applicant must:
- Have been impacted directly or indirectly by recent events and have been financially viable prior to the impact from COVID-19;
- Have an existing business banking debt relationship at the respective Bank;
- Have a situation with differing maximum finance amounts based on business revenues;
NOTICE. Please be informed:
- That these loans would be obtained through the business’s financial institution.
- That the Business Development Bank of Canada (BDC) is “a financial institution founded in 1944 that is wholly owned by the government of Canada, providing financial and consulting services to small and medium-sized Canadian businesses. It describes itself as the only Canadian bank devoted entirely to the needs of entrepreneurs, supporting small and medium-sized businesses (SMEs) in all industries and at every stage of growth with money and advice.” (Source: https://www.investopedia.com/terms/b/bdboc.asp)
- That should you not be BDC client, you can telephone the toll-free number 1-877-232-2269 (Source: https://www.bdc.ca/en/pages/special-support.aspx?special-initiative=covid19)
B.1.2.7 COVID-19 Emergency Wage Subsidy (CEWS):
The COVID-19 Emergency Wage Subsidy (CEWS) is a wage support program. As to its purpose, as per the government, it’s to:
- Backstop “much of the Canadian economy through wage subsidies to prop up struggling businesses — and the workers they employ — during the COVID-19 crisis.”
- Discourage companies from laying off workers at a time when social and economic life has ground to a halt, crippling nearly every industry and pushing millions onto government income replacement programs.
- Encourage employers who already have laid off workers to put them back on the payroll, now that they can count on direct payments from Ottawa to cover a significant portion of most wages for the next three months.
This is what I understand so far. The benefit is not limited to Small And Medium Enterprises (SMEs). Instead, it’s available to all types of corporations in Canada, (even Canadian subsidiaries of foreign-controlled companies), but with the exception of non-taxable corporations and public sector entities like municipalities, public schools and hospitals. It also doesn’t matter how many people are on staff. Sole proprietorships and partnerships are also eligible. This also applies to bars and restaurants, which are often disqualified from government backed loans! The program is retroactive to March 15, 2020. The program will be in effect for three months and companies will have to reapply each month. The subsidy is equal to seventy-five percent (75) of eligible remuneration on the first $58,700 per employee, maxing out at $847 per week. There is no overall limit that the employer can claim. The CEWS would be claimed against wages in three claiming periods: March 15-April 11; April 12-May 9; May 10-June 6 for each of March, April and May, respectively. Employers must keep records of both their arm’s length revenues and employee remuneration. The CEWS will be taxable to the employer as government assistance. I’m still unclear as to: (a) Exceptions for start-ups and new firms; (b) “Flexibility” (on a not-for-attribution basis) on the revenue comparisons to address the needs of companies that weren’t around in March 2019; etc. As to eligibility requirements, and without being exhaustive, be advised that an applicant must:
- Be an “eligible employer,” which includes individuals, taxable corporations, and partnerships with partners who are eligible employers as well as NPOs and registered charities.
- Suffer at least a 30% decrease in revenues from a business carried on in Canada earned from arm’s length sources, comparing the current month to the same month in the previous year. (N.B. To qualify, companies will have to show that their revenue in March 2020 was 30 per cent less than it was in March 2019.)
- Be obliged to attest that they are doing “everything they can” to pay the other 25% of employee wages. However, if they can’t pay such 25%, this does not bar qualification for the program. (N.B.This seems to be contradicted by the following. Employers must pay the employee wages first, then apply for the CEWS through the CRA’s My Business Account portal. Payment will be received through direct deposit, if possible.)
NOTICE. Please be informed:
- That the CEWS funds will be available shortly.
- That employers are required to reapply each month.
- That the wage subsidy will be administered by the Canada Revenue Agency (CRA) through the My Business Account portal on the agency’s website.
- That in order to avoid further delay, businesses should register for direct deposit to ensure money can be sent electronically.
- That when applying each time, companies must demonstrate, for example, that revenues in April 2020 are also 30 per cent less than they were in the same month the year prior.
- That the federal government is “working on the details” to ensure compliance and prevent fraud. It will be actively looking for instances of abuse — especially employers who pocket wage subsidies without passing them on to their employees. There will be serious consequences for those abusing the system. These could include fines and possibly imprisonment. Indeed, the government is considering new criminal offences that will apply to individuals, employers or business administrators who provide false or misleading information to obtain access to this benefit, or who misuse funds obtained under the program.
The foregoing is a lot to sum up. Instead, I’ll give you the following.
Today’s Little Pep Talk.
Since the news about the Corona virus (Covid-19) broke, people in the media are incessantly speaking about ‘flattening the curve.’ It got me thinking about the curve ball. Indeed, this pandemic was an enormous “curve ball” for the world. So I looked it up and found, “In baseball and softball, the curveball is a type of pitch thrown with a characteristic grip and hand movement that imparts forward spin to the ball, causing it to dive as it approaches the plate.”(Source: https://en.wikipedia.org/wiki/Curveball) I also learned from this article that “…The flat curveball will still drop because of gravity, but due to the lack of top spin the drop is only a small amount…” If understood, a curveball coming out of the pitcher’s hand flat is easier to hit. And since like you, I’m itching to hit a business homerun out of the park, and we’re all hoping for a flattening curve coming soon, let’s all get ready so we can each it hit a homer for our respective enterprise and family. Hooray for team Quebec-Canada!
Quotes of the week (business-wise).
If in business in Quebec in year 2020, here are a few wise statements to consider today:
- Titus Maccius Plautus (Roman playwright-philosopher who lived from 254 BC to 184 BC.): “You must spend money to make money.”
- Stanley Druckenmiller: “Good debt growth is when you borrow money, and it goes into the real economy. You do capital spending. You build businesses.”
This Blog was longggggggggggg! With so many different acronyms, it’s hard to keep track of them alllllllllllll. So take your timeeeeeeeeeeeeeeeee! See you next weekkkkkkkkkkkkk for even more COVID-19 measures and funding programs.
Best wishes to each of you and to your entire family.*
Allan J. Gold
Avocat/Barrister & Solicitor
NO 1 Wood Avenue Condominium
4055 ouest rue Ste. Catherine, suite 128(-A),
Westmount, Québec, Canada H3Z 3J8
Adresse électronique: firstname.lastname@example.org
Tel: (514) 849-1621; Fax: (514) 849-4664; Mobile: (514) 918-145
www.allanjgold.com ; Blog: https://allanjgold.com/blog-glm/
D. PREVIEW OF NEXT IN THE BUSINESS LAW BLOG SERIES.
I believe that with this blog series, I may have started you along the way to being more aware of the law for business. I will continue on with the subject of COVID-19: Economic relief measures announced to date / Allan Gold – For Independent business; Small And Medium Enterprises; SME; Petites et Moyennes Entreprises; PME; Family business – this as regards COVID-19 relief and funding programs from the province of Quebec and/or the city of Montreal. Interested? Want to get more information about the current topic, or other areas of law written by an “avocat,” one of the family business law lawyers, family business lawyers Montreal, practicing also in the elder law field? See you next time. It won’t take too much time. Remember my byline – it’s “Gold’s Legal Minute*GLM*!” And please don’t forget to join my professional community by entering your e-mail at the prompt.*
E. NOTICE – CAUTION –DISCLAIMER.
The material provided herein is of a general nature, strictly for informational purposes. The interpretation and analysis is not to be misapplied to a personal situation with a particular set of facts. Under no circumstances, are the herein suggestions and tips, intended to bring a reader to the point of acting or not acting, but instead, the hope is that they are to be a cause for pause and reflection. It is specifically declared that this content is not to be a replacement of, or a substitution for, legal or any other appropriate advice. To the contrary, for more information on these presents, related subjects or any other questions, it is the express recommendation of the author that everyone seek out and consult a qualified professional or competent adviser.
*©/TM 2020, 2019, 2015-2018, Allan Gold, Practitioners’ Press Inc. – ALL RIGHTS RESERVED
** ©/TM 2006, 2008, 2018 Allan Gold, Practitioners’ Press Inc. – ALL RIGHTS RESERVED