Frederikse Law and COVID-19
We at Frederikse Law recognize the business shocks posed by the COVID-19 crisis and wanted to reach out to offer our support in this challenging time.
We recognize that an effective game plan will be critical to the success of small businesses over the next few months. In developing your strategy, we wanted to offer our own thoughts as to some steps you might want to consider:
Prioritize Maintaining Liquidity
Prioritize maintaining liquidity. In that regard you should reach out to certain key people to see what steps you need to take to work together through this. In all cases, keep good notes and records of discussions, including written and email communication.
- Firstly, reach out to your banker to discuss what is happening in your business, what your needs are and to see what they are able to offer. If you already have loans, you might need payment deferrals. If you do not currently have loans, you may want to reach out to see what your options are for borrowing until the crisis is over.
- Secondly, reach out to your key partners, such as your landlord, key suppliers and key customers to set up plans for working through the crisis together. The supply chain needs to keep moving; consider what part you play, if any, in helping to make that happen, and be aware of any disruptions that you will need to manage. We encourage people to talk to each other first (telephone or video call), and then confirm all key points in writing, so that everyone is on the same page. This may involve payment deferrals or payment terms and/or renegotiated pricing.
- Thirdly, review your budget to identify items that can be temporarily deferred.
Remember that you will need your same key relationships once the crisis is over. We hope that people will be able to come out of this crisis faster and stronger by working together.
Apply for Government Programs
Apply for government programs for which you might be eligible, and keep current on new sources of support. With the world seeming to change hour by hour, it is challenging to keep up-to-date, but you need to do your best. Some of the resources that we have found include:
Canada Emergency Wage Subsidy (CEWS)
- Employers (individuals, taxable corporations, non-profits, and charities, but not public institutions) that had a CRA payroll account on March 15, 2020 and experienced a 30% drop in revenue will be eligible for wage subsidization.
- Drop in revenue is calculated by comparing eligible revenue for the starting month of the claim period with baseline revenue.
- Baseline revenue is either (1) revenue in the corresponding month in 2019, or (2) the average of revenue in January and February, 2020.
- Federal government will cover up to 75% of a salary on the first $58,700 (maximum payments of $847/week per employee).
- Payments will be retroactive from March 15, 2020 to June 6, 2020. Amounts automatically received under a separate program, the 10% Temporary Wage Subsidy, will be deducted.
- Additional detail, including a calculator to find out how much your wage subsidy may be, are available at the Emergency Wage Subsidy website
Business Credit Availability Program (BCAP)
- Business Development Bank of Canada (BDC) and Export Development Canada (EDC) are working with financial institutions to provide lending at market rates, with credit amounts of up to $6.25 million, to small- and medium-sized enterprises
- To seek support, contact your financial institution; if needs exceed what the financial institution can provide, it will work with BDC or EDC to access additional resources available.
Ontario-Canada Emergency Commercial Rent Assistance (OCECRA)
- OCECRA will provide loans to qualifying commercial property owners to cover 50% of three monthly rent payments of eligible small business tenants experiencing financial hardship over April, May and June 2020.
- The loans will be forgiven if the mortgaged property owner agrees to reduce the rent of eligible small business tenants by 75% for the corresponding three months and to not evict the tenant during this time period, under a rent forgiveness agreement. The small business tenants would be responsible for the remainder (up to 25% of rent).
- Eligible small business tenants are defined as businesses that pay less than $50,000 per month in rent, that either have temporarily ceased operations or experienced at least a 70% drop in revenue due to COVID-19. Non-profit and charitable organizations will also be eligible for support.
- Information on other COVID-19 Economic Response Plan programs is available at the Economic Response Plan website.
- The Burlington Chamber of Commerce is providing City of Burlington, provincial, and federal government updates, as well as information on and links to other resources for support: Support at the Burlington Chamber of Commerce
Take advantage of options to defer taxes:
- GST/HST and import duties will be deferred until June 2020.
- Individuals and businesses may defer income tax payments (for taxes owed between March 18, 2020 and September 2020 until after August 31, 2020. [Excludes Part IV tax to corporations on dividends received.]
- • Return filing due date for individuals, excluding trusts, will be deferred until June 1, 2020. Self-employed individuals’ personal tax returns remain due on June 15, 2020. Corporate tax returns which were due after March 18, 2020, have been extended to June 1, 2020 (excludes HST returns).
Review Business Insurance
Review your business insurance to see if you have business interruption coverage. While most business interruption insurance seems to offer compensation for damage to premises or equipment, there will likely be pressure on the insurance industry to help cover some of these losses under such policies. Keep separate records for any losses you may suffer due to the current crisis, including extra professional fees, such as legal and accounting.
The Courts are currently closed except for the hearing of urgent matters. In order to protect court staff, limitation periods are currently suspended. We do not yet know how courts are going to treat breaches of contract related to COVID-19 once this situation is over. However, if you believe that you might have no option but to breach a contract, you should try and put yourself in the best light possible. Do everything you can to work out your disagreement/difference of opinion. If, after you have tried your best, you have no other option but to treat the contract as at an end (after all, it does take two to tango), then make sure that your actions cannot be faulted. You will want to be sure you can come to court with “clean hands”.