The economic implications of COVID-19 have led many start-up and growth-stage companies to face tough decisions. The federal and provincial governments have introduced new programs and amended existing ones to assist businesses and mitigate the effects of the pandemic on companies and their employees. This bulletin highlights several programs that may be useful to our Nitro clients, with a focus on federal and Ontario governmental supports.
The information set out below is current as of April 14, 2020.
CANADA EMERGENCY WAGE SUBSIDY (CEWS)
On April 11, 2020, the federal government passed legislation enacting an emergency wage subsidy of up to 75 per cent for qualifying businesses. The CEWS is designed to discourage businesses from laying off employees in response to COVID-19. If eligible, businesses would qualify for the CEWS for up to 12 weeks from March 15 to June 6, 2020. The program is being implemented through technical changes to the Income Tax Act. Businesses looking to determine their eligibility for the CEWS should consult with their tax and accounting advisors.
Further details on the CEWS, please see our April 2020 Blakes Bulletin: Parliament Enacts the Canada Emergency Wage Subsidy.
How to Apply
Eligible employers will be able to apply for the CEWS through the Canada Revenue Agency's My Business Account portal. Employers will need to keep records demonstrating their reduction in revenues and remuneration paid to employees. More details about the application process will be made available shortly.
Temporary Wage Subsidy for Employers
The CEWS does not replace the Temporary Wage Subsidy, a three-month initiative that provides eligible employers with 10 per cent of the remuneration that it pays from March 18 to June 19, 2020, up to a maximum of C$25,000 per employer.
Individuals, partnerships, non-profits, registered charities and Canadian-controlled private corporations that are eligible for the small business deduction may be eligible for the Temporary Wage Subsidy. To be eligible, such employers must have an existing business number and payroll program with the Canada Revenue Agency (CRA) as of March 18, 2020 and pay salary, wages, bonuses or other remuneration to an employee who is employed in Canada.
Eligible employers do not need to apply for the Temporary Wage Subsidy. It is calculated when an eligible employer remits required deductions to the CRA.
BUSINESS CREDIT AVAILABILITY PROGRAM (BCAP)
On March 13, 2020, the federal government announced the new BCAP. BCAP will support access to financing for Canadian businesses across all sectors and in all regions. The federal government will provide more than C$65-billion of additional support through the Business Development Bank of Canada (BDC) and Export Development Canada (EDC).
Any credit-worthy business with a viable business model whose activities fall within either the BDC or EDC mandate is eligible for BCAP.
How to Apply
The financial institutions with whom businesses have a pre-existing relationship are best situated to assess and deal with a client's specific needs and requests. If a client's needs exceed the level of support that the financial institution can provide, the financial institution will work alongside the BDC or EDC to access additional resources made available by the federal government.
CANADA EMERGENCY BUSINESS ACCOUNT (CEBA)
On April 9, 2020, banks officially opened applications for the CEBA. The C$25-billion program, implemented by the EDC, will provide eligible small businesses and not-for-profits with interest-free loans of up to C$40,000. The Canada Emergency Business Account will help cover operating costs at a time where revenues have been temporarily reduced due to the economic impacts of COVID-19. The CEBA is intended to ensure that small businesses can access the capital they need during these tough economic times.
Small businesses and not-for-profits need to demonstrate that they paid between C$50,000 to C$1-million in total payroll in 2019 (shown on their T4 summary).
How to Apply
To apply for the CEBA, small businesses and not-for-profits should contact their financial institution.
BDC CAPITAL BRIDGE FINANCING PROGRAM
BDC Capital, BDC's investment arm, has launched the BDC Capital Bridge Financing Program. Where a current financing round is being raised through qualified existing and/or new investors into eligible start-ups, BDC will match the financing round with a convertible note.
To be eligible, companies must be Canadian, backed by a qualified venture capital firm, have raised at least C$500,000 in external capital before applying for the program and be specifically impacted by COVID-19. Any matching investment by BDC Capital will be further subject to, notably, satisfactory due diligence review by BDC, agreement on terms of the investment and approval by a BDC investment committee.
This is not limited to BDC's portfolio. All companies that meet the criteria are eligible to apply. Interested companies should speak to their lead investor for details.
The details of which venture capital firms will be eligible or how firms will be selected has not been released at this time. However, venture capital firms looking to participate can contact BDC Capital to discuss their eligibility.
SCIENTIFIC RESEARCH AND EXPERIMENTAL DEVELOPMENT (SR&ED) PROGRAM
The Scientific Research and Experimental Development (SR&ED) Program uses tax incentives to encourage Canadian businesses to conduct research and development in Canada. On March 18, 2020, the CRA announced a suspension of non-critical functions, including most business auditing, for four weeks as part of its operational response to COVID-19. We understand that the CRA has since expanded its list of critical operations and is working to bring its auditors online to work from home for an indeterminate time. As a result, businesses scheduled to be audited during the audit suspension may experience delays in receiving money from the SR&ED Program, as recent reports have suggested. These likely delays could intensify the economic impacts of COVID-19. Businesses should prepare for such delays and make use of other government supports, if possible, or have contingency plans in place.
CANADA EMERGENCY RESPONSE BENEFIT (CERB)
In the event your employees or contractors have stopped working because of COVID-19 and do not qualify for traditional benefits (i.e., Employment Insurance), the CERB program may provide them with temporary income support of C$500 a week for up to 16 weeks.
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 and have not voluntarily quit their job or are eligible for EI regular or sickness benefits
Who had income of at least C$5,000 in 2019 or the 12 months prior to the date of their application
Who are or expect to be without employment or self-employment income for at least 14 consecutive days in the initial four-week period, and who, for subsequent benefit periods, expect to have no employment or self-employment income
How to Apply
Eligible contractors or self-employed individuals can apply here.
Work-Sharing (WS) is a program designed to help employers and employees avoid layoffs when there is a temporary decrease in an employer's business activity beyond its control. Employees, employers and Service Canada enter into a three-way agreement where Service Canada pays employment insurance to employees that agree to work reduced hours during a temporary decrease in an employer's business beyond the employer's control.
Effective March 15, 2020, the federal government introduced Temporary Special Measures for COVID-19 (Temporary Special Measures), which extend the eligibility of such agreements to 76 weeks, ease eligibility requirements and streamline the application process.
To be eligible, employers must satisfy the following requirements:
Be a year-round business in Canada for at least one year
Be a private business, publicly held company or non-for-profit organization
Have at least two employees in a WS unit
Employers are not eligible for WS if the reduction in business activities is due to:
A labour dispute
A seasonal shortage of work
A pre-existing and/or recurring production slowdown
A recent increase in the size of the workforce
To be eligible, employees must:
Be year-round, permanent, full-time or part-time employees needed to carry out the day-to-day functions of the business (your "core staff")
Be eligible to receive EI benefits
Agree to reduce their normal working hours by the same percentage and share the available work
The following employees are not eligible for WS:
Seasonal employees and students hired for the summer or a coop term
Employees hired on a casual or on-call basis or through a temporary help agency
Employees who hold more than 40 per cent of the voting shares in the business
Under the Temporary Special Measures, employees who are needed to help generate work and/or are essential to the recovery of the businesses (i.e., senior management, executive-level marketing/sales agents, technical employees engaged in product development, etc.) will be eligible for WS.
How to Apply
Employers need to submit two forms 10 calendar days prior to the requested WS start date: Applications for a Work-Sharing Agreement form EMP5100 and Attachment A: Work-Sharing Unit form (EMP5101). In Ontario, employers should send the application materials to ESDC.ON.WS-TP.ON.EDSC@servicecanada.gc.ca.
Economic Support and Recovery for Businesses
The City of Toronto has established the Mayor's Economic Support and Recovery Task Force, which is focused on quickly determining what supports and stimulus work needs to be done in response to COVID-19. The City of Toronto has launched immediate actions that include establishing a contingency fund to support businesses and expanding the city's small business advisory services to help small businesses as they plan to recover from the impacts of COVID-19.
The COVID-19 Challenges Procurement Program
The COVID-19 Challenges Procurement Program is designed to provide small and medium-sized businesses (fewer than 500 staff) with financial support from the National Research Council of Canada Industrial Research Assistance Program (NRC IRAP). The financial support provided from the NRC IRAP is intended to allow eligible businesses to refine and sell a product or solution that is designed to meet a COVID-19 related need.
Over the next few weeks, the NRC IRAP will partner with Innovative Solutions Canada to launch calls for proposals to address challenges, fund development of solutions, and buy successful products and services that are needed to address COVID-19.
Small and medium-sized businesses with promising technology designed to meet a COVID-19 need can register their technology or product here.
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© 2020 Blake, Cassels & Graydon LLP.
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