COVID-19: Small Business Relief

Bryan & Company has long been committed to providing exceptional service to business owners in Western Canada. In response to a number of inquiries received since the onset of the current COVID-19 pandemic, this memorandum is intended to provide distilled information that can be used at a glance to inform yourself and your business of available relief measures and programs.

As this is not client-specific, this document is merely informational and not legal advice. It is intended to serve only as a guideline in creating your business continuity strategy for what has quickly become one of the more turbulent economic times that our region has faced. We encourage you to contact our office and seek specific legal advice prior to implementing any of these, or other, measures.

Canada Emergency Wage Subsidy 

On November 19^th, 2020, Bill C-9, An Act to amend the Income Tax Act (Canada Emergency Rent Subsidy and Canada Emergency Wage Subsidy) received royal assent, implementing further changes to eligibility criteria and subsidy levels under the previously announced Canada Emergency Wage Subsidy program, as since amended from time to time (“CEWS 1.0”). Our previous commentary on CEWS 1.0 can be found here. What follows is a brief summary of material changes implemented since the original rollout of that program. The culmination of those changes results in a subsidy program that is colloquially referred to as ‘CEWS 2.0’:

1) Structure Eligibility

Trusts have now been confirmed as eligible entities. In addition, otherwise eligible entities who use a payroll services provider (and thus do not have their own payroll number) are now also eligible for the program.

2) Revenue Decrease Eligibility

CEWS 2.0 introduces a sliding scale approach to subsidy entitlement, as opposed to the all-or-nothing nature of the previous regime. There are now two stackable categories of subsidies:

• If your revenue has declined in any fashion as compared to the applicable reference period, you will be eligible for some amount of base subsidy (the “Base Subsidy”).
• If your revenue has declined by more than 50%, you will be eligible for the maximum amount of Base Subsidy, as well as an additional top-up up amount (the “Top-Up”).

The rational for this new approach appears to be maximizing the availability of subsidies to employers hit the hardest by revenue decline (i.e. over 50% decline). The introduction of the Base Subsidy and Top-Up as well as the overall extension of the subsidy program necessitate new reference periods:

*Subsequent claim periods may be created by Regulation until June 30, 2021, with Parliamentary approval.

Employers maintain the ability to compare qualifying revenue to either (a) the same month during 2019 (the “Normal” method), or (b) ½ of their qualifying revenue during January 2020 and February 2020 combined (the “Alternative” method) to determine their eligibility for the Base Subsidy. If an employer elects to apply based on the Alternative method for any one of the new Claiming Periods, it is required to use the same process for all other Claiming Periods. The Alternative Method, if used, will also determine the comparator for determination of any Top-Up amounts employers are entitled to. Note the change in Top-Up calculation between Claim Periods 7 and 8 in the above table.

Interestingly, CEWS 1.0 required that any business not being carried on as of March 1^st, 2019, use the Alternative method. CEWS 2.0 does not have the same requirement – notwithstanding the fact that a business began operations after March 1^st, 2019, it can now choose to apply for Base Subsidy pursuant to the Normal method.

3) Eligible Employees 

From Claim Period 5 onwards, CEWS 2.0 removes the gating restriction that employees without remuneration for 14 consecutive days during a Claim Period could not give rise to subsidy entitlement. In other words, employers should now be less concerned about hiring new employees or bringing back workers they have previously laid-off. In addition, CEWS 2.0 relaxes the “in Canada” requirement for otherwise eligible employees. Employees can now qualify if they are employed “primarily” in Canada throughout the portion of a Claim Period for which they were employed.

4) Subsidy Amount

Where an employer’s revenue has declined by less than 50% as compared to the relevant reference period, they will be entitled to a Base Subsidy amount only. Where the revenue decline is greater than 50%, the employer will be entitled to both Base Subsidy and Top-Up:

*Claim Periods 5&6 are ‘Safe Harbour’ periods, meaning you cannot receive less subsidy than you would have been entitled to under CEWS 1.0.

Canada Emergency Business Account (CEBA)

On Friday, March 27^th, 2020, the Federal Government announced that they will provide financial aid to eligible financial institutions to facilitate lending to small and medium sized enterprises, and not-for-profit organizations. These loans areinterest free and were initially up to a maximum of $40,000 in principal.  As of December 4^th, 2020, the maximum principal amount is now $60,000.  Businesses or not-for-profits that originally applied for the previous maximum of $40,000 can now apply to ‘top-up’ their loan amounts an additional $20,000.  Repaying the balance of the loan on or before December 31, 2022 will result in loan forgiveness of 33 percent of the principal, up to $20,000.

As of October 26^th, 2020, eligible Canadian businesses that operate through a personal bank account can also apply for CEBA. Full CEBA eligibility requirements can be found here.

Canada Emergency Rent Subsidy (CERS)

The Federal Government has now introduced successor legislation to the Canada Emergency Commercial Rent Assistance program, which was previously administered by Canada Mortgage and Housing Corporation. CERS is designed as a tax subsidy, and therefore does not require landlord participation. CERS is intended to apply retroactively back to September 27, 2020, and it would last until June 2021. In the legislation’s current iteration, businesses would be eligible to receive a base rent subsidy up to 65% if their revenue has dropped by 70% or more.  There are also lesser subsidies for businesses whose revenue decline do not meet the thresholds.

CERS applies to eligible expenses which must be paid under agreements in writing entered into before October 9, 2020.   Expenses are capped at $75,000 per location for each qualifying period, with an overall cap of $300,000 that is shared among affiliated entities. Entities eligible for the subsidy include individuals, taxable corporations, trusts, non-profit organizations, and registered charities. Revenue calculations are completed using the same methods as CEWS 2.0.

Full CERS eligibility requirements can be found here and our more extensive summary of eligibility and benefit requirements can be found here.

Canada Emergency Response Benefit (CERB)

The CERB program ended on October 3, 2020, and retroactive applications closed on December 2, 2020.  In order to replace the coverage of CERB, the Canadian government has implemented a new range of Employment Insurance (EI) benefits.  These benefits are available from September 27, 2020 to September 25, 2021:

Canada Recovery Benefit (CRB)

A $500 per week (taxable) benefit paid every two weeks (for up to 26 weeks) for workers who have stopped working and are not eligible for EI, or if they have lost at least 50% of their income due to COVID-19.

• More information can be found here.

Canada Recovery Caregiving Benefit (CRCB)

A $500 per week (taxable) benefit per household paid every week (for up to 26 weeks) for workers unable to work for at least 50% of the week because they must care for a child under the age of 12 or a family member for COVID-19 related reasons.

• More information can be found here.

Canada Recovery Sickness Benefit (CRSB)

A $500 per week (taxable) benefit per individual paid every week (for up to 2 weeks) for workers unable to work for at least 50% of the week due to personally contracting COVID-19 or self-isolating due to COVID-19.

• More information can be found here.

The CRB, CRCB, and CRSB programs are all open and accepting applications on the Government of Canada website.

These are only some of the various business relief measures being instituted by our Federal and Provincial Government. For  more information on these topics or  any other  matters  please contact one of the below lawyers from Bryan & Company LLP  or access our Corporate Law group here and it would be our pleasure to assist.