COVID-19 is Ruining my Business – What Do I Do?
Though these are challenging times for business owners, Pushor Mitchell’s lawyers are here to help. We strive to offer you suggestions and practical legal advice to keep you on track.
If you own a business, you may be facing numerous challenges such as bills coming in: rent, utilities, property taxes, and invoices from suppliers all coming due. Your clients may have dried up and your receivables are starting to stack up.
You may be dealing with other shareholders or directors who are on self-isolation or worse, perhaps they are stuck outside of the country or have symptoms and are focussing on their own health.
You are likely taking on more responsibility as you have had to lay off staff or have staff who are tied up dealing with their children. You might be struggling to find the time to look your after own children while working and all of a sudden finding yourself in the role of a teacher as well. All while working on a laptop on top of boxes set up in your makeshift office in the hallway while trying to focus on both the health of your business and the health of your family at the same time.
Pushor Mitchell’s lawyers are here to work with you and help you navigate through these issues. Some of the areas where we can help are set out below.
If you have multiple shareholders and directors, you will want to review your company’s Articles as well as the BC Business Corporations Act (if you are a BC corporation). Are you permitted to conduct virtual meetings with the other directors? You certainly still want to ensure that you are complying with all of your corporate governance requirements. If you are permitted to hold virtual directors’ meetings, go ahead and do so. If you are not permitted by your Articles, a workaround is to request all directors sign consent resolutions which, if drafted properly, can be signed in counterparts and all emailed to one person to collate and keep organized. If not already permitted, if may also be appropriate to designate one director to sign alone for certain items including business contracts or amendments to them at this time to make sure the daily running of the business is more efficient and you do not get bogged down trying to track down people. You also want to make sure that you are keeping in touch on a regular basis with your fellow directors, shareholders and other stakeholders to discuss potential issues that may arise. Communication will be key to getting you through this.
This is also a great time to dust off your Shareholders’ Agreement (if you have one – if you do not, it would be a good time to consider putting one in place) and see what impact it has. For some business owners, this is a time where a partner or shareholder decides to take the plunge and retire as they have been considering for a while. In that case, what provisions does the Shareholders’ Agreement have in terms of an exit strategy. Do you want to buy out your partner? Does the Shareholders’ Agreement set the price at fair market value or something else? Is there a third party waiting in the wings, interested in purchasing all or a part of your business thinking they will obtain good value at this time? That could be a very positive thing. You may gain a great new shareholder/business partner who can add value and help you through this challenging time and set your company up for further success when the economy heats up.
Though the times are tough and strange, you still want to make sure to take the steps to get proper legal and accounting advice before entering into any transactions or changes to the business structure. Just like in calmer times, you could be walking into a minefield of tax and liability issues without proper advice.
Covering Your Bills
This is one of the biggest challenges to businesses of all sizes right now. Again, there are some solutions. You may want to consider seeing if you can defer certain payments. Some lenders are willing to let you defer mortgage payments. Some landlords are willing to let you defer rent payments for a while. You may incur penalties or additional costs in the long run, but you do need to maintain your cashflow capabilities and some additional costs in the long run may be well worth it. You will want to take a holistic look at all potential liabilities and determine where you need to prioritize payments. Which ones can be deferred? Which ones must be paid immediately? Pull out your business contracts, loan agreements, security documents and take a look at what you have agreed to in the past. Only once you fully understand your current situation will you have the tools to negotiate changes.
Pushor Mitchell can assist with drafting rental deferral agreements if you are able to negotiate a deferral or additional security documents if you find a willing lender. Do you have access to an operating line of credit that you can draw on in the short term? The situation is evolving daily and between the federal and provincial governments, there are programs being put in place and many lenders are able to assist. The Government of Canada has set up the Business Credit Availability Program where loans are available through the Business Development Bank of Canada and Export Development Canada to small and medium sized businesses.
For details on some of the issues you may be facing regarding employees and the potential for layoffs, please see our article on Layoffs, Working Remotely and School Closures as a Result of COVID-19 here. From the perspective of managing your business, it is challenging to balance the concerns of current cashflow and employees are often a huge expense. It is not generally reasonable to pay employees when you do not have enough work for them. However, there can be challenges if you let too may people go now as you may be too short staffed when things heat up again. This is of particular concern where you have employees with specialised knowledge or skill that are hard to replace. There are no easy answers here and each business owner needs to evaluate this on a case by case basis. In some cases, that means re-evaluating daily as the current situation is evolving quickly. As of Friday, March 27, the Government of Canada announced a wage subsidy program covering up to 75% of wages for up to 3 months to help business owners maintain employees through this crisis. Details are still coming in on this program and as of now we know that it will be available to any business that has seen their revenues fall by at least 30% year over year in March due to COVID-19. The subsidy will apply to annual employee salaries up to $58,700 for a maximum weekly subsidy of $847. The wage subsidy is available retroactively to March 15, 2020.
At the end of the day, remember that you are not alone. Pushor Mitchell and other professionals are here to advise. Reach out to your team and we will help you through this.
Paul Tonita is a solicitor practicing in the areas of business law, real estate, estate planning and estate administration. His business experience includes assisting clients right from the beginning by discussing the different business structures, incorporating, buying and selling businesses, assisting with lending or financing needs, drafting and advising on contracts, and providing general advice to business owners.
His real estate practice involves assisting both residential and commercial clients with purchases, sales, financing and leasing.
Paul also helps clients plan for their future with estate and incapacity planning. He guides executors through the legal challenges that are unknown to many when they agree to take on the executor’s role. This may involve determining whether a grant of probate is required and applying for one if necessary, calling in assets, paying out debts, transferring real estate to surviving joint tenants and determining whether additional steps may be required in order to wind up an estate and transfer the balance of assets to the deceased’s beneficiaries.
For more information please contact Paul Tonita at 250-869-1126 (direct line) or email him at email@example.com.