Prime Minister Justin Trudeau has announced additional measures will be introduced to help more businesses keep their workers on the payroll as Canada continues to weather the COVID-19 pandemic.
On Friday, May 8, the Prime Minister announced the Canada Emergency Wage Subsidy (“CEWS”) will be extended beyond its previously announced end date of June 6. More details on this extension are expected to be released soon.
Today, the Prime Minister announced the Federal Government will offer support to large and medium-sized businesses affected by COVID-19 as part of the Government of Canada’s COVID-19 Economic Response Plan (the “Plan”). The new components of the Plan for large and medium-size businesses are as follows:
1. The Large Employer Emergency Financing Facility (“LEEFF”)
The LEEFF aims to provide bridge financing to Canada’s largest employers, whose needs during the COVID-19 crisis are not met through conventional financing, in order to help them continue their operations. The goal of the LEEFF is not to provide loans to businesses who do not need it. Instead, the LEEFF is designed to help protect Canadian jobs, help Canadian businesses withstand the current economic downturn, and prevent bankruptcies, if possible. The LEEFF cannot be used to resolve insolvencies or restructure large businesses. It will also not be used to provide financing to companies that can otherwise survive this crisis on their own.
The following key guiding principles will be used in providing support through the LEEFF:
- Protecting taxpayers and workers:
- businesses who seek the support of the LEEFF must demonstrate how they intend to preserve their worker’s employment and maintain their investment activities;
- LEEFF recipients must commit to respect collective bargaining agreements and protect workers’ pensions;
the LEEFF program will require strict limits to dividends, share buy-backs, and executive pay;
when considering a company’s eligibility for the LEEFF, an assessment of its employment, tax, and economic activity in Canada, as well as its international organizational structure and financing agreements, may be required;
the LEEFF program will not be available to companies that have been convicted of tax evasion; and,
companies receiving the LEEFF will be required to commit to publish annual climate-related disclosure reports consistent with the Financial Stability Board’s Task Force on Climate-related Financial Disclosures, including how their future operations will support environmental sustainability and national climate goals.
- Fairness: in order to provide support across the Canadian economy, the LEEFF is intended to be applicable to all eligible sectors in all regions of the nation in a consistent manner.
- Timeliness: to ensure timely support, the LEEFF program will apply a standard set of economic terms and conditions.
Support via the LEEFF will be administered by the Canada Development Investment Corporation, in cooperation with Innovation, Science and Economic Development Canada and the Department of Finance.
The LEEFF’s full eligibility criteria are not available at this time. However, it has been announced that the LEEFF will be open to large for-profit businesses – expect those in the financial sector – and certain not-for-profit businesses, such as airports, with annual revenues of $300 million or higher. It has also been announced that to qualify for LEEFF support, eligible businesses must be seeking financing of $60 million or more, have significant operations or workforce in Canada, and not be involved in active insolvency proceedings.
2. Expansion of the Business Credit Availability Program ("BCAP")
The BCAP was established to provide additional support to small businesses through the Business Development Bank of Canada (BDC) and Export Development Canada (EDC). The BDC and EDC work with private sector lenders to coordinate on credit solutions for individuals businesses, including in sectors such as oil and gas, air transportation, exports and tourism. The BCAP program includes loan guarantees and co-lending programs.
Today, it was announced the BCAP will be expanded to mid-sized companies who have larger financing needs. Support for mid-market businesses will include loans of up to $60 million per company, and guarantees of up to $80 million. The BDC and the EDC will work with private sector lenders to provide support for Canadian businesses in all sectors and regions.
Our firm will continue to provide you with updates as the Federal Government’s response to the COVID-19 pandemic evolves.
The foregoing is for informational purposes only and should in no way be relied upon as legal advice. For legal advice tailored to your circumstances and business, please contact any of SOM LLP’s lawyers by email or telephone.