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CANADA EMERGENCY WAGE SUBSIDY: HELPING YOUR COVID-19 BUSINESS RECOVERY

The Ira Smith Team is absolutely operational and Ira, in addition to Brandon Smith, is readily available for a telephone consultation or video meeting.

Stay healthy, well balanced and safe and secure everyone.

Introduction

Statistics Canada says the annual cost of living rate went negative in April as the economy came to a standstill in the very first full month of the pandemic. The agency says the consumer price index for April fell 0.2 percent compared with a year ago as energy rates did a nosedive. It was the very first year-over-year decline in the CPI since September 2009. As a result, on May 15, Prime Minister Justin Trudeau announced some amendments to existing Federal government support programs, including the Canada Emergency Wage Subsidy program, to help during this COVID-19 pandemic.

Millions of Canadians have actually lost their jobs due to the COVID-19 pandemic. As our economic recovery gradually begins, any place feasible to do so securely, Canadians need to return to work. Businesses opening up again safely will bring life back into the Canadian economic climate. That is exactly why the federal government generated the Canada Emergency Wage Subsidy (CEWS) (initially called the Canada Emergency Response Benefit) in March.

Canada Emergency Wage Subsidy extended

I have previously written about the federal government assistance programs to help both workers and employers. The overall umbrella name for all the programs is the COVID-19 Economic Response Plan. When the CEWS program was launched, critics quickly pointed out that it did not cover all types of businesses. They also wondered if the original program, scheduled to end June 30, was long enough to really help the economy.

On May 15, PM Trudeau introduced amendments to the program to help businesses get ready for reopening. These companies need to be able to rehire workers and with any luck perhaps hire even more than they had when the state of an emergency shutdown was declared. So, the CEWS is extended for 3 extra months to August 29. The CEWS covers 75% of an employee’s salaries– up to $847 per week – for eligible employers. For those able to additionally benefit from the Temporary 10% Wage Subsidy for a period, any credits taken under that program for a pay period will decrease the amount available to be claimed under the CEWS for that exact same time period.

The 1 part of your business your customers are most worried about

So businesses currently have some runway to get restarted. This is a good thing as businesses will certainly need funding to reactivate. Specific businesses might need a few extra staff members than they had before the shutdown. I just read this morning an article about what restaurants and other businesses may have to do to make customers feel at ease about returning.

The one area of the business that people might fear is the washroom. The article raises the following questions that should be answered before reopening:

  • How many people can be in there at one time?
  • Is every other urinal in the men’s room going to have to be sealed off?
  • Are the barriers between stalls and urinals sufficient?
  • Do the sinks have automatic taps or will patrons have to use the handles to turn on the water?

So a new job category that really hasn’t been seen much since the early 1960s might just come back – the washroom attendant. The business will have to make sure they can prove to their customers and clients that the washrooms are being cleaned on a very regular basis. Someone will have to make sure that there are only a limited number of people in a washroom at one time so that social distancing can be maintained. This could lead to new jobs!

Other amendments to the CEWS

The CEWS will ideally keep encouraging companies to rehire staff and even broaden where possible. The federal government has actually pledged, for moving forward, that it will work with company and labour stakeholders on any other changes that might be required.

Among the important things, they will certainly be looking at the 30% income drop limit for eligibility. As companies start-up, satisfying that revenue test should not be an obstacle to growth. Although all businesses require aid, certain ones could not fulfill the revenue decline test. There are two main factors. The revenue decline examination is on a monthly basis. Considering that the first half of March businesses were operating normally, many could not meet the test for that month. Startup companies probably couldn’t either.

Other businesses did not qualify not because of the revenue decline test, but because their business did not meet the original definition. So, Justin Trudeau announced broadened eligibility for the CEWS benefit. Previously, only corporations and charitable organizations were eligible employers for this wage subsidy benefit. Now the list has been expanded.

The eligible employer list has now been expanded and includes:

  • individuals (including trusts)
  • taxable corporations
  • persons that are exempt from corporate tax (Part I of the Income Tax Act), other than public institutions:
  • non-profit organizations
  • agricultural organizations
  • boards of trade
  • chambers of commerce
  • non-profit corporations for scientific research and experimental development
  • labour organizations or societies
  • benevolent or fraternal benefit societies or orders
  • registered charities
  • partnerships consisting of eligible employers

Public institutions continue to not be eligible for the subsidy. This includes municipalities and local governments, Crown corporations, public universities, colleges, schools and hospitals.

Canadian Emergency Business Account (CEBA)

In my April 13 blog, COVID 19 BUSINESS SUPPORT: CANADA EMERGENCY BUSINESS ACCOUNT REVIEW, I described the CEBA in detail, as the program then existed. On May 15, at the same time, he was announcing the extension and changes to the CEWS, PM Trudeau also announced an expansion of the CEBA program. The expansion is meant to include an important part of the Canadian economy that was previously excluded. I think the exclusion was inadvertent, in the government’s rush to get the program out. So Justin Trudeau announced that the CEBA program will also now include:

  • Sole proprietorships/partnerships.
  • Any other form of owner-operated businesses.
  • Businesses that hire contractors but not employees, so they do not have a payroll account with the Canada Revenue Agency.
  • Family-owned businesses where remuneration is paid via dividends, not salary.
  • Businesses where the proprietor uses a personal bank account for business purposes rather than a business operating account.
  • Newly created businesses.

This should go a long way to removing previous inequities in the CEBA program.

So now, the list of ineligible businesses is relatively narrow, being:

  • A government organization or body, or an entity owned by a government organization or body.
  • A union, charitable, religious or fraternal organization or an entity owned by such an organization or if it is, it is a registered T2 or T3010 corporation that generates a portion of its revenue from the sales of goods or services.
  • A business owned by any Federal Member of Parliament or Senator.
  • One that promotes violence, incites hatred or discriminates on the basis of sex, gender identity or expression, sexual orientation, colour, race, ethnic or national origin, religion, age, or mental or physical disability, contrary to applicable laws.

Summary

I hope you found this Canada Emergency Wage Subsidy Brandon’s Blog helpful. It should be of particular interest to contractors, developers and builders in Ontario.

The Ira Smith Team family hopes that you and your family members are remaining secure, healthy and well-balanced. Our hearts go out to every person that has been affected either via misfortune or inconvenience.

We all must help each other to stop the spread of the coronavirus. Social distancing and self-quarantining are sacrifices that are not optional. Families are literally separated from each other. We look forward to the time when life can return to something near to typical and we can all be together once again.

Ira Smith Trustee & Receiver Inc. has constantly used clean, safe and secure ways in our professional firm and we continue to do so.

Revenue and cash flow shortages are critical issues facing entrepreneurs and their companies and businesses. This is especially true these days.

If anyone needs our assistance, or you just need some answers for questions that are bothering you, feel confident that Ira or Brandon can still assist you. Telephone consultations and/or virtual conferences are readily available for anyone feeling the need to discuss their personal or company situation.

The Ira Smith Team is absolutely operational and Ira, in addition to Brandon Smith, is readily available for a telephone consultation or video meeting.

Stay healthy, well balanced and safe and secure everyone.canada emergency wage subsidy

 

Categories
Brandon Blog Post

MY 13 BEST HOW TO SAVE MONEY IN CANADA PANDEMIC HACKS YOU NEED TO KNOW

how to save money in canadaThe Ira Smith Team is absolutely operational and Ira, in addition to Brandon Smith, is readily available for a telephone consultation or video meeting.

Stay healthy, well balanced and safe and secure everyone.

Introduction

It has now been two months since the COVID-19 pandemic state of emergency. I have spoken to many people who have contacted me about either their personal financial situation or their business financial condition. For entrepreneur’s it is both as their business and personal lives’ are totally intertwined and interdependent. In Brandon’s Blog, I provide my 5 best how to save money in Canada pandemic hacks. These tips answer the most frequently asked questions I have encountered.

Everyone has questions about their money. There is so much uncertainty. People want to know what to do. It’s such an unprecedented time in Canadian history and the economy for everyone. It is worrisome for everyone when considering their finances. Everyone is worrying about everyday household expenses, their budgets and their wallets.

It’s so stressful for so many people. Of course, a lot of people have already lost some or all of their income and even people who haven’t are worried that they’re going to.

So across the board, people have a lot of anxiety.

Hack #1 – Cut back on spending and control what you can

Thankfully, by staying at home, it makes it easy to scale back on our spending. DO NOT use online shopping as a new hobby or just something to do because you are bored. Brighten your spirits right now by knowing that your spending has lowered because we are not leaving our house. There is a lot of spending that has naturally dropped. Things like restaurants and gas spending. Admittedly, if you own a restaurant or gas station, this will not lift your spirits.

Even if you used to buy lunch going to work all of that has stopped. So, if you are one of the lucky ones to still be working and have all or most of your income, that means that you have a chance to put money into savings instead of spending. You obviously know that you cannot live through a lockdown without groceries. However, I am sure that you know many ways how to save money in Canada on groceries.

That helps control what we can, which is building up emergency savings funds and protecting ourselves because really no one knows what’s going to happen. This will help so many people reduce their stress levels.

Hack #2 – Getting income for the unemployed

I want to talk about the unemployed right now. Those who have lost their jobs are the most devastated. The Statistics Canada April 2020 Labour Force Survey tells us how bad things are.

After a drop of over 1 million in March, employment fell by almost 2 million in April, bringing the complete jobs decrease since the beginning of the COVID-19 shutdown to over 3 million.

The variety of people who worked less than half of their normal hours for factors related to COVID-19 raised by 2.5 million from February to April. As of the week of April 12, the advancing result of the COVID-19 economic closure, the number of Canadians that were either not working or working considerably minimized hours, was 5.5 million

In April, both full-time (-1,472,000; -9.7%) as well as part-time (-522,000; -17.1%) employment dropped. Job loss since February amounted to 1,946,000 (-12.5%) in full-time jobs and 1,059,000 (-29.6%) in part-time work.

The magnitude of the decrease in work since February (-15.7%) surpasses decreases observed in the previous labour market slumps by a wide margin. As an example, Stats Canada reports that the 1981-1982 recession resulted in an employment decrease of 612,000 (-5.4%) over roughly 17 months.

The April jobless rate would be 17.8% when counting certain groups who were not counted as jobless for reasons specific to the COVID-19 financial shutdown. During the week of April 12, 1.1 million people were not in the workforce however had been working just recently (in March or April) and wished to continue working. They were not counted as out of work yet were counted as not in the workforce because they did not search for work, probably because of recurring business closures and also very limited chances to find brand-new work.

If you are someone who recently lost your job you have no income, the traditional personal finance rules have just gone out the window because we’re in crisis mode right now. A lot of people just have to do what they can to get food for their families.

For the unemployed, it is more about getting income. Without income, you have no cash. You have to try to figure out how to save money fast! For income right now, the reality is that you need to look at the government assistance programs. Canada’s COVID-19 Economic Response Plan includes:

  1. Streamlining of access to Employment Insurance.
  2. Temporary wage top-up for low-income essential workers.
  3. Increasing the Canada Child Benefit.
  4. Special Goods and Services Tax credit payment.
  5. Extra time to file income tax returns
  6. Mortgage payment deferral.
  7. Canada Emergency Response Benefit (CERB).

Hack #3 – How to save money in Canada right now – Use your telephone to defer debt payments

Right now it’s all about prioritizing. One of the first priorities is the basic needs that you and your family have. So many have to choose between buying groceries, paying for your housing, your rent or your mortgage, and the credit card bills. If you absolutely cannot make your rent or mortgage payment, or your credit card payment, your first call should be to your landlord, your Bank/mortgagee and/or the credit card company.

They all understand what people are going through because of the coronavirus pandemic. They see it in their business daily. There are some options right now. Some companies because this is such a unique time are offering different flexible programs. They are allowing you to pay to defer and pay later. Some are freezing things and are waiving late fees and penalties. While it is true that later it may be tough to come up with payment for both the arrears and your then-current payment, these are unprecedented emergency times. Right now, you can only worry about now. There will be lots of time later to figure things out. You have to survive right now in order to have a chance of being successful later.

Do you really want to make the call first if you know that you can’t pay? Definitely yes. Don’t force your creditors to hunt you down. It is better to be open, forthright, honest and caring. Let your landlord, mortgagee, credit card company know that you understand they are expecting money from you. Tell them what is happening right now to you and your family because of the shutdown. Feel confident. The courts are closed right now and in Ontario, residential evictions cannot take place because the Landlord and Tenant Board is also shut down. So don’t feel you are in a position of weakness. Your creditors are right now as helpless as you are.

Hack #4 – Relax, the old rules don’t really matter right now

Feel comfortable relaxing some of the old rules that we normally live by. For example, usually, we tried not to run up spending on our credit cards. A general rule of thumb is to keep your overall spending below 30% of your total spending limit on your credit cards. Well, that kind of rule really goes out the window at a time like this when you have to make sure you have the food and the other basic necessities for you and your family covered off.

People who are unemployed and have no income right now need to use those credit cards to make sure they are keeping up with those basic necessary expenses. You need to know that you can have those basics right now. So it’s a matter of faith in protecting your family versus running up credit card bills. There is no choice, so you need to relax and do what you need to do. Just worry about how to save money in Canada. Again, if you cannot survive today, there will be no tomorrow.

Hack #5 – Forget about your credit score

It is human nature to always worry about your credit score. Every insolvent person I meet worries more about the impact of the debt settlement plan I recommend on their credit score than on the plan itself! If you need to run up your credit card purchases to buy those necessities and know you cannot pay for it right now, you have no choice.

You can worry about rebuilding your credit score later. Start rebuilding your credit and paying off debt after this crisis passes. We are at a really unique time where we need to draw on whatever resource it is that we have. So if you have the credit, if you have the ability to access something like a credit card, now is the time to take advantage of that.

Instead, focus on how to save money each month.

Hack #6 – Retirement savings

Some people are lucky enough to both still have your full-time employment and you have a company-sponsored pension plan. For them, income and retirement savings continue as normal. But unfortunately, they are not the majority.

If you do not have any job income right now, you are worried about the here and now. You are worried about contributing to your RRSP or TFSA. If you regularly contribute to your RRSP and/or TFSA and you still have your income, you need to make sure that you first cover off saving for your cash emergency fund. After that, do some budgeting and cash flow analysis to see if it makes sense right now for you to keep contributing to your retirement savings plan. If you can, you are one of the lucky ones.

People who have retirement savings are asking if they should dip into those right now just to get through this crisis period. Unfortunately, right now, the Federal government has not implemented a plan to allow Canadians to withdraw from their RRSP on a tax-free basis. So, the normal taxation rules apply. The Canadian government already has models as to how such a plan can work; think Home Buyers’ Plan and Lifelong Learning Plan. So far this model has not been implemented for RRSP.

So, if you have to dip into your retirement savings and you have a TFSA, that is the preferred retirement saving source. You will need to understand how withdrawals and later deposits work for a TFSA. But for now, that source of cash is tax-free. You can withdraw your cash any time you want it from a TFSA. You do not lose the contribution room when you make a withdrawal. You can recontribute that total to your TFSA the next year or any year after that.

Hack # 7 – Emergency cash savings fund

What is this moment like for you? Should you be saving more? Should you be keeping your expenses where they are? Even people who still have their income, who haven’t seen any major change to their finances are so worried and anxious about what may come

Maybe their job will soon disappear. Will companies need all the people they still have when we get to the “new normal”. That’s a huge worry on people’s shoulders. So now it is a really good time to shore up your emergency savings.

I always recommend people have between 3 to 6 months’ worth of expenses saved away. I know that most Canadians don’t. Many have not even tried. Right now is where the rubber is meeting the road. Those who have an emergency savings account are still worrying, but at least they know by being prudent, they can weather this for some time.

If you still have income, 3 to 6 months sounds might seem daunting and pretty impossible. It is starting to have a proper attitude and behaviour that is more important right now than the actual amount. You can start with something much smaller. Try putting aways $500 in the next month for emergency savings. At least you know that if you need it if suddenly your income reduces or disappears, you have a little bit of a cushion to help you get through that time.

So try to increase some of those emergency savings. Put away whatever you can because we don’t know what’s coming next right? There’s a lot of uncertainty about what’s ahead. Perhaps you can come up with some creative ways to save money.

Hack #8 – Your stocks

I am not a financial planner to those who have investments in the stock market. However, someone recently did ask me a question about their stock portfolio while talking about their debt problems!! I did eventually ask them the obvious question which is why they have not sold stocks in order to pay off their debts. Their answer was because, until the state of emergency, they had capital gains and didn’t want to have to pay tax. So instead, they have been struggling and worrying.

Now, they don’t have capital gains, they have capital losses. Now they want to know should they sell their stocks to pay down a portion of their debt? They wanted to know how they should look at it?

I asked him 3 questions:

  1. If you sold off all your stocks now, what percentage of your debt would the net proceeds pay down? 100% or less?
  2. Did you invest in the long term and your retirement in solid dividend-paying stocks or are they in speculative investments where you are banking on big price gains?
  3. How old are you?

If you sold off all of your stocks and it would only pay off 50% of your debts, then you still probably have a large debt problem and now no savings. As I mentioned above, now is the time that your creditors understand your predicament and are willing to cut you some slack. They are not asking if you have stocks or bonds you can liquidate!

If you can pay down your debt to a manageable level, or 100% from liquidating your stock portfolio, then, that is probably the thing you should do. Your rate of return will be the average weighted interest rate all of your debts are clicking away at. This is a very high return on things like credit card debt.

The last thing any of us can do is time the market. So, in these uncertain times, I told him we have to take a more holistic view. If you are middle-aged or close to retirement and you invested in solid dividend-paying companies, I recommend sticking with your current strategy whatever that is. You have a target date for your retirement accounts. Don’t mess with that.

If you are younger, then you have time to recover. That is not the case if you are nearing retirement.

.Hack #9 – Don’t make any big purchase decisions

What about big purchases? That’s another question I hear a lot from folks looking at the low-interest rates. They are thinking that a good way to show how to save money in Canada is making a big purchase now financed with extraordinarily low-interest rates. They are thinking it is actually a good time to move forward on it. Seeing 0% interest rates for 100% financing for that new car you were thinking about is enticing.

Do others think it is a terrible time to move forward to buy a house or refinance because of the uncertainty? It can be really hard to make such a decision for some people.

For me, it is a very easy decision. What I tell people is that unless your car is conked out and is sitting on the side of the road, don’t even think about a major purchase right now. Unless your mortgage has come up naturally for renewal, don’t worry about refinancing. The refi costs may not be worth the effort.

We are only in phase 1 of this terrible economy. We are in survival mode right now. It will take years for the economy to recover. These low-interest rates don’t have an expiry date on them. There will be lots of advance notice before they arise. Once everything opens up again, businesses are going to need to entice consumers to purchase. Those tantalizing zero and low-interest rates will still be there.

Nail down your family’s financial security now. You can buy it later. You should not have FOMO syndrome! Those who really in the know are sitting on the sidelines waiting for all the car and real estate deals to come along. You should too.

Hack #10 – Is there any advantage to having real cash in your hands these days?

This is not a normal question I get asked, but I have been asked it. Some people are worried that our economy will really go into a tailspin and they wonder if hoarding cash at home is better than money in the bank.

I think in an emergency it’s often our first instinct is to make sure we hoard supplies, like cash on hand. First, it was toilet paper and bleach. Then it was hair dye and electric hair trimmers. You can also include webcams on that list too with everyone preparing for online video meetings.

What I tell people is that this isn’t the 1920’s. Online and mobile banking was normal for many Canadians before this year. Debit cards and phone payment apps were already more popular than cash. Besides, cash can carry all sorts of germs and viruses. True enough, Canadian money can be washed. Paper bills are gone and our bill currency is made out of plastic. But who wants to waste their time laundering money? I mean really washing it, not the kind of laundering we see in crime movies.

So even if you didn’t previously pay through a mobile banking app or online, now people are trying because they don’t want the cash. So, I don’t see any danger in losing the money you have in your bank accounts. You can look at your accounts to make sure you are taking advantage of the ways your bank gives you how to save money in the bank. Therefore, I don’t see any value in hoarding cash in a mattress either.

As banks have cut back on the number of branches they have open, you are going to have to use the ATM. Do you really want to be spending the time going to the bank to touch those buttons right now in the drive-through lane?

Hack #11 – Property taxes

For those who own a home, property taxes are another expense. Luckily, municipalities are helping by offering deferrals. What happens with fees and the interest rate right now. Most municipalities are offering a property tax grace period. They are also offering property tax relief due to loss of income during the state of emergency. You should check with your local municipality to see if you qualify for any programs.

For example, the City of Toronto has such programs. Check them out for how to save money in Toronto on your property taxes.

Hack #12 for students

My May 4 blog is titled CANADA STUDENT LOAN: GET STUDIOUS ON CANADA STUDENT LOANS SUSPENDED. I wrote about what the Federal government is doing to help those with student loans and are planning on returning to their education in the Fall. This includes payment deferral, summer job assistance and help for the next academic year. I also touched upon how to save money in Canada for international students. If this affects you, please review that blog.

Bonus lucky hack #13 for businesses

I have focussed many of my April and May blogs on entrepreneurs and business. Check out my past blogs to find out about various programs for entrepreneurs, like:

Summary

I hope you found this Brandon’s Blog helpful. It should be of particular interest to contractors, developers and builders in Ontario.

The Ira Smith Team family hopes that you and your family members are remaining secure, healthy and well-balanced. Our hearts go out to every person that has been affected either via misfortune or inconvenience.

We all must help each other to stop the spread of the coronavirus. Social distancing and self-quarantining are sacrifices that are not optional. Families are literally separated from each other. We look forward to the time when life can return to something near to typical and we can all be together once again.

Ira Smith Trustee & Receiver Inc. has constantly used clean, safe and secure ways in our professional firm and we continue to do so.

Revenue and cash flow shortages are critical issues facing entrepreneurs and their companies and businesses. This is especially true these days.

If anyone needs our assistance, or you just need some answers for questions that are bothering you, feel confident that Ira or Brandon can still assist you. Telephone consultations and/or virtual conferences are readily available for anyone feeling the need to discuss their personal or company situation.

The Ira Smith Team is absolutely operational and Ira, in addition to Brandon Smith, is readily available for a telephone consultation or video meeting.

Stay healthy, well balanced and safe and secure everyone.

 

Categories
Brandon Blog Post

CANADA REVENUE AGENCY FOR INDIVIDUALS: 4 KILLER WAYS TO FULL LOAN RECOVERY

The Ira Smith Team is absolutely operational and Ira, in addition to Brandon Smith, is readily available for a telephone consultation or video meeting.

Stay healthy, well balanced and safe and secure everyone.

Introduction

On July 4, 2018, my Brandon’s Blog MORTGAGE LENDING CRITERIA SELF EMPLOYED: BIGGEST MYTH MAY BE RIGHT, I described the case of Canada v. Toronto-Dominion Bank, 2018 FC 538 (CanLII) which was heard in Federal Court. I described where the Federal Court ruled in favour of the claim of Canada Revenue Agency for individuals running an unincorporated business either as a proprietorship or in partnerships.

The Bank appealed the decision to the Federal Court of Appeal. The case was heard on October 8, 2019, in Toronto. The judgment was released at Ottawa, Ontario, on April 29, 2020. I want to remind you about the facts of the case, what was decided and provide my 4 killer ways that mortgage lenders to people who also run an unincorporated business, but you don’t lend to the business, can protect themselves.

The original Canada v. Toronto-Dominion Bank case

The original case was very simple. A man had a landscape design business he ran as a sole proprietor. In 2007 and 2008, prior to becoming a customer of the Bank, he collected GST that he did not pay over totalling $67,854.

In 2010, the Bank advanced both a mortgage loan and a home equity line of credit (HELOC) loan to the man. Security for both loans was registered against the man’s home. It was the Bank’s standard from mortgage and HELOC security documents. At the time, the Bank had no knowledge of the man’s Canada Revenue Agency for individuals’ liability for unremitted GST. There was no registration by the government against the man’s home for this outstanding tax amount either.

In late 2011, the man sold the home. His real estate lawyer issued two trust cheques to the Bank from the house sale. One paid off the mortgage and the other cheque paid off the HELOC. In return, the Bank discharged its mortgage and HELOC security charges and the house sale was completed.

In 2013 and 2015, the Canada Revenue Agency made deemed trust claims against the Bank under Section 222 of the Excise Tax Act (ETA) for the amount of the man’s collected and unremitted GST. GST or HST under the ETA and employee source deductions (amounts withheld by employers from salaries and wages paid to employees on account of income tax, the Canada Pension Plan and Employment Insurance) under the Income Tax Act, that is collected but not remitted, forms a deemed trust claim against the assets of the business.

If the business is not a company, that is unincorporated, then there is no difference between the proprietor’s or partner’s personal assets and business assets. They are just assets of the person.

Canada Revenue Agency argued that the Bank was in possession of funds from the sale of the man’s property. The Crown also submitted that when the man sold his home, he was obliged to pay his GST obligation out of the sale proceeds. He did not do that. Rather, he used part of the money from the sale to pay the Bank off. Keep in mind the Bank was a secured creditor. The Crown further argued that under this scenario, the Bank had a statutory responsibility to pay the GST tax debt out of the money it received.

The Bank argued on its behalf that the repayment of the money only applied if there was an event that triggered other events leading to the repayment, such as a secured creditor enforcing its security.

The Federal Court disagreed and ruled in favour of the taxman.

The Canada Revenue Agency for individuals claim to appeal to the Federal Court of Appeal

The Bank appealed the lower Court’s decision. The Bank’s appeal rested on three issues where they claimed that the Federal Court judge erred:

  • By finding that the deemed trust does not need an event that creates the crystallization around the assets.
  • In finding that secured creditors cannot avail themselves of the bona fide purchaser for value defence.
  • Ignored the fact that the Bank’s loans to the man had nothing to do with his business.

The Federal Court of Appeal judges went through a detailed analysis of cases and legislation. In the end, the Federal Court of Appeal did not find that the lower court judge erred in any way and dismissed the Bank’s appeal on all three grounds.

Triggering event – The Bank argued that the concept of priority can only be determined when there is an event that triggers competing claims to the priority over the assets. Since the right to a priority is essentially remedial in nature, it develops upon the enforcement action initiated by one or more creditors. When there is a competition between claimants, and it is obvious there will be a shortfall, that is when the Crown is able to assert its priority. Here, the Bank was not a secured lender at the time the Crown asserted its priority.

The appeal court decided that the lower court was correct. The relevant section of the Excise Tax Act creates a trust when there is unremitted GST or HST where the property is beneficially owned by Her Majesty in spite of any security interest in the property or in the sales proceeds thereof.

So the Bank was unsuccessful in this part of its argument.

Bona fide purchaser for value defence – This argument by the Bank is that it is a bona fide buyer for value of the cash paid to it by the debtor. Because the considered trust fund provisions of the Act do not extend to such buyers for the value the Bank submits that it is entitled to keep the funds provided in payment of the borrower’s HELOC and mortgage.

The appeal court ruled against this argument on the basis that if the bona fide purchaser for value defence was available to secured creditors who got paid off, it would render the deemed trust provision useless in probably every situation. The Court stated this was not Parliament’s intention.

The loans to the man had nothing to do with his business – This argument is that the court should distinguish between the taxpayer acting in his capacity as a business distinct from the tax debtor acting in a personal capacity. Further, it was argued that the Bank had no knowledge of the man’s business affairs.

The Court rejected this argument for two reasons. First, the statute that establishes the deemed trust states “…every person…”. It does not differentiate between different types of persons. Second, there was nothing in the evidence before the lower court that indicated what knowledge the Bank had about the man’s business.

4 killer ways to full loan recovery

So how can someone who lends money by way of a property mortgage on a personal residence of a self-employed person who runs an unincorporated business protect themselves? Here are our 4 killer ways:

  1. The mortgagee needs to ask the question on the mortgage application to determine if the person is self-employed.
  2. The proposed mortgagee must get a true copy of a statement from CRA showing that there are no amounts owing by the person on account of either unremitted HST/GST or source deductions as the employer of others. This condition should be in the term sheet for the loan being offered. The statement should be given before the lender advances the funds.
  3. Lenders should add language to their term sheet, loan and security documents and discharge or other documents issued when the loan is repaid. The new language would be an attestation by the borrower that there are no amounts owing to any government authority that would be regarded to be a deemed trust claim.
  4. Even more, the language would have to make it clear that in the event there were any kind of such claims, even if the mortgage loan was totally repaid, the borrower is still responsible to pay that additional amount to the lender. The lender would then pass on the deemed trust amount to Canada Revenue Agency for individuals.

Summary

I hope you found this CRA deemed trust claim case review helpful. It should be of particular interest to contractors, developers and builders in Ontario.

The Ira Smith Team family hopes that you and your family members are remaining secure, healthy and well-balanced. Our hearts go out to every person that has been affected either via misfortune or inconvenience.

We all must help each other to stop the spread of the coronavirus. Social distancing and self-quarantining are sacrifices that are not optional. Families are literally separated from each other. We look forward to the time when life can return to something near to typical and we can all be together once again.

Ira Smith Trustee & Receiver Inc. has constantly used clean, safe and secure ways in our professional firm and we continue to do so.

Revenue and cash flow shortages are critical issues facing entrepreneurs and their companies and businesses. This is especially true these days.

If anyone needs our assistance, or you just need some answers for questions that are bothering you, feel confident that Ira or Brandon can still assist you. Telephone consultations and/or virtual conferences are readily available for anyone feeling the need to discuss their personal or company situation.

The Ira Smith Team is fully functional and Ira, together with Brandon Smith, is readily available for a telephone or video meeting no-cost strategy session.

Continue to be healthy, well balanced and protected everybody.canada revenue agency for individuals

Categories
Brandon Blog Post

OFFICE SUPERINTENDENT BANKRUPTCY CANADA – COVID-19 AND “THROWBACK THURSDAY”

office superintendent bankruptcy canadaThe Ira Smith Team is absolutely operational and both Ira, as well as Brandon Smith, are right here for a telephone appointment, conference calls and also virtual meetings.

Stay healthy and safe everybody.

If you would rather listen to an audio version of this Brandon’s Blog, please scroll to the bottom and click on the podcast.

Introduction

As issues about COVID-19 in Canada grows, insolvency practitioners are doing their part by having determined it is needed to take steps to reduce in-person contact. The Office Superintendent Bankruptcy Canada has helped Licensed Insolvency Trustees (formerly called bankruptcy trustees) (Trustee) in these initiatives while keeping all aspects of Canada’s insolvency system running.

In my April 29 Brandon’s Blog, CONSUMER PROPOSALS IN ONTARIO TEST POSITIVE FOR COVID-19, I described how the Superintendent of Bankruptcy went to Court in Ontario. They made a motion to have the Court direct how certain procedures would change during the state of emergency lockdown. Part of that will be how the government wants to have Trustees resurrect an old methodology in personal debt settlement plans and corporate restructuring plans not really been used in the last 25 years.

Since then the government has come out with additional information and clarifications on how they see the bankruptcy Canada process continuing to work during the coronavirus shutdown. In Brandon’s Blog, I talk about these issues.

Office Superintendent Bankruptcy Canada approves social distancing

There are many ways that the Office Superintendent Bankruptcy Canada has approved social distancing for Trustees.

Initial free strategy session – Most if not all Trustees will provide a no-cost consultation for a personal or corporate insolvency discussion. In the pre-coronavirus era, most of these were done in a face to face meeting. Trustees can and do use methods aside from in-person assessments. These methods were always reserved for extraordinary circumstances. Boy, are we in one now!

So, the Office Superintendent Bankruptcy Canada has reminded Trustees that the COVID-19 pandemic is such a phenomenal circumstance and Trustees can conduct assessments making use of approaches other than face to face. Where video-conferencing is not viable, assessments may be done using a mix of telephone conversations and e-mail.

Credit counselling in personal debt settlement or bankruptcy cases – Trustees can offer counselling through telephone conversations or videoconference. The government is updating its software to allow for Trustees to file confirmation of credit counselling done this way as before it was not available. I am finding that our “customers” like this way of being able to deal with credit counselling. They don’t need to travel to our office and appreciate that we are still checking in with them.

Meetings of Creditors – The Office Superintendent Bankruptcy Canada is encouraging Trustees as the Chair of the creditors’ meeting to hold the meetings on time using either telephone conference call or video methods. Trustees can rely on the oral representation from everyone on the call as proof of attendance. The notice and legal ad calling the meeting of creditors looks a bit different than we are normally used to seeing because of this change. At the top of this Brandon’s Blog is an image of the legal notice I ran in a local newspaper.

Signatures/Oaths – I am now circulating papers that call for signature by means of e-mail. I then supply debtors the necessary support to explain the papers via videoconference. I then ask the debtor over the Zoom meeting if they swear or affirm that what is in the document is true. When they respond affirmatively, I then ask them to sign in the space provided. I then commission the document on my end, ask them to email me a copy of the signed document and put the original signed paper in the mail to me. So far it has been working smoothly.

Closure of non-essential businesses

The provinces have ordered the closure of non-essential businesses. So far, the businesses of lawyers and accountants have been deemed essential. The Office Superintendent Bankruptcy Canada has confirmed to Trustees that it wants the Canadian insolvency system to continue operating smoothly. So, the Trustee business is considered to fall under these same categories as being essential.

As you are aware, creditors right now seem to be choosing to either explicitly or implicitly forbear on amounts owing to them. They are trying to be supportive of people by recognizing that with reduced or no income, they need some breathing room. Although there are media reports to the contrary, as of now, debtors seem to be getting a break. Trustees are also encouraged to do the same if someone is having trouble making a surplus income payment in their bankruptcy right now. In fact, Trustees will probably be held to a very high standard when their conduct is reviewed by the Court.

In my April 29 Brandon’s Blog, I spoke about the whole issue of a debtor in a consumer proposal who misses three payments. If that happens, the consumer proposal is considered annulled. In this case, the Order the Ontario Court issued essentially gives debtors up to the end of 2020, and in some cases, beyond that date, to make up the missed payments.

COVID-19 insolvency frequently asked questions

There are some frequently asked questions that are coming up. So, I want to give the questions and answers to help people better understand what is going on right now in the Canadian insolvency system.

Q: Do consumer proposal debtors need to make up all missed payments by December 2020?

Response: This was not previously well explained. The answer is No. As much as an extra three monthly payments can be missed between March 13, 2020, and December 31, 2020, before a consumer proposal is considered annulled. Missed payments will need to be made up by the end of the proposal or a modified proposal will certainly need to be authorized by creditors. I am advising debtors to carefully think about whether it is necessary to miss making payments. There is no guarantee that later on, debtors will be able to make up the missed payments. So I am telling debtors that if they can still afford to make the payments, they should. Don’t choose to miss payments you otherwise can afford to. What if you can’t catch up? Do you really want your consumer proposal to be annulled later on after potentially you have paid everything except a few payments? That would be terrible..

Q: If a proposal was deemed annulled before April 27, 2020, when does it need to be revitalized to be covered by the order?

Response: A proposal that is revived by the steps taken under the Bankruptcy and Insolvency Act (BIA) on or prior to June 30, 2020, will certainly be covered by the order.

Q: If three payments were missed on or before April 27, 2020, but the Trustee did not send notices of deemed annulment, does anything require to be done to be covered by the order?

Response: Yes. When three payments prior to April 27, 2020, are missed out on the BIA states that a consumer proposal is regarded annulled despite administrative actions that may or might not have been taken. Thus, where the equivalent of three or even more payments has been missed out on, the consumer proposal will certainly need to be revived according to the BIA on or before June 30, 2020, in order to be active under the order.

Q: Is the duration under which a consumer proposal can be automatically revived likewise extended?

Response: No. The order allows the equivalent of as much as three extra payment defaults or an added three months time during the March 13 to December 31, 2020 timeline, prior to a deemed annulment of a consumer proposal. After this happens, a notice of revival has to still be filed within 30 days of the deemed annulment.

Q: Will the five-year restriction on consumer proposals be lengthened in order to offer debtors the time required to make up the missed out on payments?

Response: The BIA says that a consumer proposal needs to say that it will be completed within 5 years. Consequently, all payments, including missed repayments, have to be made during this same timeline. The only thing that will change that is if an amended proposal is filed and approved. After saying that, the BIA does not offer instant repercussions for defaults that lead to non-performance during this 5 year time period. If a consumer proposal has exceeded the five-year period but has actually not been annulled, it remains in force and therefore, in my view, can be completed.

This assumes no interested party goes to Court to ask for a court-ordered annulment. The Office Superintendent Bankruptcy Canada has formally stated that where hold-up in completion is due to COVID-19 reasons, they will not be seeking an annulment.

Everything old is new again or “Throwback Thursday”

There is one area that has not yet been covered off by the Order obtained by the Office Superintendent Bankruptcy Canada. When a person who does not fit under the $250,000 debt limit of consumer proposals, and for all companies, debt settlement restructuring plans under the BIA are done under Part III Division I Proposal section.

If a restructuring proposal cannot be filed straight away, the BIA allows for the filing of a Notice of Intention To Make A Proposal (NOI). The BIA statute says that unless extended by the Court, a Proposal needs to be filed within 30 days after the filing of the NOI. The Court can extend the timeline for a period not exceeding 45 days for any individual extension. In total, extensions cannot be more than 5 months. So in total, a debtor who has filed an NOI can be operating under the NOI for a maximum of 5 months and 30 days.

The Court has to order the extension prior to the expiry of the earlier time period trying to be extended. But the Courts are currently closed. They are only hearing emergency applications via telephone conference call or videoconference. Are a bunch of businesspeople fighting over money with the debtor asking for more time to file a Proposal an emergency? I can’t answer that right now. So if they can’t get into Court, what is the answer?

The Office Superintendent Bankruptcy Canada has recommended an old method. In the “old days”, before 1992, there was no NOI provision. So what did a person or company who needed more time to formulate and file a Part III Division I Proposal debt settlement plan, but needed to hold off creditors right now, do? They filed what was called a “holding proposal”. A holding proposal is no more than a proposal that says I promise to file a debt settlement plan that will clearly say how I plan to settle my debts either by a certain date or when a specific set of events happen.

The benefit was that the debtor got help from the immediate stay of proceedings. If the debtor could, he, she or it filed an amended proposal at the meeting of creditors which really said how the debts would be settled and then paid. If not, the creditors could consider the issues holding up the filing of the real proposal. If they felt it was in their best interests, they voted in favour to give the debtor the necessary time. If not, they voted it down and the debtor was immediately deemed to have filed an assignment in bankruptcy.

Where the creditors gave the debtor more time under the holding proposal, the Court approved them as long as the requirements the Court had to review were met. It was ultimately the creation of the NOI that was made to make it easier for debtors who were not ready to file a definitive proposal but needed relief from creditors to get it.

So now, the Office Superintendent Bankruptcy Canada is recommending for those cases where you just can’t get into Court, file a holding proposal. I am glad that Ira has kept a copy of a holding proposal in our document template file!!

Summary

I hope you found this case review helpful. It should be of particular interest to contractors, developers and builders in Ontario.

The Ira Smith Team family hopes that you and your family members are remaining secure, healthy and well-balanced. Our hearts go out to every person that has been affected either via misfortune or inconvenience.

We all must help each other to stop the spread of the coronavirus. Social distancing and self-quarantining are sacrifices that are not optional. Families are literally separated from each other. We look forward to the time when life can return to something near to typical and we can all be together once again.

Ira Smith Trustee & Receiver Inc. has constantly used clean, safe and secure ways in our professional firm and we continue to do so.

Revenue and cash flow shortages are critical issues facing entrepreneurs and their companies and businesses. This is especially true these days.

If anyone needs our assistance, or you just need some answers for questions that are bothering you, feel confident that Ira or Brandon can still assist you. Telephone consultations and/or virtual conferences are readily available for anyone feeling the need to discuss their personal or company situation.

Are you now worried just how you or your business are going to survive? Those concerns are obviously on your mind. This pandemic situation has made everyone scared.

The Ira Smith Team understands these concerns. More significantly, we know the requirements of the business owner or the individual that has way too much financial debt. You are trying to manage these difficult financial problems and you are understandably anxious.

It is not your fault you can’t fix this problem on your own. The pandemic has thrown everyone a curveball. We have not been trained to deal with this. You have only been taught the old ways. The old ways do not work anymore. The Ira Smith Team makes use of new contemporary ways to get you out of your debt problems while avoiding bankruptcy. We can get you debt relief now.

We look at your whole circumstance and design a strategy that is as distinct as you are. We take the load off of your shoulders as part of the debt settlement strategy we will draft just for you.

We understand that people facing money problems require a lifeline. That is why we can establish a restructuring procedure for you and end the discomfort you feel.

Call us now for a no-cost consultation. We will listen to the unique issues facing you and provide you with practical and actionable ideas you can implement right away to end the pain points in your life, Starting Over, Starting Now.

The Ira Smith Team is absolutely operational and both Ira, as well as Brandon Smith, are right here for a telephone appointment, conference calls and also virtual meetings.

Stay healthy and safe everybody.

 

Categories
Brandon Blog Post

CONSTRUCTION LIEN ACT: CAN YOU TRUST AN INSOLVENCY PROCEEDING?

The Ira Smith Team is absolutely operational and both Ira, as well as Brandon Smith, are right here for a telephone appointment, conference calls and also virtual meetings.

Stay healthy and safe everybody.

Introduction

Matters involving the Construction Act, R.S.O. 1990, c. C.30 ( formerly known as the Construction Lien Act) is very complex. In this Brandon’s Blog, I will use the term that laypeople are most familiar with, being the former name of the provincial legislation.

Construction law is a specialty unto itself. It gets even more complex when a company involved in construction enters insolvency proceedings. There is normally a conflict in these kinds of files between:

In this Brandon’s Blog, I describe a recent 5 member panel decision of the Court of Appeal for Ontario who had to decide whether a trust created under section 9(1) of the provincial Construction Lien Act survives a sale by the Monitor in an insolvency proceeding under the federal Companies’ Creditors Arrangement Act (CCAA).

The case is Urbancorp Cumberland 2 GP Inc. (Re), 2020 ONCA 197 (Urbancorp). The matter was heard on October 3, 2019. The unanimous decision was recently released on March 11, 2020.

Some background matters

Before getting into the actual case, there are two background matters that I should first explain. When I thought of these concepts and then the decision this way, it made it easier for me to understand.

The first issue is the types of insolvency proceedings. There are essentially four types of insolvency proceedings. Some are not mutually exclusive. Each one of them can be used for the assets of the insolvent debtor to be sold. I break down the insolvency proceedings list in this way:

  1. Using the restructuring provisions of either the Bankruptcy and Insolvency Act (Canada) (BIA) or CCAA.
  2. A bankruptcy administration under the BIA.
  3. A secured creditor taking enforcement proceedings on the assets subject to its security through the security itself by privately appointing a Receiver or Receiver and Manager.
  4. A secured creditor making an application to the Court that it is just or convenient for the Court to appoint a Receiver to act on behalf of all creditors in stabilizing an insolvent debtor situation and to come back to Court with recommendations on how to proceed, including the sale of assets.

The second issue has to do with trust claims under the Construction Lien Act. There are several sections in the legislation dealing with trust claims. As I stated above, it is a very complex topic. So, I am going to only focus on the one that is the subject matter of this case. That is section 9(1) of the Act. That section deals with a trust claim against the vendor of the construction assets. It states:

“9 (1) Where the owner’s interest in a premises is sold by the owner, an amount equal to,

(a) the value of the consideration received by the owner as a result of the sale,

less,

(b) the reasonable expenses arising from the sale and the amount, if any, paid by the vendor to discharge any existing mortgage indebtedness on the premises,

constitutes a trust fund for the benefit of the contractor. R.S.O. 1990, c. C.30, s. 9 (1); 2017, c. 24, s. 9, 70.

Obligations as trustee

(2) The former owner is the trustee of the trust created by subsection (1), and shall not appropriate or convert any part of the trust property to the former owner’s own use or to any use inconsistent with the trust until the contractor is paid all amounts owed to the contractor that relate to the improvement. R.S.O. 1990, c. C.30, s. 9 (2).”

The distinction here that I want you to keep in mind is the words in the very first line “Where the owner’s interest in a premises is sold by the owner…”(emphasis added).

Now for the case.

The Urbancorp Construction Lien Act case

This case deals with Urbancorp and related companies that developed and was building a residential condominium project. Urbancorp was insolvent and filed first a Notice of Intention to Make A Proposal under the BIA. The proceedings were later converted by the Court into proceedings under the CCAA. The insolvency proceeding was in both cases under a Federal restructuring statue. The Court appointed a Monitor to oversee the insolvency administration. Through various Court applications and court orders, the Monitor was given the authority to market and sell the condominium assets. The Monitor did so.

Now the cash the Monitor received from the sale stood in place of the original condominium assets. Subcontractors brought an application before the lower Court claiming they had a valid trust claim under the Construction Lien Act. The lower court judge carefully reviewed the evidence and prior decided cases and came to the conclusion that the subcontractors did not have a valid trust claim against the assets. The subcontractors appealed the lower court’s decision.

In addition to appealing the lower court’s decision, they also raised with the Court of Appeal a constitutional question that comes up many times. The constitutional question is, does federal law always take priority, or trump (with a small “t”!!) provincial law. This is otherwise known as the concept of paramountcy. Stated slightly differently, the issue can be stated as does section 9 of the Construction Lien Act remain to have application after a bankruptcy or initial order under the CCAA? The Attorney General of Ontario also stepped in on that part of the case.

The Court of Appeal accepted this constitutional question to be decided so there were now two issues before the Court of Appeal; the issue of paramountcy and the trust claim issue.

The constitutional question

The Court of Appeal went through a very thoughtful and careful analysis. It confined the constitutional question to the facts of this case. The court concluded in this case:

  1. The trust created under section 9(1) of the Construction Lien Act is a valid trust under provincial law.
  2. The BIA excludes from property available to the creditors any property held in trust.
  3. Therefore, this provincial trust can be effective when there is an insolvency proceeding under the BIA.
  4. Similarly, with the CCAA legislation, it follows that a section 9(1) provincially created trust might be effective when the insolvency administration is subject to the CCAA.

Now for the actual appeal

The Appeal Court now turned to the lower court judge’s decision that a section 9(1) of the Construction Lien Act trust did not apply in this matter. The five-member panel again went through a careful analysis of the statute and the case law. They spent a lot of time reviewing an earlier Court of Appeal for Ontario decision which the lower court judge relied upon in his decision.

The Court of Appeal highlighted that in that decision the lower court relied upon, the owner, being the insolvent debtor, had no interest in the asset that the subcontractors were claiming a trust claim against. The reasons were:

  1. The asset was part of a package of assets sold.
  2. There was a secured creditor who had security over all of the assets of the developer.
  3. The proceeds less the expenses to produce the sale were less than what was owed to the secured creditor.
  4. The court allowed the cash from the sale to stand in place of the assets.

Using this framework, the Court of Appeal stated that a s.9( 1) trust only arises if the value of the consideration received by the owner from the sale of assets, which have actually been enhanced by the work or materials of the contractor, surpasses the amount of the mortgage debt. A trust will not occur if the value is zero, or if the mortgage debt is equal to or above any kind of sale proceeds.

Therefore, the decision that the lower court relied upon in disallowing the trust claim does not stand for the suggestion that control by a CCAA Monitor of a sales process, or the receipt by the Monitor of the proceeds of the sale by itself, avoids a s.9( 1) trust against the proceeds of the sale of the enhancement are shown to have a positive worth that surpasses the mortgage debt on the asset. That fact pattern was absent from the case relied upon.

The decision

Now, you remember at the beginning of this blog I went through the essentially four types of insolvency proceedings. The Court of Appeal also considered the various types. The court drew a distinction in them as it relates to section 9(1) of the Construction Lien Act. Also remember that from my quotation above of this section, it starts with “Where the owner’s interest in a premises is sold by the owner…”(emphasis added).

In a receivership or bankruptcy, the owner loses control of the assets. The vendor in a sale is either the receiver/receiver and manager or the trustee in bankruptcy, respectively. In those examples, it is not the owner selling its own assets. It is the licensed insolvency trustee (formerly known as a bankruptcy trustee) selling its right, title and interest, if any, in the assets of the debtor. So the vendor is the licensed insolvency trustee in its specific capacity.

The Urbancorp matter started out as a restructuring under the Proposal provisions of the BIA and was then converted by the Court and continued under a different restructuring statute, the CCAA. In an insolvency administration under the restructuring provisions/statue, the owner does not lose control of its assets. True that the Monitor is given court authority to make decisions, market and then sell the assets. However, one of the cornerstones of the appointment of a Monitor is that the owner does not lose control of the assets and the Monitor does not become the owner of the assets.

Rather, the Monitor gets its powers from the court. The Monitor is actually selling the insolvent company’s assets as the company’s representative or agent. So even though it is the Monitor doing the selling, it is doing so on behalf of the owner. This is very different than a sale by a receiver/receiver and manager or trustee in bankruptcy.

In the Urbancorp situation, the value of the consideration received by the owner from the sale of assets, which have actually been enhanced by the work or materials of the contractor, surpasses the amount of the mortgage debt.

Highlighting these distinctions, the Court of Appeal for Ontario overturned the lower court decision and upheld the subcontractors’ trust claim. It substituted the lower court decision with an order that a s.9( 1) trust under the Construction Lien Act applies for the sum of $3,864,429 held in the accounts of the Monitor on account of the Urbancorp companies, for the benefit of the subcontractors, pro-rata in accordance with the amount owing to each of them.

Summary

I hope you found this case review helpful. It should be of particular interest to contractors, developers and builders in Ontario.

The Ira Smith Team family hopes that you and your family members are remaining secure, healthy and well-balanced. Our hearts go out to every person that has been affected either via misfortune or inconvenience.

We all must help each other to stop the spread of the coronavirus. Social distancing and self-quarantining are sacrifices that are not optional. Families are literally separated from each other. We look forward to the time when life can return to something near to typical and we can all be together once again.

Ira Smith Trustee & Receiver Inc. has constantly used clean, safe and secure ways in our professional firm and we continue to do so.

Revenue and cash flow shortages are critical issues facing entrepreneurs and their companies and businesses. This is especially true these days.

If anyone needs our assistance, or you just need some answers for questions that are bothering you, feel confident that Ira or Brandon can still assist you. Telephone consultations and/or virtual conferences are readily available for anyone feeling the need to discuss their personal or company situation.

Are you now worried just how you or your business are going to survive? Those concerns are obviously on your mind. This pandemic situation has made everyone scared.

The Ira Smith Team understands these concerns. More significantly, we know the requirements of the business owner or the individual that has way too much financial debt. You are trying to manage these difficult financial problems and you are understandably anxious.

It is not your fault you can’t fix this problem on your own. The pandemic has thrown everyone a curveball. We have not been trained to deal with this. You have only been taught the old ways. The old ways do not work anymore. The Ira Smith Team makes use of new contemporary ways to get you out of your debt problems while avoiding bankruptcy. We can get you debt relief now.

We look at your whole circumstance and design a strategy that is as distinct as you are. We take the load off of your shoulders as part of the debt settlement strategy we will draft just for you.

We understand that people facing money problems require a lifeline. That is why we can establish a restructuring procedure for you and end the discomfort you feel.

Call us now for a no-cost consultation. We will listen to the unique issues facing you and provide you with practical and actionable ideas you can implement right away to end the pain points in your life, Starting Over, Starting Now.

The Ira Smith Team is absolutely operational and both Ira, as well as Brandon Smith, are right here for a telephone appointment, conference calls and also virtual meetings.

Stay healthy and safe everybody.construction lien act

Categories
Brandon Blog Post

CANADA STUDENT LOAN: GET STUDIOUS ON CANADA STUDENT LOANS SUSPENDED

canada student loanThe Ira Smith Team is absolutely operational and both Ira, as well as Brandon Smith, are right here for a telephone appointment, conference calls and also virtual meetings.

Stay healthy and safe everybody.

If you would rather listen to the audio version of this Brandon’s Blog, please scroll down to the bottom and click on the podcast

Introduction

For plenty of students, the month of May generally marks the beginning of a summertime job. But now, due to the COVID-19 pandemic, it might be actually challenging for them to get any kind of work. They could have already been trying for weeks to find a job without any success. The purpose of this Brandon’s Blog is to describe what the Canadian government is doing to help students in general, and especially those with a Canada student loan.

“Banks were once places to hold money and were very careful in lending to finance families as they built a future – bought homes, bought cars, took out student loans.” – Elizabeth Warren

Government of Canada student loan program announcement

Prime Minister Justin Trudeau revealed comprehensive assistance of close to $9 billion for post-secondary students and also recent graduates. The plan was developed to give assistance to students for the financial backing they need this summer, help them proceed with their research studies in the fall, and help them get the experience they require to start their jobs.

These measures consist of:

  • the Canada Emergency Student Benefit, which gives assistance to students as well as new graduates that are not eligible for the Canada Emergency Response Benefit. This benefit gives $1,250 monthly for qualified students or $1,750 each month for qualified students with dependents or disabilities. The benefit would be offered from May to August 2020.
  • the new Canada Student Service Grant, which will help students gain useful job experience and also skills while they help their communities throughout the COVID‑19 pandemic. For students that pick to do serve their community, this new program will offer as much as $5,000 for their 2020-21 education.

On March 30, 2020, the Government of Canada also announced a six-month interest-free moratorium on the repayment of any Canada student loan for all people that are in the process of paying off their student debt. To reassure the student loan borrowers, the government went on to say that all pre-authorized debits taking payments automatically out of people’s accounts will stop.

This will certainly provide interest and payment relief to virtually 1 million Canada student loan borrowers. This delaying payment date of September 1, 2020 ties into the same moratorium given on other types of payments for both Canadian business and individual taxpayers.

“I think my mom and dad both wanted to get across to me that… I obviously grew up with great privilege and was very lucky and was able to afford college and not have student loans, and they would pay for college, but beyond that, it would be up to me to make a living.” – Anderson Cooper

Summer jobs for 2020

The federal government is developing 76,000 work for students in addition to the Canada Summer Jobs program. These placements will be in industries that need an additional hand today or that are on the cutting edge of this pandemic.

“I am just one of the overwhelming majority of Americans who is responsible and hard-working and at one point in their life benefited greatly from government programs such as student loans, Medicare, and Social Security.” – Tammy Duckworth

Fall 2020 to 2021 assistance for post-secondary students

Adjustments to the Canada student loan program have also been done so students facing financial difficulties from COVID-19 can access and manage post-secondary education. Pending federal government authorization, the new measures will come into force on August 1, 2020, for students for a one year period. The Canada Student Service Grant will help those who would rather volunteer and serve their neighbours and country during this health crisis.

These changes include:

  • Doubling of the student grants for all eligible full-time students to up to $6,000 and for part-time students up to $3,600 in 2020-21. The Canada student grants for students with long-term disabilities and students with dependents will also be doubled.
  • Widen eligibility for student financial assistance by getting rid of the expected student’s and spouse’s payments in 2020-21, given there will be struggles saving for university for next year.
  • Boost the program by raising the maximum amount that can be provided weekly to a student in 2020-21 from $210 to $350.
  • Extra support for First Nations, Inuit, and Métis students going after post-secondary education by giving an additional $75.2 million in 2020-21.
  • Extend ending government graduate research scholarships and postdoctoral fellowships, and supplement existing federal research study funding, to support students and postdoctoral fellows, by supplying $291.6 million to the government approval councils. Furthermore, the government wants to boost work opportunities for graduate students and postdoctoral fellows via the National Research Council of Canada.

“I would get my student loans, get money, register and never really go. It was a system I thought would somehow pan out.” – Ray Romano

Summary

The Ira Smith Team family hopes that you and your family members are remaining secure, healthy and well-balanced. Our hearts go out to every person that has been affected either via misfortune or inconvenience.

We all must help each other to stop the spread of the coronavirus. Social distancing and self-quarantining are sacrifices that are not optional. Families are literally separated from each other. We look forward to the time when life can return to something near to typical and we can all be together once again.

Ira Smith Trustee & Receiver Inc. has constantly used clean, safe and secure ways in our professional firm and we continue to do so.

Revenue and cash flow shortages are critical issues facing entrepreneurs and their companies and businesses.

If anyone needs our assistance, or you just need some answers for questions that are bothering you, feel confident that Ira or Brandon can still assist you. Telephone consultations and/or virtual conferences are readily available for anyone feeling the need to discuss their personal or company situation.

Are you now worried just how you or your business are going to survive? Those concerns are obviously on your mind. This pandemic situation has made everyone scared.

The Ira Smith Team understands these concerns. More significantly, we know the requirements of the business owner or the individual that has way too much financial debt. You are trying to manage these difficult financial problems and you are understandably anxious.

It is not your fault you can’t fix this problem on your own. The pandemic has thrown everyone a curveball. We have not been trained to deal with this. You have only been taught the old ways. The old ways do not work anymore. The Ira Smith Team makes use of new contemporary ways to get you out of your debt problems while avoiding bankruptcy. We can get you debt relief now.

We look at your whole circumstance and design a strategy that is as distinct as you are. We take the load off of your shoulders as part of the debt settlement strategy we will draft just for you.

We understand that people facing money problems require a lifeline. That is why we can establish a restructuring procedure for you and end the discomfort you feel.

Call us now for a no-cost consultation. We will listen to the unique issues facing you and provide you with practical and actionable ideas you can implement right away to end the pain points in your life, Starting Over, Starting Now.

“Bankruptcy laws allow companies to smoothly reorganize, but not college graduates burdened by student loans.” – Robert Reich

The Ira Smith Team is absolutely operational and both Ira, as well as Brandon Smith, are right here for a telephone appointment, conference calls and also virtual meetings.

Stay healthy and safe everybody.

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Brandon Blog Post

CONSUMER PROPOSALS IN ONTARIO UNFORTUNATELY TEST POSITIVE SADLY FOR COVID-19

The Ira Smith Team is absolutely operational and both Ira, as well as Brandon Smith, are right here for a telephone appointment, conference calls and also virtual meetings.

Stay healthy and safe everybody.

<h2

Consumer proposal in Ontario: Introduction

The Superintendent of Bankruptcy (OSB) went to Court in Toronto on April 24, 2020, to see if consumer proposals in Ontario tested positive for the coronavirus. The Honourable Chief Justice Morawetz issued his decision on Monday, April 27. He put it to the test and it came out testing positive. The OSB is making similar applications in all the different provinces to obtain the same relief. In this Brandon’s Blog, I explain everything.

Consumer proposals in Ontario: The issue

In Ontario, an emergency was proclaimed on March 17, 2020, and the Courts were closed, except for proven emergency situations. This emergency status was extended from April 14 until May 12, 2020, subject to further review. The clock on any provincial limitation period for any proceeding in Ontario was stopped, retroactive to March 16, 2020 (Suspension Period). Ontario is not unique in this. All other provinces have taken similar action.

The closure of the Courts was to assist in slowing the spread of COVID-19. Emergency applications are being held only by conference calls either by telephone or online video. This unprecedented action has created delays in every Court hearing that is not an emergency. This included most insolvency or bankruptcy court cases.

All licensed insolvency trustees (formerly called bankruptcy trustees) (Trustee) started to review all of their cases to see which files were affected. It was not just what cases were scheduled for a court hearing. It actually had more to do with stipulated timelines in the Bankruptcy and Insolvency Act (Canada) (BIA). Various sections of the BIA layout time frames by which certain actions need to be taken.

The emergency situation created by COVID-19 and its containment procedures is impeding the ability of insolvency specialists, borrowers, financial institutions and other stakeholders to meet the timelines of the BIA. This is especially true of all the people in Ontario who chose to avoid bankruptcy by filing consumer proposals in Ontario.

The most important thing that allows someone to perform a successful personal debt restructuring plan is the fact that they are employed. They put their best foot forward and file for personal bankruptcy protection by making a personal debt settlement offer to their creditors. The creditors accept it and the person is making his or her monthly payments on time. Now because of COVID-19 they are laid off and don’t have their salary or wages they have been relying upon both to live and to fund their consumer proposal.

Although there are many timelines in the BIA, such as when a meeting of creditors needs to be held after bankruptcy or debt restructuring filing. However, the OSB helped alleviate certain of the impediments caused by the coronavirus pandemic by allowing Trustees to hold meetings by either telephone or online video meetings.

One timeline that could not be fixed by a telephone call or video chat is an insolvent debtor, either a person or company, making the debt restructuring payments on time. With no job, no income or not much corporate revenue for a business that had to shut down, those debtors were at serious risk of defaulting on its debt restructuring plan caused by these never before experienced issues facing all of us.

Trustees across Canada, both individually and through the two professional organizations, brought the issues forward to the OSB to seek clarification and a solution. That led to the OSB’s Court application. Of particular concern is the section of the BIA that states that a consumer proposal goes into default once three payments are missed.

consumer proposals in ontario
consumer proposals in ontario

Although the Court was asked to consider various issues, I am focussing on the necessity to keep up the monthly payments under a consumer proposal (or a Division I proposal).

Effect of COVID-19 on consumer proposals in Ontario

The OSB’s position was that COVID-19 associated interruptions have both increased economic pressures on consumer debtors and made adhering to legal demands for creditor protection more difficult. When consumer debtors fail to pay in accordance with their consumer proposal, it can be considered annulled under the BIA.

In that case, the consumer debtor then loses the bankruptcy protection from his or her creditors. Upon default and annullment, the legal rights of creditors get revived. While the Courts are closed, this may only result in harassing phone calls from collection agencies. However, when the Courts inevitably reopen, then the lawsuits can either continue or start flying. Remember, the Suspension Period halted the time clock, so, no one loses their rights because of the passage of time.

More importantly, because of the default, the consumer debtor is banned from filing another consumer proposal without court approval. If the person is bankrupt and is trying their best to annul their bankruptcy through a BIA debt settlement proposal, the default causing the debt restructuring plan to be eliminated as if it never happened, keeps the person in bankruptcy.

The OSB also submitted evidence to the Court that lots of people who filed consumer proposals in Ontario were already in arrears in their payments before COVID-19. It further stated that it expects that the defaults in payments are set to rise significantly because of this unique situation..

Consumer proposals in Ontario: The Court’s analysis and decision

Mr. Justice Morawetz went through a very detailed analysis of both the submissions and the law. He noted that what he was being asked to approve was “extraordinary”. He agreed with the OSB that these are unusual times.

The Court first defined two specific terms:

  1. The “Period of the Emergency” starts on March 13, 2020, and ends on June 30, 2020.
  2. The “Suspension Period” begins on the date of the Court’s Order, being April 27, 2020, and ends on June 30, 2020.

The Court then went on to say that its Order applies to:

  1. All active Division I Proposals are those filed with the OSB up to the end of the Period of the Emergency.
  2. All active consumer proposals in Ontario (Division II proposals) are the ones filed with the OSB or revived by the BIA up to the end of the Period of the Emergency. They exclude all those that were already deemed annulled, annulled or that were completely performed on or prior to April 27, 2020.
  3. All active bankruptcies are defined as all bankruptcies filed with the OSB up to the end of the Period of the Emergency. For further clarification, all bankruptcies where the bankrupt received his or her discharge before April 27, 2020, are not included. This makes sense because a discharged bankrupt is no longer subject to laws for undischarged bankrupts. The only party left to abide by timelines is the Trustee.

The Court then ordered the following concerning Commercial Proposals, consumer proposals and bankruptcies:

  • Division I or Commercial Proposals – the time for holding the meeting of creditors that is to take place during the Period of the Emergency, is expanded by the time of the Suspension Duration.
  • Consumer proposals in Ontario –
    • the time for holding the meeting of creditors that needs to be held during the Period of the Emergency is extended by the time of the Suspension Period.
    • an active consumer proposal will not be regarded as annulled unless the consumer debtor remains in default of:
      • When payments are to be made on a regular monthly basis or faster, the day on which the consumer debtor is equal to more than the amount of three payments and an extra amount equal to up to another three payments for defaults that occurred during the period of March 13, 2020, to December 31, 2020.
      • For payments are to be earned less often than on a regular monthly basis, the day that is 3 months after the day on which the consumer debtor is in default in regard of any type of payment except for those due between March 13, 2020, to December 31, 2020, will be the day that is 6 months after the day on which the consumer debtor defaulted.
  • Active bankruptcy matters –
    • The Trustee’s commitment to applying for a court hearing in the Period of the Emergency is to be extended by the time of the Suspension Period.
    • The time for the holding of the meeting of creditors scheduled to take place during the Period of the Emergency is expanded by the time of the Suspension Period.
    • The period fo time for setting up a mediation appointment that needs to happen during the Period of the Emergency is lengthened by the time of the Suspension Period.

      consumer proposals in ontario
      consumer proposals in ontario

Consumer proposals in Ontario: What about the major creditors in an insolvency filing?

In most personal insolvency filings, Canada Revenue Agency (CRA) is a creditor. In fact, it is quite normal for CRA to be the majority creditor. In order for consumer proposals in Ontario to be successful, the first step is to get the support of your major creditor.

Debtors have suffered a loss of employment or a reduction of earnings as a result of the COVID-19 outbreak. People are scared that they will default on their proposals. So the CRA is taking an approach consistent with the position of the OSB. It wishes to make sure that all Canadians are supported if they are experiencing economic challenges due to the COVID-19 pandemic.

So where the CRA is the majority creditor and the debtor is suffering financial hardship, CRA has advised that:

  • For Commercial Proposals, the CRA is providing a waiver of the default and providing a deferment of payments to September 1, 2020. The waiver and extension also apply to amounts owing to unremitted source deductions.
  • For consumer proposals in Ontario, the CRA supports the approval of an amended proposal that requires a deferment of settlements up to September 1, 2020.

Ideally, this will offer debtors the time to concentrate on other facets of their lives and wellbeing without having to go bankrupt. The September 1, 2020 date ties into other COVID-19 programs the government is running to help Canadian taxpayers during this crisis. For example, HST and income tax payments which would otherwise come due between March and July 2020 also have an extended payment program to this same September date.

Consumer proposals in Ontario: Summary

The Ira Smith Team family hopes that you and your family members are remaining secure, healthy and well-balanced. Our hearts go out to every person that has been affected either via misfortune or inconvenience.

We all must help each other to stop the spread of the coronavirus. Social distancing and self-quarantining are sacrifices that are not optional. Families are literally separated from each other. We look forward to the time when life can return to something near to typical and we can all be together once again.

Ira Smith Trustee & Receiver Inc. has constantly used clean, safe and secure ways in our professional firm and we continue to do so.

Revenue and cash flow shortages are critical issues facing entrepreneurs and their companies and businesses.

If anyone needs our assistance, or you just need some answers for questions that are bothering you, feel confident that Ira or Brandon can still assist you. Telephone consultations and/or virtual conferences are readily available for anyone feeling the need to discuss their personal or company situation.

Are you now worried just how you or your business are going to survive? Those concerns are obviously on your mind. This pandemic situation has made everyone scared.

The Ira Smith Team understands these concerns. More significantly, we know the requirements of the business owner or the individual that has way too much financial debt. You are trying to manage these difficult financial problems and you are understandably anxious.

It is not your fault you can’t fix this problem on your own. The pandemic has thrown everyone a curveball. We have not been trained to deal with this. You have only been taught the old ways. The old ways do not work anymore. The Ira Smith Team makes use of new contemporary ways to get you out of your debt problems while avoiding bankruptcy. We can get you debt relief now.

We look at your whole circumstance and design a strategy that is as distinct as you are. We take the load off of your shoulders as part of the debt settlement strategy we will draft just for you.

We understand that people facing money problems require a lifeline. That is why we can establish a restructuring procedure for you and end the discomfort you feel.

Call us now for a no-cost consultation. We will listen to the unique issues facing you and provide you with practical and actionable ideas you can implement right away to end the pain points in your life, Starting Over, Starting Now.

The Ira Smith Team is absolutely operational and both Ira, as well as Brandon Smith, are right here for a telephone appointment, conference calls and also virtual meetings.

consumer proposals in ontario
consumer proposals in ontario

Stay healthy and safe everybody.

Categories
Brandon Blog Post

SMALL BUSINESS RELIEF PROGRAM: CANADA EMERGENCY COMMERCIAL RENT ASSISTANCE

small business relief program

If you would prefer to listen to the audio version of this Brandon’s Blog, please scroll to the bottom and click on the podcast

The Ira Smith Team is absolutely operational and both Ira, as well as Brandon Smith, are right here for a telephone appointment, conference calls and also virtual meetings.

Stay healthy and safe everybody.

Introduction

I want to describe what is known right now about the most recent Canadian small business relief program. The program named the Canada Emergency Commercial Rent Assistance (CERC) Program was set up to help small companies cover their commercial rent payments for April, May and June. This kind of program is necessary because of the COVID-19/coronavirus pandemic.

The latest small business relief program announcement

On Friday, April 24, Prime Minister Justin Trudeau announced the launch of the CERC for small companies that have been strongly impacted by the coronavirus pandemic. It is designed to reduce rental costs by 75 percent for impacted local businesses.

The CERC will provide forgivable loans to commercial landlords that qualify under the plan to cover half of the three regular monthly rent payments. It is designed to help small businesses experiencing financial difficulty throughout April, May and June.

The expense and management of the CERC will be shared by the provincial and federal governments. It should be accessible by mid-May.

“A big business starts small.”
-Richard Branson

The Ontario program

Since I practise in the province of Ontario, that is the provincial program I will comment on. Other than for the level of money contributed, presumably, the federal program works the same way in all provinces. When all the details come out, we will then know for sure.

The Ontario Government is devoting $241 million to partner with the federal government to supply more than $900 million in immediate aid. This small business relief program is for both small businesses and their landlords via a brand-new program, the Ontario-Canada Emergency Commercial Rent Assistance Program (OCECRA).

The OCECRA will offer forgivable loans to qualified commercial property owners experiencing potential rental income deficiencies since their local business lessees have been greatly affected by the COVID-19 crisis.

The program has been created to share the cost of small businesses with property owners. Local business occupants, as well as landlords, will each be asked to pay 25 percent of the previous rent cost, before profit. The provincial and federal governments will share the remaining 50 percent.

For example, say the monthly rent payment under a commercial lease for a local business is $10,000. In this instance, presume the property owner doesn’t make a profit (How this will be determined/monitored/enforced right now is anyone’s guess). The landlord gives up $2,500 (25% of rent). The small company would be accountable for paying $2,500 (25% of the rent). The government would cover $5,000. The federal/provincial split will be $3,750 from the federal government (37.5%) and $1,250 (12.5%) from the provincial government.

To obtain the funding, commercial property owners will need to reduce the rental expenses of small company tenants for April through June 2020 by a minimum of 75%. The funding is also contingent on the finalizing of an agreement or letter for rent reduction between the impacted tenant and the landlord. In addition to confirming the rent abatement for the 3 month period, it would also include a halt on distraint or termination for three months.

“You don’t build a business, you build people, then people build the business.”
-Zig Ziglar

How to apply for OCECRA

The OCECRA will be administered by the Canada Mortgage and Housing Corporation (CMHC). Applications can be filed up until September 30, 2020. Support would be retroactive to April 1, covering April, May and June 2020.

“Bringing great people onto your team is about demonstrating that size really doesn’t matter – people do.”
-Jess Campbell

Are there any restrictions on the CERC/OCECRA?

The OCECRA small business relief program would apply to commercial properties with small business occupants. Commercial with a residential component, and mixed-use residential and commercial properties with at least 30% of the space being commercial, qualify as it relates to the commercial rental only.

The property owner must be both the registered owner landlord of the property. If a property owner does not have a mortgage registered against the commercial rental building, the owner has to contact CMHC. Then there will be a discussion if the property owner/landlord has any other type of debt that would allow it to qualify under the program.

What are the qualification demands for small businesses?

“Make something people want” includes making a company that people want to work for.”
-Sahil Lavingia

Are there any qualifications the small business commercial tenant must meet?

A qualified small company lessee is one that:

  • Pays a regular monthly rental not more than $50,000 in gross lease payments; and
  • is a non-essential local business that has had to shut down or that is experiencing a 70% drop in pre-COVID-19 earnings (identified by comparing earnings in April, May or June to the very same month in 2019.

Not-for-profit organizations and charitable entities would also be taken into consideration for the program.

“A small business is an amazing way to serve and leave an impact on the world you live in.”
-Nicole Snow

Are any kind of small businesses omitted from the CERC/OCECRA program?

The following excludes any business from this small business relief program:

  • businesses owned by people holding political office;
  • companies that promote physical violence, incite hatred or discriminate; and
  • a company placed in their lender’s special accounts group prior to March 1, 2020.

The impact this small business relief program will have depends of course on all the fine print that has not yet come out. For it to be successful, landlords have to agree to the program. A commercial tenant cannot apply on its own.

“Good business leaders create a vision, articulate the vision, passionately own the vision, and relentlessly drive it to completion.”
-Jack Welch

Summary

The Ira Smith Team family hopes that you and your family members are remaining secure, healthy and well-balanced. Our hearts go out to every person that has been affected either via misfortune or inconvenience.

We all must help each other to stop the spread of the coronavirus. Social distancing and self-quarantining are sacrifices that are not optional. Families are literally separated from each other. We look forward to the time when life can return to something near to typical and we can all be together once again.

Ira Smith Trustee & Receiver Inc. has constantly used clean, safe and secure ways in our professional firm and we continue to do so.

Revenue and cash flow shortages are critical issues facing entrepreneurs and their companies and businesses.

If anyone needs our assistance, or you just need some answers for questions that are bothering you, feel confident that Ira or Brandon can still assist you. Telephone consultations and/or virtual conferences are readily available for anyone feeling the need to discuss their personal or company situation.

Are you now worried just how you or your business are going to survive? Those concerns are obviously on your mind. This pandemic situation has made everyone scared.

The Ira Smith Team understands these concerns. More significantly, we know the requirements of the business owner or the individual that has way too much financial debt. You are trying to manage these difficult financial problems and you are understandably anxious.

It is not your fault you can’t fix this problem on your own. The pandemic has thrown everyone a curveball. We have not been trained to deal with this. You have only been taught the old ways. The old ways do not work anymore. The Ira Smith Team makes use of new contemporary ways to get you out of your debt problems while avoiding bankruptcy. We can get you debt relief now.

We look at your whole circumstance and design a strategy that is as distinct as you are. We take the load off of your shoulders as part of the debt settlement strategy we will draft just for you.

We understand that people facing money problems require a lifeline. That is why we can establish a restructuring procedure for you and end the discomfort you feel.

Call us now for a no-cost consultation. We will listen to the unique issues facing you and provide you with practical and actionable ideas you can implement right away to end the pain points in your life, Starting Over, Starting Now.

“Find a great mentor, someone who has already been through the many challenges of being an entrepreneur..”
-Jodi Levine

The Ira Smith Team is absolutely operational and both Ira, as well as Brandon Smith, are right here for a telephone appointment, conference calls and also virtual meetings.

Stay healthy and safe everybody.

Categories
Brandon Blog Post

WHEN ARE TAXES DUE CANADA 2019?: ARE YOU SERIOUSLY CONFUSED?

The Ira Smith Team is operating fully and both Ira, as well as Brandon Smith, are available for a telephone appointment, conference call or online video chat.

Stay healthy and balanced and safe everybody.

Introduction

This is the time of year where you see all the advertisements for income tax preparation services. There are always two parts to every income tax season: 1. preparing and filing your income tax return, and 2. getting your refund or paying what you owe. I have in the last couple of weeks received several phone calls from people asking when are taxes due Canada 2019? People seem to be confused.

So, in today’s Brandon’s Blog, I discuss when personal and corporate income taxes are due for both filing and payment. I also discuss what happens if you owe money and cannot pay and if CRA payment arrangements are possible.

“One thing is clear: The Founding Fathers never intended a nation where citizens would pay nearly half of everything they earn to the government.”
― Ron Paul

When are taxes due Canada 2019 for Canadians?

This year, due to COVID-19, Canadians are allowed to file taxes later.

When can I file my taxes 2019 canada: When are taxes due Canada 2019? The deadline for people to file has been postponed to June 1, 2020. The due date to pay any kind of amounts owing has been extended to September 1, 2020. This includes the June 15, 2020, instalment payment for those who have to pay by instalments.

CRA self-employed income tax deadline: For individuals carrying on a business either as a sole proprietor or an unincorporated partnership in 2019, when are taxes due Canada 2019? Your return for 2019 needs to be filed on or before June 15, 2020. However, if you have a balance owing for 2019, you need to pay it on or prior to September 1, 2020. The June 15, 2020 instalment payment, for those that need to pay by instalments, is also due September 1.

When are corporate taxes due in Canada: When are taxes due Canada 2019? June 1, 2020, is the filing due date for all corporations that would otherwise have their filing due after March 18 and before June 1, 2020. The payment date for the fiscal tax year is September 1, 2020. This includes balances and instalments under Part 1 of the Canadian Income Tax Act due on or after March 18 and before September 1, 2020.

So when are taxes due Canada 2019 for trusts and charities? I am glad that you asked!

Trusts: When are taxes due Canada 2019? The filing for the current tax year, including the T3 information return, is extended to May 1, 2020. This applies to charities with a tax year-end of December 31, 2019.

The new filing date for all trusts that would otherwise have a filing due in April or May is extended to June 1, 2020.

Payment for the current tax obligation year is now September 1, 2020. This applies to income tax obligation balances and instalments due on or after March 18 and before September 1, 2020.

Charities: When are taxes due Canada 2019? The filing for charities with a Form T3010 due between March 18 and December 31, 2020, is now December 31, 2020. Obviously, registered charities do not need to bother with knowing their payment date, because they do not have one!

when are taxes due Canada 2019
when are taxes due Canada 2019

What about International students?

I have seen a lot of chatter online about international students studying in Canada. This group has a challenging time determining whether they ought to file a Canadian tax return. This is because international students may not owe Canadian taxes or have access to all tax refunds or credits.

International students need to submit a tax return if they owe tax or if they intend to claim a refund or credits.

Considering that Canadian-earned income is constantly taxed in Canada, employment with a Canadian firm is a clear sign that you should submit an income tax return, even as a non-resident. Therefore, international students employed in Canada may find themselves either owing to tax or being able to claim a refund.

Students who have actually established considerable property connections to Canada can be considered residents of Canada. Significant property connections consist of a home, whether owned or rented, Canadian savings account or drivers’ license or living with a spouse or dependents.

Like all other Canadian citizens, international students under this classification are eligible for GST credits, tuition carry-forward credits, and other provincial credits or tuition rebates.

Students who spend less than 183 days (6 months) in Canada, and who do not establish residential ties in Canada, are usually classified as non-residents. Non-residents are not qualified for benefits or credits. They are just required to submit an income tax return to either pay taxes or to receive a refund on earnings from Canadian sources.

CRA payment arrangements

So you will remember I said there are two parts to when are taxes due Canada 2019 season: 1. preparing and filing the return, and 2. paying what you owe. Possibly you owe CRA back taxes and cannot afford to pay 2019 income tax. Regardless of when are taxes due Canada 2019, you have tried very hard to pay, but especially in this COVID-19 coronavirus world, you just won’t have the money.

If this sounds familiar, then one day you can expect to get a call from a CRA collection officer because of when are taxes due Canada 2019. They will listen to your story and suggest that you enter into a payment arrangement with CRA. They will, of course, expect you to pay the most possible. Once you reach an agreement, and you provide post-dated cheques to CRA, then you just need to make sure that each cheque clears on the payment due date.

But what happens if all the post-dated cheques you gave to CRA is only for say, one year’s worth of payments that do not pay off what you owe in total? Or worse, what if one of your cheques does not clear your bank for insufficient funds.

You will then get a call from a collection officer who says what you have done so far is not good enough. They will want details from you about your bank accounts. If it is your proprietorship, partnership or company, CRA will want a copy of your accounts receivable listing and all your bank account information, other than for the account you have given the post-dated cheques on. If you have a job, they already know who you work for.

What do they do with that information? They garnishee your wages and your bank accounts. By doing that, they can shut you or your company down without even having to go to Court. Then you will not be able to buy food, pay your rent or mortgage or run your business.

At that stage, you will have only one choice. That will be to not walk but run, to a licensed insolvency trustee in order to take steps for a formal restructuring of your debt. This will provide you with the time to free up your wages and bank accounts and run your business. That is the only way you will be able to survive.

Summary

I hope that you enjoyed this when are taxes due Canada 2019 Brandon’s Blog.

The Ira Smith Team family hopes that you and your family members are remaining secure, healthy and well-balanced. Our hearts go out to every person that has been affected either via misfortune or inconvenience.

We are all citizens of Canada and we need to coordinate our initiatives to stop the spread of the coronavirus. Social distancing and self-quarantining are sacrifices that are not optional. Families are literally separated from each other. We look forward to the time when life can return to something near to typical and we can all be together once again.

Ira Smith Trustee & Receiver Inc. has constantly used clean, safe and secure ways in our professional firm and we continue to do so.

I hope that you got some useful information from this when are taxes due Canada 2019 Brandon’s Blog. Revenue and cash flow shortages are critical issues facing entrepreneurs and their companies and businesses.

If anyone needs our assistance, or you just need some answers for questions that are bothering you, feel confident that Ira or Brandon can still assist you. Telephone consultations and/or virtual conferences are readily available for anyone feeling the need to discuss their personal or company situation.

Are you now worried just how you or your business are going to survive? Those concerns are obviously on your mind. This pandemic situation has made everyone scared.

The Ira Smith Team understands these concerns. More significantly, we know the requirements of the business owner or the individual that has way too much financial debt. You are trying to manage these difficult financial problems and you are understandably anxious.

It is not your fault you can’t fix this problem on your own. The pandemic has thrown everyone a curveball. We have not been trained to deal with this. You have only been taught the old ways. The old ways do not work anymore. The Ira Smith Team makes use of new contemporary ways to get you out of your debt problems while avoiding bankruptcy. We can get you debt relief now.

We look at your whole circumstance and design a strategy that is as distinct as you are. We take the load off of your shoulders as part of the debt settlement strategy we will draft just for you.

We understand that people facing money problems require a lifeline. That is why we can establish a restructuring procedure for you and end the discomfort you feel.

Call us now for a no-cost consultation. We will listen to the unique issues facing you and provide you with practical and actionable ideas you can implement right away to end the pain points in your life, Starting Over, Starting Now.

The Ira Smith Team is absolutely operational and both Ira, as well as Brandon Smith, are right here for a telephone appointment, conference calls and also virtual meetings.

Stay healthy and safe everybody.

when are taxes due Canada 2019
when are taxes due Canada 2019
Categories
Brandon Blog Post

REDWATER ALBERTA NEWS: $1.7B TO CLEAN UP ORPHANED WELLS DUE TO COVID-19

redwater albertaThe Ira Smith Team is absolutely operational and both Ira, as well as Brandon Smith, are right here for a telephone appointment, conference calls and also virtual meetings.

Stay healthy and safe everybody.

If you would prefer to listen to the audio version of this Brandon’s Blog, please scroll to the bottom of this page and click on the podcast

Introduction

When it went insolvent in 2015, Redwater Energy Corp. (Redwater Alberta or Redwater) might have been a small business, with only 19 generating wells and 90 dormant wells. However, a relatively small oil producer was responsible for a huge Supreme Court of Canada (SCC) decision.

Basically, the SCC decided in the Redwater Acase, that if a business goes belly up, its environmental obligation needs to be paid before secured creditors. I have written before on the Alberta Courts’ decisions and the SCC decision. As a result of COVID-19, the Canadian government just announced a $1.7 billion fund to create jobs in the Canadian oil patch.

Redwater Alberta history of cases

In my previous blogs, I described the Alberta court decisions. The Alberta Courts concurred with the receiver and held that the regulator’s enforcement activities to force Redwater’s adherence to its previously agreed requirements to clean up and permanently cap its oil site, in bankruptcy was not enforceable.

The Courts stated that given the bankruptcy of the company (in addition to a receivership), the Bankruptcy and Insolvency Act (Canada) (BIA) took paramountcy over the provincial law. The provincial Courts said that the BIA took paramountcy because:

  1. Allowed the receiver protection from the promises of Redwater Alberta as the licensee in connection with the Redwater properties disclaimed by the receiver/trustee, according to s. 14.06(4) of the BIA.
  2. The priority for the distribution of a bankrupt’s assets is regulated under the BIA, not provincial legislation. If the provable claim of the Regulator, an unsecured creditor, was paid in advance of the claims of Redwater’s secured creditors, that would not be the regime laid out in the BIA.

The SCC decision

In the SCC 5 to 2 judgment in the Orphan Well Association v. Grant Thornton Ltd. case, the SCC ruled that financially troubled companies like Redwater can no longer disclaim or merely bow out of properties they don’t want. In this situation, non-producing oil wells, when abandoned or orphaned, leave the resulting ecological cleaning to Alberta’s Orphan Well Association. It is a non-profit operating for the Alberta Energy Regulator.

What the SCC decision in the case of the Redwater Alberta receivership means is that the costs of properly and permanently sealing an oil well that is to be abandoned is a first ranking charge against the producer’s assets. In the Redwater case, the receiver had to turn over the proceeds (about $600,000) from the asset sales to the Alberta regulator. There was absolutely nothing left for any other creditor, either secured or unsecured.

This case was obviously difficult and contentious, given that it was a 5-2 decision and not unanimous. The majority decision stated that:

  • The regulator’s use of its provincial powers is not in conflict with the BIA to trigger the doctrine of federal paramountcy.
  • Section 14.06(4) of the BIA deals with the personal liability of receivers and trustees and does not let a trustee ignore the environmental liabilities of the estate.
  • The regulator is not asserting any claims provable in the bankruptcy.
  • There is no attempt by the regulator to upset the scheme of priorities stipulated by the BIA.
  • There is not a conflict by the regulator tagging the Redwater receiver as a licensee under Alberta legislation.

The Supreme Court decision goes on to say that the rules cannot be ignored just because there is a bankruptcy. Insolvency professionals must abide by valid provincial laws in administering corporate bankruptcy. It also found that receivers and trustees must:

  • conform with non-financial requirements the insolvent company must still adhere to that do not create a provable claim in the insolvency administration; and
  • Adhere to the parts of the provincial legislation that does not go against the BIA, notwithstanding that it might prove harmful to the position of one or more groups of creditors.

COVID-19 and orphaned wells

Near the end of March 2020, Finance Minister Bill Morneau said that help for the oil and gas industry would be announced. This industry has been hit by two different factors:

  1. Reduced demand due to people self-quarantining because of COVID-19 and therefore there is less demand for oil and gas.
  2. The price battle between Russia and Saudi Arabia. Oil on the world market is at an all-time low. At one point, a barrel of Canadian oil was selling for less than $5. The industry cannot operate with oil prices that low.

As a result, there have been massive job losses in British Columbia, Saskatchewan and Alberta oil patches. As well, the regulators do not have the money to reclaim and permanently seal off the abandoned orphaned wells. It is currently estimated that the total cost could be in the $8 billion range.

On Friday, April 17, Prime Minister Justin Trudeau announced that the federal government will invest at least $1.7 billion to the orphaned well cleanup. The money is to be used to create oil patch jobs to allow for the environmental cleanup.

So COVID-19 or coronavirus, has forced the Canadian government to create this support for the Canadian oil and gas industry. It will create jobs badly needed and allow for the cleanup of some orphaned oil wells.

Details of the support package have not been released. Presumably, the legislation will have to be drafted and passed in the House of Commons. No doubt, more information will come out in the coming days or weeks.

Summary

The Ira Smith Team family hopes that you and your family members are remaining secure, healthy and well-balanced. Our hearts go out to every person that has been affected either via misfortune or inconvenience.

We are all citizens of Canada and we need to coordinate our initiatives to stop the spread of the coronavirus. Social distancing and self-quarantining are sacrifices that are not optional. Families are literally separated from each other. We look forward to the time when life can return to something near to typical and we can all be together once again.

Ira Smith Trustee & Receiver Inc. has constantly use clean, safe and secure routines in our professional firm and we continue to do so.

Revenue and cash flow shortages are critical issues facing entrepreneurs and their companies and businesses.

If anyone needs our assistance, or you just need some answers for questions that are bothering you, feel confident that Ira or Brandon can still assist you. Telephone consultations and/or virtual conferences are readily available for anyone feeling the need to discuss their personal or company situation.

Are you now worried just how you or your business are going to survive? Those concerns are obviously on your mind. This pandemic situation has made everyone scared.

The Ira Smith Team understands these concerns. More significantly, we know the requirements of the business owner or the individual that has way too much financial debt. You are trying to manage these difficult financial problems and you are understandably anxious.

It is not your fault you can’t fix this problem on your own. The pandemic has thrown everyone a curveball. We have not been trained to deal with this. You have only been taught the old ways. The old ways do not work anymore. The Ira Smith Team makes use of new contemporary ways to get you out of your debt problems while avoiding bankruptcy. We can get you debt relief now.

We look at your whole circumstance and design a strategy that is as distinct as you are. We take the load off of your shoulders as part of the debt settlement strategy we will draft just for you.

We understand that people facing money problems require a lifeline. That is why we can establish a restructuring procedure for you and end the discomfort you feel.

Call us now for a no-cost consultation. We will listen to the unique issues facing you and provide you with practical and actionable ideas you can implement right away to end the pain points in your life, Starting Over, Starting Now.

The Ira Smith Team is absolutely operational and both Ira, as well as Brandon Smith, are right here for a telephone appointment, conference calls and also virtual meetings.

Stay healthy and safe everybody.

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