COVID-19: Government programs for the biotech sector

Emily: Okay, so it's now about one minute after the hour so I think we will get started. Welcome everyone and thank you all for tuning in today. On behalf of BIOTECanada we are excited to feature three experts from the law firm Gowling WLG for a virtual session exploring government economic assistance for grants for the biotech and life sciences sector, that address business hardships related to COVID-19. I'd like to give a warm welcome to Neena Gupta, Ted Thiessen and Colin Green. Thank you all so much for joining us today. Before we begin, to our attendees, I'd like to bring your attention to the Q&A feature. If you hover your mouse down towards the bottom of our zoom window you'll see a gray menu bar pop up. If you have questions during the presentation please type them in here and we'll try to get them answered at the end of the session. That said, there is quite a lot of content today in this presentation, so there's a chance we may not get to your questions during the webinar, but we will be sure to address them via email afterwards. With that I will mute myself and turn off my video and hand it over to Neena. Go ahead, Neena.

Neena: Good afternoon everyone. My name is Neena Gupta and I'm a partner at Gowling WLG in the employment labour and equality section. I practice in the Waterloo region. I'm joined by two of my wonderful tax partners, Colin Green, in Ottawa and Ted Thiessen, in Calgary, who are distinguished tax practitioners. Instead of reading a boring bio I thought you'd like to know a little bit about the human beings behind the partner, if you will. Colin is an avid hiker and Ted Thiessen has a background as a classic scholar, which I think makes them wonderfully prepared for the practice of law, perhaps not so well prepared to be a handyman around the house. But we can talk to his wife about that. Just a note, this is not intended to be legal advice. Every practitioner will tell you that to give proper legal advice we need to get into the kind of details that we couldn't possibly get into in a high level overview. We encourage you to talk to your own lawyers and accountants and also to recognize that the situation is fluid, government programs have changed, sometimes on a daily basis. So we're doing the best we can in these circumstances, but again, ... with your own lawyer or accountants before making any decisions. We thought we would start with a program that has gotten a lot of coverage in the news which is the Canada Emergency Wage Subsidy. Which is pronounced CEWS or CEWS, depending on who you are. We're going to use CEWS and I'm going to turn over the CEWS section to Ted Thiessen over in Calgary. Ted, over to you.

Ted:    Sure. Thanks, Neena. Hi everybody. Good afternoon. Thanks for joining us today. I'll be talking about the Emergency Wage Subsidy, so we call that CEWS or CEWS, you can pronounce either way, whatever way you prefer. Basically introduced by finance on Saturday, April 11^th. Minister Morneau gave a press conference where he kind of outlined broad strokes of what that program was going to encompass and then on that weekend Canada passed the legislation. So it's known as the COVID-19 Emergency Response Act, No. 2. It was the second one because a temporary wage subsidy had been passed prior to that. The Bill number, in case anyone's looking for it, is Bill C-14. The stated purpose for the subsidy, which is expected to cost Canada approximately 73 billion dollars, to support the well-being of employees, obviously, because the government was recognizing that a bunch of people were out of work temporarily, or some permanently. It was also to enable employers to try to maintain employment relationships in a situation when cashflow was restricted, or in some cases, eliminated entirely. The third kind of purpose behind implementing the program, in the way it was done, was to kind of reduce stress on the regular EI insurance regime, which was getting inundated with claims and they were having a hard time keeping up. This CEWS is kind of a blunt instrument sort of meant to take the pressure off some of that. Can I get the next slide, Neena? Thanks.

Okay, so, who's eligible for the CEWS? You need to be a certain type of employer, first of all, to be eligible. We listed the types of employers there. A corporation that's not a public institution. Basically, municipalities, universities, schools, hospitals. If you get some sort of Federal public funding, you're generally not going to qualify. And tax exempts also generally won't qualify subject to a point we'll talk about in a second. Individual employers. So, sole proprietors who have their own employees could also qualify for this. The reason we used the word individual there is because trusts, for tax purposes, are also individuals. So if you happen to have a trust that has a bunch of employees in it, it could also qualify for this. Registered charities that are not pubic institutions would typically be expected to qualify as well. Registered charities are tax recognized entities so they would qualify, generally speaking. Certain tax exempt entities, aside from the broad carve out for tax exempts, certain types will qualify. So, agricultural are granted tax exempt status under a very specific section in the Act so they would typically qualify. Boards of trade or chambers of commerce are two other examples of the types of tax exempt entities that would qualify, notwithstanding the broad tax exempt exclusion. If you happen to have a bunch of employees in a partnership, all of the partners in the partnership are entities that would qualify under one of the headings, then the partnership itself would also, typically, be expected to qualify for  this subsidy. They built in some flexibility in to the legislation, to be able to prescribe certain entities to qualify if they don't qualify under any of the other headings, but none of those have prescribed so far. The one thing we wanted to make everybody aware of is that you need to have had a Canadian business number, with a payroll account, on March 15^th, 2020 in order to qualify for this subsidy. So, this was kind of aimed at preventing people who might have figured out a way to take advantage of it, from quickly starting up some sort of business and paying, potentially, wages that were only semi-legitimate. So this is kind of a broad instrument to eliminate that kind of quote/unquote "foul play" and I think the general thinking was that people who legitimately might be excluded under this heading is probably going to be a pretty small group. That covers eligible employers. As far as eligible employees, what are we talking about here? So we're basically talking about employees that you would have issued a T4 to. A real employee. You won't catch independent contractors, or quasi employees, under this program. To the extent you're paying money to independent contractors, or quasi employees, who aren't actual T4 employees, that pay won't qualify for the subsidy. The employees that will qualify have to be working in
Canada. So if you've got employees working, for example in the US, pay to them wouldn't qualify for the subsidy. Generally speaking, an employee has to be without remuneration for, sorry. If an employee is without remuneration for 14 or more consecutive days in one of the qualifying periods, which we'll describe a little bit later, it wouldn't qualify because they wouldn't be expected to qualify for the CERB, which is the Canadian Emergency Response Benefit that Neena's going to talk about a little bit later. The one caveat to this is the legislation was clarified later so that people are now allowed to make $1,000.00, or something like that. There's some sort of minimist exemption. I think that covers that one, Neena.  You can go to the next one.

Okay. So which employees are covered, provided they work in Canada and they're actual employees. It will cover both arms length and non-arms length employees. You can get covered for pay that you're giving to directors or controlling shareholders. Which wasn't always clear when they were kind of talking about it in broad strokes, before they put the legislation in, but has become more clear now that the legislation's been out. So that's encouraging. Employers can put employees back on payroll, retroactively, to claim the CEWS. For example, if following the passing of the legislation you decided to hire a bunch of employees retroactively and paid them for weeks, for which they had been laid off initially but you were effectively giving them back pay, that back pay can, in most circumstances, also qualify for the subsidy. But because of the retroactive nature of the subsidy, if you could potentially end up in a situation where you laid off an employee, they started collecting the Emergency Response Benefit, or the CERB, and then you decide later to re-hire them and give them back pay. So then they kind of would have got the benefit of both programs, which isn't really the intention. In that scenario the employee would likely be required to re-pay all or part of the CERB benefit, probably when they file their tax return last or next year for 2020.

Okay. Eligible periods is one of the key concepts in the legislation for a couple of reasons. One, you have to figure out in respect of what period you're paying your employees, and two, the kind of gating issue is that you have to have displayed, or suffered, a drop in revenue over certain eligible periods. The eligible periods are outlined in this table for your reference. There are three so far. The legislation has flexibility for the government to add some later if that need should arise. So the first period, which is already over, but applications don't have to be filed for until, I think you have until October, to file them. These are just a reference. The first period was March 15^th to April 11^th, and then you have a second period of April 12^th to May 9^th, and the third period covers May 10^th to June 6^th. For each of those, what we're calling claiming periods or what some people refer to as eligible periods, each of those relates to a specific reference period. Period one, you can see the claiming period is March 15^th to April 11^th, so the reference period for that is March 2020. The reference period is in this table is the period over which you have to be able to demonstrate that you've suffered a sufficient reduction in revenues to qualify for the subsidy. Each of the claiming periods, in that first column there, need to be applied for separately. Just because you qualify for one doesn't necessarily mean you qualify for all three. You need to be able to show a revenue drop, basically, in each of them. I'll get you some specific rules that we'll talk about later. For example, ... one .... qualify for the subsidy on pay that you paid to employees in period one, or in respect of period one, you need to be able to show a 15%25 revenue drop when you measure March 2020 against March 2019. That's kind of how this table works. So you read it left to right in that manner. For the April and May claiming periods you need to be able to show a 30%25 revenue drop for each of those periods over the comparative period. Which is either going to be same month from the year prior, as we'll talk about in a minute, an average of January and February of 2020, if you decide to use that method instead. I think that covers that one, Neena.

Okay. Yeah, I can talk about this real quick. This is the revenue drop requirements. Just a note, we've gotten a lot of questions. You don't need to have suffered the revenue drop as the result of COVID-19. The instrument is more blunt than that. All you need to be able to do is show that your revenue is decreased by the required percentage. The other point is that when measuring the drop it's gross revenues that matter and it's not profit or taxable income. As I mentioned briefly, there's two ways to measure the drop. For the March period you would either take your revenue from March, and you would compare to March of 2019, or to an average of January and February  in 2020. If you qualify under either of those, ie: if your revenue has dropped by 15%25 or more, when compared to either one of those reference periods, then you qualify for the subsidy for the March period. But with the caveat that once you choose to use either the same month from the year prior, or the January, February average, you have to use that same method for purposes of calculating eligibility for any future periods, like for April or May. But basically, this would cover people, for example, businesses who started up in the middle of last year. So they didn't have a comparative, they don't have month over month. They don't have a March 2019 period for which to measure against March of 2020. So they can use their January, February average in 2020 to come up with their benchmark.

Neena: Thank you, Ted. I think we're going to turn it over to Colin to take on the revenue drop and other ways of calculating it. So if I could take Colin to the next slide.

Colin:  Great. Thank you, Neena. Thanks, Ted. As we're dealing with here, how do you prove the revenue drop? Ted has ably set out the requirement and the purpose of the program, and the question we need to look at now, is how do we deal with the computation of revenue. And revenues, as we discussed, is from a business carried on in Canada, whether foreign owned or not, here we're presuming they have a business number. They're properly filing their taxes. They are on the CRA grid and that income is derived from our arm's length sources. It does however, exclude a few considerations. One, it excludes extraordinary items. Two, it excludes amounts deemed to received under the 10%25 subsidy. That's dealt with separately as we'll discuss in a later example. Three, it deals with special rules for entities who derive all, or substantially all, of their revenue from non-arms length entities. Again, we'll look at the non-arms length component, but those are the things we need to be being aware of to put them aside. Here, one important thing to look at is really the flexibility of this program. I think it's something that caught a lot of observers by surprise. Certainly we weren't, at least I was not expecting to see the breadth of the program. Not only are you able to use your 2019 comparison, 2020 March, you can also, as Ted indicated, use the average of Jan, Feb 2020. But then there's further flexibility provided for in respect of whether or not use accrual, so the standard accounting rules, or regular cash accounting rules for revenue recognition. Slide, please.

So what about related entities? Here we see additional flexibility which is the theme of the program. If you have normally consolidated financials, every member of the group is able to determine it's qualifying revenue separately, provided they adopt the same approach ... Alternatively, you can choose to determine the number of the revenue figure on a consolidated basis on behalf of every member of the group. I'd highlight here that this provides tactical flexibility. What we would suggest to clients, in these instances, is you will want to have a plan. That plan will want to be involving what is your exposure, what's your optionality in terms of your employees across the various structures, if you have them, how do we look at that revenue to make sure that you can assist as many employees as possible. In some instances you might be able to include revenues on a consolidated basis, if you're looking at a consolidated approach, that would otherwise not be able to access this programming. Entirely appropriately because of the scope of the losses from some of the lossco's. Again, as Ted has noted, special rules exist for joint ventures and partnerships. Equally there are special rules for entities that derive all, or substantially, all of their revenue from non-arms length sources. Slide.

In terms of looking at the alternative method on a simplified basis as we discussed. It's important to understand your base choices. Your comparatives. So you can average your income for January and Feb 2020 to establish a monthly income basis. Against this you'll want to compare the established income average that you have for the month in comparison purpose. So you compare that average and establish by Jan 2020 to the results in March, April and May. As indicated, if the program is extended, then the comparison examples would presumably continue to apply. But for now March, April and May and noting, of course, that March is at a lower figure of 15%25. Cash accrual or regular accounting method exists as well but once you pick a method, and this is really the key component, you must maintain that method, consistently. We would also note that if you qualify for a monthly period you automatically qualify for the subsequent period. This is to provide businesses with the method of flexibility and planning. Slide, please.

In terms of revenue reduction and difficulty, it's important to acknowledge the timing components that exist as well. Here it's important to note that there is a gap between the application and the actual period for which the remuneration would apply and the timing upon which you will actually receive the funds from the government. Until the time the renumeration is paid you may not know whether or not your qualifying for CEWS. In the example we look at here is whether or not we're dealing with bi-weekly pay periods, wages paid on April 24^th, in respect of the 2 prior weeks, or only the second of those weeks. Again, pay in respect of April 3^rd to 19 would only qualify if the gross revenues from April 2020 exceeded 70%25 of the gross revenues from April 2019, or the gross revenues from April 2020 exceeded 70%25 of the Jan, Feb 2020 average. We await further clarification for charities and NFP's but note the broad application average of these programs. Slide, please.

 

So there's no clarity as of yet as to what happens if an employer uses a third party professional employer organization as labour supplier. As always this brings us to the question as to who's employees that these actually properly pertain to. What we have been advising clients is that they need to be involved in early communication with their counsel to ensure that they have a plan and the proper documentation in place to substantiate any filing positions that are taken. Again, this may depend upon how we treat the expenses, and the financial statements, and the other components of the financials as they are assembled together. There is no relief for pre-revenue entities. For example, start-ups, and we had seen a question into the questions that had raised this point, and we await further clarification from CRA and finance on these points. Thank you.

Neena: Thank you, Colin. I think what we thought we would do is just have a little bit of fun with numbers. I think we selected Ted Thiessen to start doing a little bit of an example of a CEWS calculation and Ted, if I could ask you to take over from here.

Ted:    Basically, once you've got a qualifying employer, and a qualifying employee, and you've met the revenue reduction tests that you need to meet the obvious question is what's the amount of the subsidy you're going to qualify for. The first thing I note is that mechanically the .... calculator ... per employee basis. So, when we're talking here we're going to talk about how much money would you get back when you make a payment to a particular employee. It's basically set up as the lessor of two amounts, or the greater of two amounts, I should say. First amount is set out in part one of what we'll call the test. Part one of the test will give you a number and you pick the least of the three. So 75%25 of the amount of what we call eligible remuneration actually paid in the week claimed. So that's 75%25 of which you actually pay to the employee in the week we're talking about. On the second amount there's $847.00 per week. Because this is set up as a least of, $847.00 per week per employee is the max amount of the subsidy that you can get. Then this part of the test says the amount under part one is going to be nil if your employee is non-arms length, ie: a controlling shareholder or a family member of a controlling shareholder or a director. Those are typically going to be non-arms length employees. Under part one of the test that amount is going to be zero. Next slide, Neena. Thanks.

Part two is going to give you, in some circumstances, a different number. If part two is greater than part one you actually get part two. So part two set up is the least of the actual amount of pay to the employee in the week. 75%25 of the employees, what we'll call pre-crisis weekly remuneration, that's the average of their weekly pay over January and February, basically. Then the last number, again, is $847.00 weekly max. If what you've got is an employee who's a non-arms length employee, ie: a controlling shareholder or a director or a family member of such an individual, then you're only going to get an amount greater than zero under part two. So it's part two you're going to want to be looking at. Next slide, Neena.

In some circumstances as a result of the way that the formulae work, you can actually get covered for 100%25 of the remuneration that you're paying to an employee in an in eligible period. But that's only going to happen if, first of all, they're under the $847.00 max and if their pay has dropped from what they were getting paid prior to the COVID pandemic, ie: prior to the crisis. The total maximum subsidy, you'll see that in the second bullet, is $10,164.00 per employee. That's the $847.00 maximum multiplied by 16. That's how we get that. It could ... a lot if finance ends up extending the program past June 6^th, but for right now that's the maximum. As we noted, regulation, potentially, could extend the program to September 30^th, as it's currently worded but hasn't been extended yet. Okay. Now I'm ready.

So in terms of hiring new employees, to the extent those employees are arms length, ie: not controlling shareholders, not directors, not related to any of those people, you can go ahead and hire new employees and get covered. Get a portion of that pay covered under the subsidy. Non-arms length employees, you can't hire any new people, which basically means that you can't simply decide that you're now going to hire a bunch of family members and try to get a subsidy for a bunch of money that you're going to pay to them. That is kind of the blunt instrument they've used to prevent that from happening. Now, the one situation where this is actually a bit of concern is that a lot of owners/managers, for example, take the bulk of their compensation from their company by dividends and not by a salary. So, in that circumstance, that individual wouldn't have quote/unquote "pre-crisis employment income". Any salary that they suddenly get in an eligible period, is not going to qualify for the subsidy, because they were being paid by dividend before that. Whether or not there's a principle basis for drawing that distinction is a matter of some debate, but that is the distinction, that's kind of the hard line that's been drawn in the legislation as it's currently worded.

Okay. So we're going to go through a couple of examples here. There are actually several examples in the slides but we don't really have time to go through them all so I'll go through a couple of basic ones. In this one, let's assume that you've got an employee who's making $962.00  a week, prior to the pandemic and you maintain that salary post-pandemic. Under the formula, wages paid to that employee would qualify for a subsidy in an amount equal to the greater of either one or two. So the least, under one it's the least of $962.00 x 75%25. So $722.00 which is less than the $847.00 max and this employee is assumed to be arms length. So part one of the test gives you $722.00. Under part two of test, actual compensation is $962.00, compensation paid. The baseline compensation paid pre-crisis is $962.00 x 75%25. So that's $722.00 which gives you the same number you had in number one above. Again, the max is $847.00, which is greater than the $722.00. So in the first example there, you get the same number either way. $722.00 of the $962.00 would be your subsidy number. If you reduced it, on the bottom half of that slide, if you reduced it by 20%25, post-crisis, so that you only pay that employee $769.00, your numbers become different. Under part one of the test it's the least of what they're getting paid. $769.00 x 75%25. So that's $577.00. That's still less than your weekly max and, again, this is an arms length employee, we're assuming here. So part one it's $577.00. Part two of the test actually gives you a higher number because you're actually paying $769.00. The pre-crisis pay was $962.00. 75%25 of that is $722.00. So that's the number you get which is still less than the $847.00 max. So because the test let's you take the greater of one and two, you get covered for $722.00 of the $769.00 you're paying. Almost all of it but not quite, under that example.

Okay. Let's go to the bottom here. We just want to show you one example where you could actually get compensated for the whole amount that you're paying to our employee, post-crisis. That's basically if you are in a situation where you are reducing that employee's pay by more than 25%25 when compared to what the pre-crisis pay was. In the example at the bottom half of this slide we're contemplating 40%25 reduction in salary. Under part one of the test it's the amount you're actually paying, so that's $461.00 now x 75%25. That gives you $346.00. That's obviously way less than the max and, again, we're assuming arms length. So (c) doesn't apply there. So part one of the test let's you get a subsidy for $346.00. Part two of the test let's get you the least of the amount you're actually paying. So that's $461.00. The amount of pre-crisis pay, which was $769.00 x 75%25. So that's $576.00 here and then $847.00.  You're always going to be capped at what you actually paid, which is $461.00, but because in two, or in this example, they've experienced a decrease of more than 25%25 and you're actually paying less than the max, you're going to get covered for everything you paid that employee for the week, $461.00, forward. Obviously the exercise is pretty number intensive and you've got to a crunch a bunch of numbers to try to figure out what scenario works for both you and the employee, that hopefully gets them enough money to kind of get through the next few months, and at the same time let's you get as much subsidy as you can get. That's kind of the exercise. Pretty number intensive and very employee specific. Next slide, Neena.

Okay. So, we've had a bunch of questions on this because in the initial press conferences where the government was announcing the facts they kind of said that employers were going to be expected to make best efforts to keep employees, at what we call, pre-crisis compensation, ie: not to reduce their pay. And to the extent possible, that the government was going to pay 75%25 of the wage, they kind of expected employers to cover the remaining 25%25. None of that language has actually been included in the legislation so, while the government has said employers are expected to make good faith and best efforts to keep employees at the pay they were getting before, there's no penalty built into the legislation if that can't or doesn't happen. But there does appear to be good faith expectation on the part of government that employers will do what they can to keep employees whole, and obviously there are employee considerations with respect to what they expect their employers to do, and there are constructive dismissal and breach of contract considerations associated with any pay reductions, obviously.

One more note on an additional subsidy that was included in the CEWS package. To the extent that you are making employer contributions for CCP and EI premiums, those will also be refunded to you, to the extent they're made in respect of eligible remuneration. So that's another attempt to kind of increase cashflow for the employers. For employers with employees in Quebec it also applies to QPP and QPIP premiums. The employer half of those premiums.

Neena: Ted, I'm just going to skip you a few slides because I'm keeping on eye on time. I just thought we'd go to the next steps for employer slide and then move on to our example that we have.

Ted:    Sure. Basically, what should you be doing to kind of get ready for this? The portal opened on Monday, but as I said, applications can be made until October, but you obviously want to be getting money as quickly as you can. So make sure you register for direct deposit with CRA. Kind of get all the records together that you need to get to demonstrate the revenue reduction. CRA's got a wage subsidy calculator. It's a little bit rough but it lets you get a pretty good idea of the amount of subsidy that you qualify for. We've included a link there. Generally speaking, while what we're hearing is that payments, to the extent that people were able to apply on Monday, those people are kind of expecting payments to start flowing end of next week, by May 7^th. That might be optimistic but that's the information we've got so far.

Neena: Thank you, Ted. I'm going to turn this over to Colin to actually work through a small cashflow example just to see how this actually works for your business. Colin.

Colin:  Great. Thanks, Neena. Thanks, Ted. I will move through this relatively quickly, in view of the fact that we've outrun this information already and we're pressed for time, so we can move right into the example. Here we're looking at four components. Lots of slides flashing. Okay, hopefully we're settling on to slide 33. Perfect. Excellent. We have it. Measurement is key. We see that there's four components to this. Method, adjustments, consolidate, comparable periods. These are the four components that we'll want to bear in mind when you look to the example to try and find the right outcome for everyone. 34, please.

In terms of our example the question is how to account for revenue. As a starting point we've already discussed that there's two flexible options that we would consider. The accrual method, in terms of the standard approach, including sales on account of A/R, with a cash method based on actual sales cash receipts. Slide, please.

In terms of dealing with adjustments we adjust for items not in the course of ordinary activity, extraordinary items, revenue from non-arms length parties and related subsidies received or receivable. Just as a side note here, it may be worth having a discussion, with counsel and your accountant, if there's matters that you're not entirely sure how it should be accounted, bearing in mind that accountants don't have privilege. So if you send an email to them, on this topic, you'll want to make sure that thought that email through. Slide, please.

So consolidation. Flexible options here in terms of whether or not you consolidate the financial results of the affiliated group, joint venture, partnership, there's few restrictions in terms of how you do it, but the general rule of thumb is be consistent. Preliminary restrictions to consolidate, previous consolidate financials are not required, and there's no requirement for same for the similar type of business. Slide, please.

The question of what period, and as we've discussed here we can look at dealing with the calendar month of 2019, month to month comparisons or the average of Jan, Feb 2020. This provides some assistance for cyclical businesses, start-ups, R&D and there's a same basis comparison for all qualifying periods. Slide.

So let's look at an example very quickly. Here we're assuming a related group of corporations, all private Canadian controlled private corporations, and some associated group, and this applies from COVID-19 facts. We have operating results ... 1 March, different entities within the corporate group are hit hard but to varying extents and we have salaries ranging between $15,000.00 and 1.6 million dollars. Obviously we'd want to opt into the higher range but the point is there's a range in terms of the salary components. All in, 135 salaries, salaried employees, salary average of $60,000.00. Slide, please.

Here what we look at when we look at our example, my apologies I don't have the pointer and the bow tie to go full tax nerd on people, but when we have this what we'd be looking at is we'd see the Opt Co A would be showing, $1.00 in terms of it's January and February 2020 and then things started to go badly in March 2020, with .5, in terms of on the far side it's outcome. We look at Opt Co B, we see that it had skinnier income .3, in Jan, Feb 2020, and that it wasn't impacted at all when we look at March 2020. Here I recognize I'm ignoring, just for the current moment, that middle column but the point is that Opt Co B was not impacted, similarly passive corporation wasn't impacted at all. So the goal is not only to try and get Opt Co A involved, the employees that may be imbedded therein, but to see whether or not it's possible to get those additional entities, those additional corporations, the employees included in our CEWS application. What would we do is we would look and we'd say the January, February average works out for us but the March 2019 does not. The conclusion, again, is that consolidation permits us to include Opt Co B along with the passive corporation. This is a very, very rough and ready example to try and outline the process that we want to take. It's not a question of getting just one corporation, or the other, it's stepping back and asking what's the highest level example output that we can get to. Perfect. Neena, am I turning this over to you?

Neena: Thank you very much, Colin and Ted. Just wanted to very quickly indicate that although we spend a lot of time on CEWS there are other governmental measures aimed at helping employees. So we need to sort of think about how all of these interact with CEWS, or maybe your company does not actually qualify for CEWS, so you're looking at some of the other programs. There's a 10%25 temporary wage subsidy for small businesses, work sharing programs under EI, supplementary unemployment insurance benefits and the CERB, or our Canada Emergency Wage Subsidy, which is actually given directly to employees and independent contractors who have suffered income loss. The 10%25 temporary wage subsidy was announced first. It was for Canadian controlled private corporations, not for profits, registered charities and individual business proprietors that have a threshold of 15 million taxable capital or partnerships of same. This is an important point for you to know that it's automatically assumed that you're going to apply for it, if you're eligible, and it's paid for, really, by way of an offset or deduction on remittances that you would otherwise be liable to pay the government. But in terms of CEWS, it's really important to keep a track on that temporary wage subsidy, because if you're entitled to it it's assumed that you're going to take it and it reduces the actual dollar value of a CEWS payment that you will receive.

Now, work sharing. I'm not going to go through this in detail but this is an unemployment insurance concept. Whereby effectively there is a partial reduction in hours, or a partial layoff, if you want to call it that and EI will eventually pay prorated EI benefits to your employees for the portion of time that they're unemployed. And you will pay them for the hours that they work, as an employer. Now, it's been greatly simplified. When I was a young pup it used to take 30 days or more, it required a formal proof of downturn and it required a formal recovery plan. None of that applies anymore, and while it does require approval, we're hearing stories of people applying and getting contacted by an officer within 24 to 48 hours, although the government has committed a 10 day turnaround period. One thing that you need to know is that there's some misleading information on the government website. It's not intended to be a criticism, it's a recognition, that things are moving so fast that sometimes websites haven't been updated, but the application form is where you should go and it's greatly simplified. It actually walks you through the process. Couple of things you need to think about is any amounts that are paid by EI to your employees will actually reduce any CEWS payment that your company or business might be otherwise entitled to. In general, if you think you're going to be entitled to the CEWS payment, perhaps work sharing is not the best way to go. The other thing you need to know is that like all EI payments, it's subject to clawback at tax time if your employee earns more than $67,750.00 in 2020, from all employment sources. So typically for higher wage business work sharing is less attractive. I'm encouraging people to talk to their accountants and re-run the numbers and see whether or no work sharing works. There's a tremendous number of applications made in middle of March. It may be worth thinking about whether you want to cancel those in light of the greater availability of the CEWS payment.

One other thing, and I won't go through EI in detail, because that's really an employee benefit. One thing you need to know is even if your employee's laid off and terminated, and would ordinarily get EI, they're all going to be paid per ... and that's just the way it is. Even if they ordinarily would have earned more under EI. As mentioned earlier, I think by Ted, you cannot get a CEWS payment for an employee you haven't paid in 14 days, consecutive, in the qualifying period. CERB has been changed a little bit. Employees can earn up to $1,000.00 in a 4 week period. Income includes employment and self-employment and CERB doesn't apply to employees who are taking parental, compassionate care leave or the other kinds of EI leave. They will go into the regular EI period. Another word on CERB is, I get a lot of questions on this, there is a program called supplementary unemployment benefits. It's a way, quite frankly, of employers being able to top up employees who are on EI. There is no indication, yet, whether or not we can top up CERB payments the way some employers topped up EI payments. However, remember, you can pay your employees at up to $1,000.00 in a 4 week period without impacting their eligibility. One thing that's also interesting about CERB payments is there's no indication of clawback. You remember I mentioned a clawback at tax time if employee earns more than $67,750.00. That has not been talked about. I didn't see that in the legislation. So CERB has some interesting differences from EI. It's a simpler version if you will of EI. This was mentioned, I think by Ted earlier, it's possible to retroactively put people back on payroll to take advantage of their CEWS program. What will happen is there will be a repayment obligation on your employee at tax time, or perhaps before, but certainly by tax time, April 2021. I also mentioned the supplementary unemployment insurance benefits which is a top up mechanism. Now, remember, if you're going to try to top up anything, and it's regular EI as opposed to parental, pregnancy or illness and disability, you must have an application and you should. There's the application link, I've given it to you. The application is essentially got to be approved but the approval will be retroactively dated to the date of your application. Those are some of the programs that are employee focused that help either employees or employers help their employees and all try to get through this together.

We will review some of the other programs. One is the Canada Emergency Business Account, or CEBA or CEBA. That is actually administered through your own financial institution. It's not an application to the government. It's an interest free loan of up to $40,000.00 for small businesses. That's defined as the size of your payroll in 2019, 20 million to 1.5 million in 2019. The business can't be owned by somebody holding political office. Your business can't promote violence, hatred or discriminate on the basis of sex, gender and other protected grounds. You have to use it to pay non-deferable operating costs and can't use it for to increase dividends, management compensation or prepay or refinance debt. But the nice thing about the CEBA loan is that if it gets paid on or before December 31^st, 2022, essentially there'll be a loan forgiveness of 25%25. So not only is it interest free it's essentially getting $40,000.00 at the cost of $30,000.00 if you recover sufficiently to pay it off.

There's some business credit, or liquidity, programs through EDC and BDC that you apply through EDC and BDC for. In the interest of time we will not go through details.

There is the very well announced Canada Emergency Commercial Rent Assistance. That essentially is a program whereby landlords who have a mortgage will be given a forgivable loan. So this is what you have to remember. So landlord gets the forgivable loan as long as they lower the rent by 75%25 for their small business tenants. A small business tenant is one who pays less than $50,000.00 per month in rent. It's still a pretty hefty amount, $50,000.00 per month in rent, and it's a conjunctive test. They've either stopped operating, so think about your restaurants or storefront operations, or they've experienced a 70%25 drop in pre-COVID-19 revenue. So a much, much higher threshold than what you saw in the CEWS program. Non-profits and charitable organizations may also receive this benefit but we're looking for some clarification from finance as to what their criteria will be. So that's the Canada Emergency Commercial Rent Assistance and many of my clients will be trying to get some assistance through that program. The expectation, effectively, if you look at how the numbers work, is the government takes care of 50%25, so that's a forgivable loan to the landlord. The Tenant pays 25%25 and essentially the landlord absorbs 25%25. I will have this at the end but we've done a detailed seminar on the Canada Emergency Commercial Rent Assistance, and at the end of this program I've given you a link to that. There's also some deferrals of taxes. Income tax filing deadline is extended to June 1^st for individuals and the payment deadline to September 1^st, and also some deferrals of GST, HST, custom tariffs and some municipalities have also deferred property tax. All of this is really to help your cashflow. Eventually you're going to have it pay it but it does help with present cashflow issues and cash is king.

Now, most of you who are on this call, it's hard for us because we can't see you, are in the biotech industry and have been watching a number of announcements made by Prime Minister Trudeau over the last 2 weeks with great interest. So we're not going to go through all of these, in any detail at all, but just have put in slides so you have an inventory of the various initiatives announced by the Federal government, including on Coronavirus research and medical countermeasures. We also have the strategic innovation fund for COVID-19 with a very specific email site if you believe that you have a vaccine, or can assist with clinical trials, this is the email site for you to, essentially, register your interest in participating in the strategic innovation fund for COVID-19. Also, for those of you, who believe you can assist in expanding our manufacturing capacity, vaccine manufacturing, medication manufacturing, this is the site that you should be registered at. For all I know most of you have already gone ahead and, if you qualify, and done that. But again, this intended to be an inventory of what's been announced in the last 2 weeks. Then there's a number of supports that have been announced to protect Canadian jobs, about which we don't have sufficient details right now, to help you. Perhaps we'll be invited again. One of the things that we mentioned earlier is that it's very difficult for startups and there is actually a 20 million dollar fund for future entrepreneurs, for young entrepreneurs who are starting up. So it's just trying to help the startup, young community. A lot of these measures, as you will see, are really for innovated early stage companies that aren't really able to access either measures that are available.

This is a procurement plan that many of you are already aware of so I'm just going to skip through this very quickly, in the interest of time, all of which focusing our energies on responding to the COVID-19 pandemic. I would be remiss if I didn't mention and do a specific shout out to indigenous owned businesses. There's a specific fund of 306.8 million to help small and medium size indigenous businesses. That is, regardless of whether it's in the biotech sphere, or any other sphere. But some of you may actually qualify for the indigenous business funding. So I wanted to include it in this seminar.

I don't even want to think about what the total bill is going to be but most economists says that we've got to keep liquidity in the economy or we're going to go into another recession.

One other thing I wanted to do as a shout out as measures to help youth and students. I'm the parent of an 18 year old. So it's very, very dear to my heart. Essentially, if you had funding through the Canada Summer Job programs, now that funding portal or opportunity is closed, you should know that there's a potential increase of 100%25 of the minimum hourly wage for each employee, and an ability to stand employment February 28^th, 2021. So it's not really a summer jobs program. The government is recognizing that many opportunities have been curtailed due to COVID-19 and so people will be seeking to perhaps start even as late as September or July and that the funding will carry on to February 28, 2021. It also allows for part-time hires which wasn't allowed before. There's a number of programs that I encourage you to look at, I'm going to talk about a couple of them, to really help you develop additional job placements. There's a student work placement program I'm going to talk about. I'm actually on the board of Biotalent Canada so we administer that. My task is additional funding for job placements. There's a number of business and higher education initiatives to create 5 to 10,000 new student placements. So, really, a recognition that people are just starting their careers are going to be very much impacted by what's happening in the marketplace right now. My task, as I mentioned before, has significant funding for interns and I include the link to see where you can explore, whether you might be eligible, and it's a hefty subsidy. So really, the company covers $37.50 and my tax subsidy could actually cover the balance, up to $15,000.00. Biotalent.ca has significant funding for co-op student salaries. So it's $50,000.00 to a maximum of $5K and 70%25 to a maximum $7,000.00. So first, your students because they're young, under represented groups such as women, indigenous peoples, people with disabilities and newcomers or immigrants. So, I've given you those two links which has very helpful information. I'm going to skip through the actual requirements although they are here.

As you can tell there's a plethora of information and it's sometimes hard to find out where the information is. Our favourite site is the Canada government website which is routinely updated and that's the link. Our own Gowling WLG website, I mentioned we had a seminar earlier this week on the Commercial Rent Assistance program and that's the webinar there. We invite you to subscribe on COVID-19 topics and because of legislation you do to have to subscribe to get those updates. We want to thank you very much, all of us, for having paid attention through what has been a very intense and whirlwind tour through our program. I'm going to leave that up. I hope that was helpful to all of you and, of course, I know there's been a number of questions. What we plan to do, Ted, Colin and I, is go through your questions using the Q&A function and issue an FAQ along with the webinar update so you have answers to your questions. Emily, I hope that's helpful to you.

Emily: Yes. That's extremely helpful. We will do that as you're just about out of time. Neena, Colin and Ted, thank you all so much for taking the time to be here with us today and going through this really important topic that has been well attended today. Really grateful for your time.

Colin:  Thank you. Our pleasure.

Ted:    Thanks.

Emily: I know you're calling Jennifer Tam. She did add some links to the chat feature to all attendees. So if anyone's curious for more information you can go ahead and click that link, down at the bottom in the chat feature. So with that, if we're taking questions after the session and sending out the FAQ page to all attendees, we will end it there.

Neena: One thing. I believe that there is a seminar that Gowling is doing with BIOTECanada next week. Did you want to give a shout out for that as well?

Emily: Yes. I do but the time and date has not yet been confirmed. So I will wait to do that by email. Great.

Neena: Thank you for inviting us, very much. We really enjoyed it.

Emily: Of course. Thanks for being here. Great. Thanks everyone. I will end the meeting right here.

Colin:  Thank you.