By Timothy Dunn, Financial Services, Bankruptcy, and Insolvency Lawyer
Over the past few weeks, terms like “social distancing” and “self-isolation” have found their way into the common vernacular and will no doubt end up being the Merriam Webster words of the year. In the wake of the exponential spread of the COVID-19 virus and the resulting shut down of non-essential businesses, we are all adjusting to a new financial landscape.
To say that the current crisis is dynamic would be a serious understatement. To be sure, the shuttering of businesses during the government-mandated shut down period has had an immediate effect on owners that now have debt obligations but no revenue and on employees who must rely upon their savings and whatever aid is offered as part of government stimulus packages.
The longer-term effects on the Canadian economy are too speculative to dwell upon and, in truth, such speculation serves no meaningful purpose.
What does serve a meaningful purpose - whether you are a business owner, a landlord, a lender to a business, or an employee of any of these essential players in our economy - is taking the time to assess your financial position and to understand your legal options.
The following checklist should form the basis of any financial assessment in the current crisis:
- What is the expected life-cycle of this crisis?
- Are current financial resources sufficient to cover necessary expenses during this period? For business owners, radically honest cash flow modeling and management are essential.
- Are there any non-essential costs that can be eliminated?
- Are the Canada Emergency Response Benefit or Wage Subsidy programs a source of potential assistance?
- What, if any, creditors will allow a payment deferral or payment forgiveness during the crisis? For business owners, the logical first step is to approach lenders and landlords to determine if any relief is possible.
- For landlords receiving requests for rent deferral, requiring complete financial disclosure is a prerequisite for considering any such request.
- For business owners with business interruption insurance, consider whether the coverage has been triggered.
If the financial assessment indicates no viable path forward without recourse to the protection of insolvency legislation, the various options provided under these statutes need to be fully explored and understood with insolvency experts before any decisions or steps are undertaken. Bankruptcy is not the only option.
When this crisis ends, it will be the businesses, landlords, lenders, and employees that act now to understand their respective financial positions, who use all the stimulus benefits being offered by the Provincial and Federal governments and the legal protections our restructuring and other insolvency laws provide that will be best positioned to weather the financial storm.
Our Financial Services Group has a tremendous depth of expertise in assisting all manner of stakeholders dealing with issues relating to financial distress. Now, possibly more than ever, anyone adversely affected by the current COVID-19 crisis needs to protect their financial future by getting the expert advice they need to understand all of the available options to weather the current financial crisis. For questions on bankruptcy or insolvency options and solutions, contact Timothy Dunn at firstname.lastname@example.org.
For more COVID19 articles prepared by various practice groups of Minden Gross LLP, visit https://www.mindengross.com/our-firm/covid-19-response.