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Government Aid to Small Business and Start-Ups

In Quebec, small and medium-sized businesses make up the majority of businesses in operation in the province. In fact, according to Statistics Canada, over 99% of businesses in Quebec are either small or medium-sized[1]. A small business is defined as a business that employs between 1 to 99 employees. Medium-sized businesses, on the other hand, usually consist of anywhere between 100 to 499 employees. Large businesses, which make up around 0.3% of all the businesses operating in Quebec, employ over 500 employees[2].

Recently, both the federal government and the Quebec government announced measures to aid small business and start-ups during these times where many are struggling.

Canada Emergency Business Account (CEBA)

The Federal government has instituted programs, such as the Canada Emergency Response Benefit (CERB), the Canada Emergency Student Benefit (CESB) and the Canada Emergency Business Account (CEBA), to aid those affected by the pandemic.

CEBA, in particular, was announced to help small businesses whose revenues were declining as a result of the current situation. Under CEBA, small businesses have access to “zero-interest, partially forgivable loans up to $40,000”[3].

On May 19, 2020, CEBA was modified in order to have a more comprehensive scope of application. Previously, only businesses with a payroll and a business account were eligible to apply for the program[4]. With the recent modifications, “applicants with payroll lower than $20,000 would need: (1) a business operating account at a participating financial institution, (2) a Canada Revenue Agency business number, and to have filed a 2018 or 2019 tax return, and (3) eligible non-deferrable expenses between $40,000 and $1.5 million. Eligible non-deferrable expenses could include costs such as rent, property taxes, utilities, and insurances”[5].

The Canadian government also announced that they are examining solutions to provide aid to entrepreneurs who utilize solely a personal bank account or have not filed a tax return, which would include newly created businesses[6].

Programme d’aide à l’entrepreneuriat (PAEN)

The Quebec government has also instituted the Programme d’aide à l’entrepreneuriat (PAEN) to help businesses in any stage of growth, whether it is during the early stages of development or in an acquisition process, for example[7]. However, more specifically concerning start-ups, the third part of PAEN is precisely focused on aiding the development of start-up businesses.

The goals of the third part of the PAEN are threefold. First, this program seeks to encourage the creation, development and integration of a pivot in the business model of corporations who have a high growth potential. In addition, the program aims to contribute to the development of new technologies and their subsequent entry into the marketplace. Lastly, this program has the objective of assisting in the creation of highly skilled jobs[8].

In order to be admissible for this program, the start-up must fulfill the following criteria:

· It must be a for-profit corporation, duly incorporated under the laws of Quebec or Canada and having an establishment in Quebec;

· It must be a collective enterprise as defined by the Social Economy Act;

· It must be an innovative corporation with a high growth potential that has been in existence for less than three years;

· If controlled by another corporation, this control must not be superior than 50% and the start-up corporation must not have been created in the process of a merger, restructuring, an extension of pre-existing activities or the resumption of said activities;

· The corporation most own the intellectual property rights associated to their product or process;

· The corporation must not have conducted any sales of their product or process, unless they were validation sales;

· The corporation must dedicate over 50% of its resources to its development and the creation, development, and subsequent sale, of its product or process; and

· The corporation must currently be receiving aid from a business incubator or accelerator[9].

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[1] https://www.ic.gc.ca/eic/site/061.nsf/eng/h_03114.html#1.1 (Updated December 10, 2019). [2] Id. [3] https://pm.gc.ca/en/news/news-releases/2020/05/19/prime-minister-announces-expansion-support-workers-and-small (Published May 19, 2020). [4] https://nationalpost.com/news/politics/changes-to-covid-19-small-business-support-program-welcome-but-rent-relief-still-needs-fixing (Published May 19, 2020) [5] https://pm.gc.ca/en/news/news-releases/2020/05/19/prime-minister-announces-expansion-support-workers-and-small (Published May 19, 2020). [6] Id. [7] https://www.economie.gouv.qc.ca/bibliotheques/programmes/aide-financiere/programme-daide-a-lentrepreneuriat-paen/?no_cache=1 [8] https://www.economie.gouv.qc.ca/bibliotheques/programmes/aide-financiere/programme-daide-a-lentrepreneuriat-paen/soutien-aux-jeunes-entreprises-innovantes-a-fort-potentiel-de-croissance/?fbclid=IwAR1vp9sXQ1IjSHE-jsG1LdJBXOATWqGhBcyWSBXha0Wi7vpNhbgdUVDQt-4 [9] Id.


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