Image: Simon Hill
The Global Covid-19 pandemic has affected everyone in various ways in Canada including businesses and as we emerge from the imposed lockdown, one of the questions insolvent businesses may need to respond to is whether to file for bankruptcy.
No doubt, the government has been supportive of the economy by providing fiscal palliatives to keep businesses afloat which in turn has postponed key decision businesses have to make regarding their affairs. It is noteworthy that bankruptcy filing was at an all-year low in March 2020 despite the economic gloom. While this may seem like good news, the government’s fiscal palliatives to businesses are not infinite which will cause insolvent businesses to ultimately rethink strategies to continue to stay afloat.
In order to avoid the stigma of bankruptcy, businesses may decide to reorganize their business affairs to make it more profitable or negotiate with creditors so as to come up with better payment structure to keep the business thriving while servicing its debts. There are other alternatives a business may explore to avoid bankruptcy which is not discussed in this write-up and some alternatives may involve the full cooperation of secured creditors. Nonetheless, the decision a business decides to embark on is predicated upon its structure since there is no one size fits all.
In concluding whether a business is going to survive after the Covid-19 pandemic, recourse must be had to its fiscal status before the pandemic. This is not in itself conclusive and as we mentally absorb the bankruptcies of retail giants all over the world, struggling businesses must endeavour to act with despatch regarding their business affairs. If you are unsure what steps to take, do ask a professional.
This article is intended for informational purpose only and does not constitute legal advice or a client-lawyer relationship.