Question Period Note: Business in financial trouble funded by CED

Business in financial trouble funded by CED

• Canada Economic Development for Quebec Regions ensures the sound management of public funds and assesses each project on the basis of the information presented to it at the time of the analysis.

• The government shares the risks with other partners and ensures that mitigation measures are put in place, if necessary.

• Canada Economic Development for Quebec Regions supports businesses that come up against unforeseen difficulties overcome the obstacles and successfully complete their projects, within the limits of the rules governing the funding provided.

CED does not comment on its clients’ files, since they contain confidential third-party business and financial
information.

CED may sometimes be prepared to support riskier projects, if justified by the potential benefits for the
regional economy.

• CED thoroughly assesses all files submitted.

• When assessing a project, the advisor specifically looks at the risks associated with the project, the
  client’s repayment capacity, the management team’s experience and the viability of the funding package.
  Once the project has been approved and the client has signed the contribution agreement with CED, the
  contribution is paid out according to a project implementation schedule established at the time of the assessment, upon submission of claims for costs incurred and supporting documentation based on the
  level of risk.

• In the case of repayable contributions, at the end of a project, the client is entitled to a repayment
  moratorium (usually two years). The client then generally has five years, according to the agreement, to
  repay the assistance in regular instalments, without interest.

• Over the course of the agreement, the business office

  • regularly monitors the client according to the project’s level of risk;
  • amends the agreement, as required, with the mutual consent of the parties; and,
  • as a last resort, declares the client to be in default or recalls the contribution paid out when required for the protection of public funds (e.g., bankruptcy, project write-off).

Higher risk cases
* CED may decide to support a higher-risk project because of the even greater potential benefits it could
offer for the community or a business line. Take the example of a start-up that wants to market an
innovation and try to tap into a highly competitive market in which there are no Canadian companies.

• In such situations, CED attempts to share the risk with other funding partners and will add a series of additional measures to its contribution agreements designed to mitigate the risk over the course of the
  project. These measures may include more frequent monitoring, accepting security such as a mortgage (quite rare), subordinating shareholder advances, or paying out the assistance based on revenue milestones.

• Despite all the monitoring and precautions taken for a file, a business may still encounter financial
  difficulties as a result of circumstances that are unpredictable or beyond their control.

• When arrangements are possible, CED can discuss them with the client and its financial partners and try to come up with the best solution for all the stakeholders involved. If no acceptable outcome can be identified, and if the client cannot follow through on its commitments to CED under the contribution
  agreement that it has signed, the business office will transfer the file to the CED Recovery team, which
  will take over the case.

• Write-offs have been made for the following fiscal years:

  • 2019 - 2020 (32 files for $12.5 million)
  • 2020 - 2021 (26 files for $2.5 million)
  • No write-offs in 2021–2022.
  • No write-offs in 2022-2023

Despite the thorough assessment of funding applications, it sometimes happens that businesses receiving
Canada Economic Development for Quebec Regions (CED) funding run into financial difficulties. This can make
it hard for the businesses to repay the funding awarded, or they may find themselves unable to complete their
project or having to seek protection under the Bankruptcy and Insolvency Act. In such situations, CED attempts
to find the best solution for all stakeholders involved.