VREG Blog

The fallout continues from the sudden collapse of Small Business BC — an organization long regarded as too big to fail due to the vital resources it provided to small businesses across British Columbia and its close ties, including significant public funding, with both the provincial and federal governments. Each year, Small Business BC supported tens of thousands of small businesses and entrepreneurs by offering educational programs and advisory resources that helped them start, grow, and manage their businesses successfully, including avoiding or navigating through bankruptcy. The shutdown of Small Business BC comes at a time of economic uncertainty and poor economic fundamentals, leaving small businesses at a higher risk of bankruptcy. For example, in recent weeks, businesses impacted by the prolonged shutdown of Canada Post services during the busy Christmas shopping season may have sought advice from Small Business BC. Small business is big business in BC; over 500,000 small businesses make up 98% of all businesses in the province, and employ over 40% of the BC workforce or over 1.1 million people. They also represent over half of private-sector employment. However, the non-profit organization shut down, filed for bankruptcy, and laid off about three dozen staff members on December 5, 2024. Bankruptcy filings show the non-profit organization is facing $5.733 million of claims (including $5.65 million to unsecured creditors) from 63 different entities, including businesses, individuals, non-profit organizations, and governments. Governments account for 76% of total claims Of this amount, the claims made by entities of the provincial and federal governments represent a combined $4.35 million or 76% of the total claims. From the Government of British Columbia, the claims entail about $1.72 million from the BC Ministry of Social Development and Poverty Reduction and $794,000 from the BC Ministry of Jobs, Economic Development, and Innovation, as well as smaller claims of nearly $60,000 from WorkSafe BC, $10,800 from Revenue Services of BC, $7,200 from Destination BC, and $1,500 from the BC Ministry of Finance. The single largest claim is $1.78 million by the Government of Canada’s Department of Innovation Science and Economic Development. Some of the non-governmental claims include $3,150 from PostMedia Network, $18,200 from Vancity Credit Union, $22,600 from Fortis BC, and $43,000 from unpaid rent for Small Business’ office at City Square Mall in Vancouver. The third largest claim being made is from unpaid salaries/wages and other compensation of the staff of Small Business BC. Under the federal Wage Earner Protection Program Act, which kicks in when an employer has filed for bankruptcy, the staff of the organization are owed about $890,000. “We have some staff who have been in their positions for a while, one in particular over 30 years. We have a couple more employees with 20+ years under their belt, so they have actually built up quite a bank of severance payments,” said a laid-off employee of Small Business BC in an interview with Daily Hive Urbanized on Friday, speaking on the condition of anonymity. “There’s people who are, if their layoff had proceeded in slightly rosier financial circumstances, they would be looking at quite a bit of money right now, and there’s absolutely no certainty whether we’re going to get any of that.” “Secrecy” about financial mismanagement Canada’s bankruptcy and insolvency laws require a bankrupt entity to provide a declaration to all creditors. This includes selecting all applicable reasons from 19 checkboxes, each outlining a different cause of the debtor’s financial challenges. Just two boxes were checked for Small Business BC’s situation — the “Increased Cost of Doing Business” and “Other (Please specify).” It was specified in writing that the “Other” reason is the “Mismanagement of funds.” Daily Hive Urbanized spoke with an accountant who specializes in bankruptcy proceedings. They explained that, generally, the term “Mismanagement of funds” when applied to the context of non-profit organizations could, as a theoretical example, refer to situations where funds provided by a government grant or program were used for purposes other than those intended. But it could also mean a scenario where a significant amount of money spent on an initiative was not offset by sufficient revenue. There are different ways of interpreting the relatively broad term. The accountant also noted that, because many non-profit organizations operate on relatively limited budgets, implementing all the necessary checks and balances could be challenging due to the additional costs involved. The legally stated reasons for the bankruptcy of Small Business BC. The former Small Business BC employee laid off by the bankruptcy proceedings told Daily Hive Urbanized that the organization’s leadership has not been forthcoming with sharing knowledge over how exactly the financials were mismanaged. “There has been quite a bit of secrecy about what exactly the financial mismanagement was. Staff were kept in the dark and are still kept in the dark,” they said. “Whenever we inquired what exactly is going on here, we were always met with the response, ‘Oh, sorry, we’re not allowed to discuss that.’” They shared that the situation first saw daylight in early November 2024, when Small Business BC board chair Joyce Yip held an organizational-wide meeting with all employees. She read out a prepared statement that informed the workforce that the board of directors had been recently been made aware of “significant financial mismanagement.” At that point, she said the board of directors had accepted the resignation of COO Josh Ludgate and suspended both CEO Tom Conway and the financial