What Does A General Security Agreement Do

These agreements can secure current or future debt, and the underlying assets can be tangible assets of your business, including: The trap? If the secured party does not register correctly, it may lose the benefits of the GSA. The legal requirements for such registrations are often complex to apply to a particular situation. A secure party should seek legal advice to ensure that appropriate registrations are made in all appropriate jurisdictions. Any tips? Assets that may be registered as security under a security agreement include product inventory, furnishings, equipment used by a business, furnishings and real estate owned by the company. The borrower is responsible for maintaining the guarantee in good condition in case of default. Assets listed as security may not be removed from the premises unless the asset is required in the course of regular commercial activities. Companies usually act as guarantors of GSAs, although partnerships, SAZs and sometimes individuals can also issue these agreements as investors for your company. Ask a professional or lawyer to review your security agreement, as GSAs can be complicated and filled with legal jargon. Make sure the agreement correctly lists all your information and understands what happens if you are in default. They don`t want surprises when it comes to legal documents.

Due diligence and corporate action. The debtor`s lawyer should issue a notice that he has implemented all necessary legal due diligence measures and that the debtor has taken the appropriate commercial steps to authorize the GSA. This includes a review by counsel of all relevant laws related to the GSA, . B such as the Business Financial Support Acts, which prohibit a debtor in some provinces from providing such security unless the debtor meets certain complex financial criteria. After signing the general security agreement, the debtor is obliged to perform the actions mentioned in the agreement, e.B. repay a certain amount to the lender, not allowing third parties to take measures regarding the guarantee without the agreement of the lender and not to change control of the company without the consent of the lender. Real estate. A secured party might assume that the debtor`s “assets” include its immovable property. The trap? In the Atlantic provinces, a GSA cannot guarantee interests in real estate. The advice? Land, rental shares in land, rents and rental contracts must be secured by real estate guarantees such as a mortgage, bond, lease assignment or rent assignment instead of a GSA. The main exception to the priority rule is the personal currency security right (PMSI), where a supplier of goods or equipment provides security on goods delivered (but not yet paid).

For example, a hire purchase agreement for a refrigerator or a loan from a financial company secured by a motor vehicle (standard property). A PMSI creditor has a “super” priority for the recovery of his unpaid goods and/or equipment. Security agreements often include agreements that include provisions for fund support, a repayment plan, or insurance requirements. The borrower may also allow the lender to retain the loan guarantee until repayment. Collateral agreements may also cover intangible assets such as patents or receivables. The secured party must register a security notice created by a GSA by filing a financing statement in the appropriate Provincial Personal Property Registry (PPR) and perhaps also under the United States Uniform Commercial Code or elsewhere, depending on the type of encumbered assets. The secured party may need to make multiple registrations in different provinces, depending on the type of secured assets, where they are located, and the jurisdictions in which the debtor operates. Depending on the circumstances, a GSA that secures rents may need to be registered in the PPR, in addition to entering the associated rent allowance in the land register. .