Written by As a business owner, it`s important to understand the different types of agreements that you may need to enter into in order to protect your assets. One such agreement is a General Security Agreement (GSA) in Ontario.
A GSA is a legal document that provides a lender with a security interest in the borrower`s assets. This means that if the borrower defaults on the loan, the lender has the right to take possession of the secured assets and sell them to recover the outstanding debt.
In Ontario, a GSA must be registered with the Personal Property Security Registration (PPSR) system. This system is used to establish priorities between different secured creditors in the event of a default.
There are two types of GSAs in Ontario: specific and floating. A specific GSA secures a particular asset or group of assets, while a floating GSA covers all of the borrower`s present and future assets.
It`s important to note that a GSA is different from a personal guarantee, which is a separate agreement where an individual agrees to be personally liable for the borrower`s debts.
In order to create a GSA, the borrower and the lender must agree to the terms and conditions of the agreement. This includes identifying the secured assets, the duration of the security interest, the interest rates and fees, and the conditions under which the lender can enforce the security interest.
If you are entering into a GSA, it`s important to seek legal advice to ensure that the agreement is drafted correctly and that you understand your rights and obligations under the agreement.
In summary, a General Security Agreement is a legal document that provides a lender with a security interest in a borrower`s assets in case of default. It is an important tool in protecting assets and ensuring that lenders have a method of recovering outstanding debts. In Ontario, GSAs must be registered with the PPSR system and there are specific and floating types of GSAs. Seek legal advice before entering into a GSA to ensure that the agreement is drafted correctly and that you understand your rights and obligations.