What is this document?
A General Security Agreement (GSA) creates a security interest in the personal property of a debtor, and is used to give security for a loan. Personal property means property that is not real estate.
When would I use this document?
This agreement is used with a loan agreement when the lender wants to have security for repayment of the loan. In general terms this means that if the borrower defaults on the loan, the collateral can be sold and the proceeds can be used to pay back money owed on the loan. A GSA is used only when personal property (not real estate) is used as collateral. If a loan is secured with real estate, a mortgage is required.
Who signs this document?
This agreement is signed by the borrower (also called the debtor) and the lender or creditor (often called the secured party). The secured party may also require another corporation or individual to sign as a guarantor of the debtor’s obligations.
More details about this document
While a General Security Agreement (GSA) does not create a loan, a loan document may contain a GSA. The debtor will grant a security interest in personal property to the lender. The property then becomes ‘collateral’, and the lender then becomes a ‘secured party’. The collateral will be described in the GSA and can range from one specific piece of property to all of the debtor’s current or future assets. The GSA will contain clauses that deal with default, and how the secured party may deal with the collateral if the debtor defaults.
In Canada, security interests in personal property are governed by provincial legislation. Priority will usually depend on registration of the security interest in the personal property security registry of the applicable province. Registration of the security interest is a separate process from entering into a GSA.
What are the core elements of this document?
The core elements include: Grant of Security Interest, Description of Collateral, Definition of Obligations, Attachment, Default, Effects of Default, Term, Termination, Remedies, Dealing with the Collateral, and Authorization to Register.
Some additional clauses could include Representations and Warranties, Deficiencies, Disposition of the Collateral, Assignment, Ownership of Collateral.
Related Documents
- Loan Agreement - an agreement that sets out the terms of a loan
- Share Purchase Agreement - an agreement governing the sale of shares
- Equipment Lease - an agreement for the lease of equipment, which can be used either as a ‘true lease’ or as a vehicle to finance the equipment
- Promissory Note - a written promise to pay money, often used to provide some security for payment of a debt.