A general security agreement (GSA) is a legal document that allows a lender to secure its interest in a borrower`s property. It is commonly used in Canada as a form of collateral for loans and other forms of credit.
A GSA is also known as a security agreement, security interest agreement, or simply a security agreement. It outlines the terms and conditions of the borrower`s obligations to the lender and the rights and remedies available to the lender if the borrower defaults on the loan.
In Canada, a GSA is governed by the Personal Property Security Act (PPSA) and is filed with the applicable provincial or territorial registry. Once the GSA is filed, the lender`s security interest is perfected, which means that the lender has priority over other creditors in the event of default.
A GSA can be used to secure any type of personal property, including inventory, equipment, accounts receivable, and even intellectual property. It can also be used to secure future assets that the borrower might acquire during the term of the loan.
When drafting a GSA, it is important for both the borrower and the lender to understand their respective rights and obligations. For example, the borrower must ensure that they are not granting a security interest in property that they do not own, while the lender must ensure that they are properly registering their security interest and complying with all applicable laws and regulations.
In the event of default, the lender has several remedies available, including the right to seize and sell the secured property, to appoint a receiver to manage the property, or to sue the borrower for the outstanding debt.
Overall, a general security agreement is an important legal document that provides lenders with a level of protection when lending money or providing credit to borrowers. It is essential that both parties understand their obligations and rights under the agreement to ensure a smooth and successful transaction.