Floating Deed Of Trust Template for Canada

A Floating Deed Of Trust is a sophisticated security instrument that creates a floating charge over your business assets under Canadian law. Unlike fixed charges that attach to specific assets, this document allows you to maintain operational flexibility while providing comprehensive security to lenders. The floating charge "floats" over your changing inventory, accounts receivable, and other business assets, only crystallizing into fixed charges upon specified events like default or insolvency.

When do you need this document?

You need a Floating Deed Of Trust when entering syndicated lending arrangements where multiple banks or financial institutions provide credit facilities. This document is essential for businesses seeking working capital loans while maintaining the ability to sell inventory and collect receivables in the normal course of operations. Manufacturing companies, retail businesses, and distributors commonly use floating deeds of trust because their asset base constantly changes through sales, purchases, and business operations. The document is also crucial when refinancing existing facilities or when lenders require additional security beyond traditional fixed charges on real estate or equipment.

Key legal considerations

The floating charge provisions must clearly define which assets are included and specify crystallization events that convert the floating charge into fixed security interests. You must understand the priority rules under provincial Personal Property Security Acts, as floating charges typically rank below fixed charges and purchase money security interests. The trustee's powers and duties require careful consideration, including their authority to appoint receivers, realize on security, and distribute proceeds among beneficiaries. Default provisions should be precisely drafted to avoid disputes, and the document must include proper notice requirements for enforcement actions. Cross-default clauses linking to other credit agreements need careful review to prevent unintended acceleration of obligations.

Legal requirements in Canada

Federal Bank Act requirements apply when chartered banks are involved, mandating specific disclosure of interest calculations and security terms. Provincial Personal Property Security Act registration is typically required to perfect the floating charge against third parties, with specific filing requirements varying by province. The Interest Act governs disclosure of effective interest rates and calculation methods for the underlying secured obligations. Provincial Trustee Acts impose fiduciary duties on trustees and may require specific qualifications or bonding arrangements. Land Title Act provisions apply if the floating charge extends to real property interests, requiring appropriate registrations against title. Some provinces have specific requirements for receiver appointments and realization procedures that must be incorporated into the deed's enforcement provisions.