Guaranty And Security Agreement for Canada

Guaranty And Security Agreement Template for Canada

A Canadian Guaranty and Security Agreement is a hybrid legal instrument that combines a guarantee of payment or performance with the granting of a security interest in specified collateral. The document is governed by both federal and provincial laws, including the Personal Property Security Act (PPSA) of the relevant province(s) and the federal Bankruptcy and Insolvency Act. It establishes the guarantor's obligation to fulfill the principal debtor's obligations and creates a security interest in the guarantor's assets as collateral, providing the secured party with enforcement rights upon default. The agreement must comply with specific Canadian legal requirements for both guarantees and secured transactions, including proper registration under the applicable PPSA system.

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What is a Guaranty And Security Agreement?

The Guaranty and Security Agreement is a fundamental document in Canadian secured lending and corporate finance transactions, used when a party wishes to guarantee another's obligations while also providing collateral security. This agreement is particularly crucial in commercial lending scenarios where additional security is required beyond the principal debtor's assets. The document serves dual purposes: it establishes the guarantor's commitment to fulfill the principal debtor's obligations and creates a security interest in the guarantor's assets as backup collateral. Subject to Canadian federal and provincial laws, including the PPSA and Bankruptcy and Insolvency Act, the agreement must be properly structured to ensure enforceability and maintain priority of security interests. It typically includes detailed provisions regarding the scope of guaranteed obligations, collateral description, enforcement mechanisms, and the parties' respective rights and obligations.

What sections should be included in a Guaranty And Security Agreement?

1. Parties: Identification of the guarantor, secured party, and principal debtor

2. Background: Context of the agreement, relationship between parties, and reference to principal obligations

3. Definitions and Interpretation: Key terms, rules of interpretation, and calculation of time periods

4. Guarantee: Scope of guaranteed obligations, nature of guarantee (absolute/conditional), and payment terms

5. Grant of Security Interest: Creation and grant of security interest, description of collateral

6. Representations and Warranties: Guarantor's representations regarding authority, ownership of collateral, and legal status

7. Covenants: Positive and negative obligations of the guarantor regarding collateral and business operations

8. Events of Default: Circumstances constituting default and triggering enforcement rights

9. Enforcement Rights and Remedies: Secured party's rights and remedies upon default

10. Application of Proceeds: Order of application of proceeds from enforcement

11. General Provisions: Standard clauses including notices, amendments, governing law, and severability

What sections are optional to include in a Guaranty And Security Agreement?

1. Consumer Protection Provisions: Required when guarantor is an individual or consumer, including mandatory disclosures and cooling-off rights

2. Cross-Border Provisions: Required when collateral or parties are in multiple jurisdictions

3. Subordination and Postponement: Used when there are multiple secured creditors requiring priority arrangements

4. Insurance Requirements: Detailed insurance obligations when collateral requires specific insurance coverage

5. Bank Act Security: Special provisions when secured party is a bank taking security under Section 427 of the Bank Act

6. Quebec-Specific Provisions: Required when agreement covers Quebec assets or parties

7. Environmental Matters: Required when collateral includes real property or environmentally sensitive assets

8. Intellectual Property: Required when collateral includes significant intellectual property assets

What schedules should be included in a Guaranty And Security Agreement?

1. Schedule A - Description of Collateral: Detailed description of all assets subject to the security interest

2. Schedule B - Permitted Liens: List of pre-existing or permitted encumbrances on the collateral

3. Schedule C - Locations of Collateral: List of all locations where collateral is kept or may be kept

4. Schedule D - Intellectual Property: Detailed list of intellectual property included in collateral

5. Schedule E - Legal Description of Real Property: Description of any real property related to the security interest

6. Appendix 1 - Form of PPSA Financing Statement: Template for personal property security registration

7. Appendix 2 - Compliance Certificate: Form of periodic compliance certification by guarantor

8. Appendix 3 - Power of Attorney: Form of power of attorney for enforcement purposes

Authors

Alex Denne

Head of Growth (Open Source Law) @ Genie AI | 3 x UCL-Certified in Contract Law & Drafting | 4+ Years Managing 1M+ Legal Documents | Serial Founder & Legal AI Author

Jurisdiction

Canada

Publisher

Genie AI

Document Type

Security Agreement

Cost

Free to use
Relevant legal definitions
Clauses
Relevant Industries

Banking and Financial Services

Manufacturing

Real Estate and Construction

Technology and Software

Healthcare

Agriculture

Energy and Natural Resources

Retail and Consumer Goods

Transportation and Logistics

Professional Services

Relevant Teams

Legal

Finance

Treasury

Risk Management

Compliance

Credit

Corporate Secretariat

Commercial Banking

Collateral Management

Operations

Relevant Roles

Chief Financial Officer

Treasury Manager

Corporate Counsel

Legal Director

Credit Risk Manager

Commercial Lending Officer

Collateral Manager

Financial Controller

Security Trustee

Compliance Officer

Corporate Secretary

Risk Management Director

Finance Director

Banking Relationship Manager

Industries
Teams

Employer, Employee, Start Date, Job Title, Department, Location, Probationary Period, Notice Period, Salary, Overtime, Vacation Pay, Statutory Holidays, Benefits, Bonus, Expenses, Working Hours, Rest Breaks,  Leaves of Absence, Confidentiality, Intellectual Property, Non-Solicitation, Non-Competition, Code of Conduct, Termination,  Severance Pay, Governing Law, Entire Agreemen

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