Intercreditor Agreement Template for Canada

An Intercreditor Agreement is a critical legal document that governs the relationships and priorities between multiple creditors in complex Canadian financing arrangements. When your business involves senior debt, subordinated loans, mezzanine financing, or bond issuances from different lender groups, this agreement ensures each creditor understands their position in the capital stack and their rights during both normal operations and potential default scenarios.

When do you need this document?

You need an Intercreditor Agreement whenever your financing structure involves multiple layers of debt from different creditor groups. This commonly occurs in leveraged buyouts where senior banks provide primary financing while mezzanine lenders offer subordinated capital. Real estate developments often require these agreements when construction lenders, permanent lenders, and equity investors all hold security interests in the same project. Corporate acquisitions frequently involve senior term loans, revolving credit facilities, and high-yield bonds that require priority coordination. You'll also need this document when refinancing existing debt while maintaining subordinated obligations, or when adding new creditor classes to existing financing arrangements.

Key legal considerations

The ranking and priority provisions form the foundation of any Intercreditor Agreement, establishing which creditors get paid first from available cash flows and security proceeds. Payment waterfall clauses dictate the specific order and conditions under which different creditor classes receive distributions. Security sharing arrangements determine how collateral is held and enforced, often through a common security trustee structure. Enforcement standstill provisions prevent junior creditors from taking action that could interfere with senior creditor rights. Voting and consent requirements establish decision-making protocols for amendments, waivers, and restructuring scenarios. Turnover provisions require junior creditors to remit certain payments received in violation of the priority structure to senior creditors.

Legal requirements in Canada

Canadian Intercreditor Agreements must comply with the Personal Property Security Act in each relevant province, which governs security interest creation, perfection, and priority rules. The Bankruptcy and Insolvency Act provides the federal framework for creditor rights and priorities in formal insolvency proceedings. Under the Companies' Creditors Arrangement Act, intercreditor arrangements may be subject to court supervision during CCAA restructuring processes. The Bank Act imposes specific requirements when chartered banks are parties to the agreement, particularly regarding security interests and lending restrictions. Provincial corporate legislation may affect security granting and guarantee enforcement provisions. Registration requirements under provincial PPSA regimes must be carefully coordinated to ensure proper priority protection. The agreement should address Canadian tax withholding obligations and ensure compliance with foreign investment regulations where applicable.