Promissory Note And Security Agreement for Canada

Promissory Note And Security Agreement Template for Canada

A comprehensive legal document governed by Canadian federal and provincial laws that combines a promissory note (evidencing a debt obligation) with a security agreement (providing collateral as security for the debt). The document details the loan terms, including principal amount, interest rate, and payment schedule, while simultaneously creating and documenting a security interest in specified collateral. It incorporates requirements from the federal Bills of Exchange Act for the promissory note portion and provincial Personal Property Security Act provisions for the security aspects, ensuring enforceability of both the debt and security components.

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What is a Promissory Note And Security Agreement?

The Promissory Note and Security Agreement is a vital instrument in secured lending transactions under Canadian law, combining the features of a negotiable instrument with security arrangements. This document type is commonly used when a lender requires both a clear acknowledgment of debt and collateral security to support the loan. It's particularly relevant in business financing, equipment purchases, or any situation where a lender seeks additional protection beyond a simple promise to pay. The document must comply with federal legislation such as the Bills of Exchange Act and Criminal Code interest rate provisions, as well as provincial security and property laws. It's structured to create an enforceable debt obligation while simultaneously establishing a security interest in specific assets or property of the borrower.

What sections should be included in a Promissory Note And Security Agreement?

1. Parties: Identification of the lender(s) and borrower(s)

2. Background: Brief context of the loan arrangement and security agreement

3. Definitions: Definitions of key terms used throughout the agreement

4. Promise to Pay: Core promissory note terms including principal amount, interest rate, and payment dates

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

6. Representations and Warranties: Borrower's statements regarding their legal capacity, ownership of collateral, and authority to enter agreement

7. Covenants: Ongoing obligations of the borrower regarding maintenance of collateral and financial conditions

8. Events of Default: Circumstances constituting default and consequences

9. Remedies: Lender's rights and remedies upon default

10. General Provisions: Standard provisions including notices, amendments, governing law, and assignment restrictions

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

1. Guaranty: Required when there are third-party guarantors of the debt

2. Subordination: Required when there are multiple creditors and priority needs to be established

3. Conversion Rights: Include if the note is convertible into equity or other securities

4. Insurance Requirements: Detailed insurance requirements for specific types of collateral

5. Special Payment Terms: Include for prepayment rights, payment penalties, or variable payment schedules

6. Additional Security Documents: Reference to additional security documents like UCC filings or specific asset pledges

What schedules should be included in a Promissory Note And Security Agreement?

1. Schedule A - Collateral Description: Detailed description of all assets serving as collateral

2. Schedule B - Payment Schedule: Amortization schedule or payment terms if not simple periodic payments

3. Schedule C - Permitted Liens: List of pre-existing or permitted liens on the collateral

4. Schedule D - Interest Calculation: Details of interest calculation method if complex or variable

5. Appendix 1 - Forms: Standard forms for notices, payment calculations, or other required documentation

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 Industries

Financial Services

Banking

Commercial Real Estate

Manufacturing

Retail

Technology

Agriculture

Construction

Private Lending

Small Business

Equipment Financing

Relevant Teams

Legal

Finance

Treasury

Credit

Risk Management

Loan Administration

Collections

Corporate Secretariat

Commercial Lending

Security Administration

Relevant Roles

Chief Financial Officer

Finance Director

Treasury Manager

Credit Manager

Commercial Lending Officer

Risk Manager

Legal Counsel

Corporate Secretary

Financial Controller

Business Development Manager

Loan Officer

Collections Manager

Security Registration Specialist

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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