Term Facility Agreement Template for Canada

When your business needs substantial financing for expansion, acquisitions, or refinancing, a Term Facility Agreement provides the legal foundation for your lending arrangement. This comprehensive document establishes a fixed-term loan facility between you as the borrower and financial institutions, setting out precise terms for accessing and repaying funds over a predetermined period.

When do you need this document?

You'll require a Term Facility Agreement when securing medium to long-term financing for specific business purposes. This includes acquiring another company, funding major capital expenditures, refinancing existing debt, or supporting significant business expansion. Unlike revolving credit facilities, term facilities provide a lump sum that you repay according to an agreed schedule. The document is essential when dealing with syndicated loans involving multiple lenders, complex security arrangements, or when your financing exceeds typical commercial lending thresholds.

Key legal considerations

Your Term Facility Agreement must address several critical legal elements to protect all parties' interests. Interest rate provisions require careful structuring to comply with federal Interest Act disclosure requirements and Criminal Code usury prohibitions. Security arrangements typically involve personal property security interests governed by provincial legislation, requiring precise documentation of collateral and priority arrangements. Conditions precedent clauses protect lenders by ensuring legal due diligence, insurance coverage, and regulatory approvals are completed before fund disbursement. Default provisions must clearly define events triggering acceleration while providing reasonable cure periods. Cross-default clauses linking the facility to your other debt obligations require careful consideration of their scope and impact.

Legal requirements in Canada

Canadian Term Facility Agreements must comply with multiple layers of federal and provincial legislation. The federal Bank Act governs lending activities by regulated financial institutions and imposes specific documentation and disclosure requirements. Interest Act compliance requires proper calculation methods and clear disclosure of borrowing costs, including any fees or charges. Provincial Personal Property Security Act registration may be necessary to perfect security interests in business assets. For facilities involving guarantees, you must ensure compliance with provincial guarantor protection legislation. Corporate borrowers must obtain proper board resolutions and satisfy corporate power requirements under relevant companies' legislation. The agreement should also address potential insolvency scenarios under the Bankruptcy and Insolvency Act or Companies' Creditors Arrangement Act, particularly regarding creditor priorities and security enforcement rights.