A General Security Agreement (GSA) is a legal document that is used to create a security interest in the assets of a borrower in favor of a lender. This agreement is used to secure a debt or a loan and provides the lender with the right to seize and sell the borrower`s assets in case of non-payment of the debt.
In Quebec, a GSA is governed by the Civil Code of Quebec, and it is recognized as a legal instrument to secure assets. The agreement can be used for both moveable and immoveable assets. It is important to understand the key elements of a GSA agreement to ensure the rights of both parties are protected.
The parties involved in a GSA agreement are the borrower, who is also known as the debtor, and the lender, who is also known as the secured party. The borrower grants the lender a security interest in the assets specified in the agreement to secure the loan.
The assets that can be included in a GSA agreement include inventory, equipment, accounts receivable, intellectual property, and real estate.
To create a valid GSA agreement in Quebec, the agreement must be in writing and signed by both parties. Also, the agreement must include a description of the assets that are being secured, the duration of the security interest, and the priority of the security interest.
The duration of the security interest can be indefinite or for a specific period. This means that the security interest will remain in effect until the debt is repaid, or the agreed period has elapsed.
The priority of the security interest determines who has the right to claim the assets in case of default. Generally, the first lender to create a valid GSA agreement will have priority over subsequent lenders.
In conclusion, a General Security Agreement is an important legal document used to secure assets in Quebec. It provides protection for both the borrower and the lender in case of non-payment of the debt. To ensure that your rights are protected, it is essential to understand the key elements of a GSA agreement before entering into one.