A General Security Agreement (GSA) is a legal document that provides a lender with a security interest in all of a borrower`s assets. The purpose of a GSA is to provide a lender with a means of recovering its money in the event that the borrower defaults on a loan.
In Quebec, a GSA is governed by the Personal Property Security Act (PPSA). The PPSA is a set of laws that regulates the creation, registration, and enforcement of security interests in personal property.
When a borrower grants a security interest in personal property to a lender, the lender is said to have a “secured interest” in that property. The secured interest may be in the form of a lien or a mortgage, depending on the type of property involved.
The GSA must be registered with the personal properties registry to be enforceable. The registration must include a detailed description of the property, including its value and location. This information is important because it allows the lender to identify the property that is subject to the security interest.
If a borrower defaults on a loan that is secured by a GSA, the lender has the right to take possession of the property. The lender may then sell the property or use it to satisfy the debt.
It is important to note that a GSA does not guarantee that the lender will recover all of its money in the event of a default. If the value of the property is less than the amount owed, the lender may still be out of pocket.
In conclusion, a General Security Agreement is an important tool for lenders in Quebec. By registering a GSA, a lender can secure its interest in a borrower`s personal property, providing a means of recovering its money in the event of default. However, it is important for lenders to understand the limits of a GSA and to carefully consider the value of the property before entering into any loan agreement.