A General Security Agreement is a legal document that details the terms under which a lender secures an interest in a borrower’s assets as collateral for a loan (details of a loan are covered by a Loan Agreement). It documents important details such as the parties, the asset description, and default and indemnity provisions, and if there are any restrictions on the borrower from selling or transferring the secured assets. It is important that the terms of a General Security Agreement are aligned with industry standards.

A General Security Agreement covers a broad range of assets of the borrower, including shares, business inventory, intellectual property and motor vehicles. This does not include real property. If a lender requires security over the borrower’s real property, a mortgage may be appropriate.

Is a General Security Agreement Suitable?

Legal advice on the appropriateness of a General Security Agreement is the first consideration. The parties should have consideration to the loan amount and the security provided in proportion to the loan amount; and if other types of security are more appropriate. Speak to our lawyers for targeted legal advice on the appropriateness of a General Security Agreement for your situation.

If lenders seek to secure the loan using a specific asset, then a Specific Security Agreement may be appropriate instead. Speak to our commercial lawyers to determine the best suite of documents to protect your legal interests.

Loan Agreement

A Loan Agreement documents key information on a loan. This includes - loan amount, term of the loan, purpose of the loan, interest rate, and repayment schedule. The terms to a loan are separate to the General Security Agreement. Our commercial lawyers can provide advice on best way to document your transaction and draft tailored loan agreements that are suitable for your situation.

Registering Security Interest

Timing rules under the Personal Property Securities Register provides statutory time frames on when to register security interests and when you need to discharge registrations. They need to be followed for the lender to have a security interest under the register.