A general security agreement (GSA) is the document granting a lender a broad security interest over a corporation’s personal property, drafted to modern Personal Property Security Act (PPSA) mechanics and registered under the PPSA to establish and protect the lender’s priority against other creditors.
A GSA and an older-style debenture do the same commercial job through different drafting traditions. A debenture historically evidenced a corporation’s borrowing and often carried the security language creating fixed and floating charges; a GSA is the more commonly used modern document… using modern PPSA-style drafting. Functionally, both types of document ultimately need to be registered under the PPSA to protect the lender’s priority against other creditors.
Registration is what makes the security mean anything to a third party. Common-law provinces each run their own Personal Property Security Act, but the mechanic is the same across them: registering the GSA is how a lender puts the world on notice and locks in its ranking against a later creditor taking security over the same assets. Quebec does not use PPSA-style security at all — it runs a civil-law regime built around the hypothec instead, which is a genuinely different mechanism, not a provincial variant of the same one.
A GSA is the collateral piece that gives every other financing term teeth. The financial covenants a lender tests post-closing are only enforceable in practice because a registered GSA is what lets the lender actually reach the business’s assets on a breach, and it is the same security instrument that typically stands behind a BDC or CSBFP-backed acquisition loan, not something separate layered on top.
A term lender registers a GSA against Newco on the day the acquisition loan closes, capturing all of Newco’s present and after-acquired personal property. Eight months later, an equipment vendor extends Newco additional credit and takes its own security over a piece of newly purchased equipment. Because the term lender’s GSA was registered first and covers after-acquired property, its claim generally ranks ahead of the vendor’s later security on that same equipment — which is exactly the priority position the term lender paid to register on day one, and exactly why a diligent secured lender always registers before, not after, funds are advanced.
See also: financial covenant, Canada Small Business Financing Programme and leverage multiple.
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