General Security Agreements (GSA) in Alberta Explained
If your business borrows money, opens a line of credit, or signs commercial financing documents, you may be asked to sign a General Security Agreement, often called a GSA.
Many business owners sign these agreements without fully understanding what they allow a lender to claim if something goes wrong. A GSA can grant sweeping rights over your company’s assets and, in some cases, expose you to personal liability.
The business team at Libra Law regularly advises Alberta companies on financing arrangements and risk management. Understanding how a GSA works can help you negotiate better terms and protect your business before problems arise.
What Is a General Security Agreement?
A General Security Agreement is a legal contract between a borrower and a lender.
It gives the lender a security interest in the borrower’s assets as collateral for a loan or other financial obligation.
Instead of taking security over just one item, such as equipment or real estate, a GSA typically covers most or all of the business’s present and future assets.
This can include:
- inventory
- equipment
- accounts receivable
- intellectual property
- vehicles
- after-acquired property
In simple terms, if the business defaults, the lender may have the right to seize and sell these assets.
Why Lenders Use GSAs
From a lender’s perspective, a GSA reduces risk.
By taking security over a broad range of assets, the lender improves its chances of recovering money if the business cannot repay the loan.
Because of this, GSAs are common in:
- bank loans
- operating lines of credit
- equipment financing
- commercial leases
- supplier financing arrangements
While this is standard practice, the terms are not always as “standard” as they appear. Small wording changes can significantly affect your risk.
How a GSA Affects Your Business
Signing a GSA can limit your flexibility in several ways.
You may need the lender’s consent to:
- sell significant assets
- take on additional debt
- grant security to another creditor
- restructure or dissolve the company
If the business runs into financial trouble, the lender may have the right to:
- seize assets
- appoint a receiver
- collect receivables directly from customers
- force a sale of the business
These powers can disrupt operations quickly.
Understanding these risks is an important part of broader business law planning, which you can explore through business law services in Alberta.
Personal Guarantees and Director Risk
Many lenders require not only a GSA from the corporation, but also a personal guarantee from directors or shareholders.
This means that if the business cannot repay the debt, you may be personally responsible.
In some cases, directors may also face exposure through statutory or contractual obligations tied to the business.
Before signing, it is important to understand how corporate protection works and where personal liability may still arise. You can learn more about these risks in directors’ duties and liability under Alberta law.
Priority and Registration Under the PPSA
In Alberta, most security interests are registered under the Personal Property Security Act (PPSA).
Registration establishes priority between creditors. If multiple lenders have claims over the same assets, the order of registration can determine who gets paid first.
If you later seek additional financing, a previously registered GSA may:
- limit your options
- make new lenders hesitant
- require negotiations or amendments
Reviewing registrations during due diligence is essential, especially when buying or selling a business.
Common Mistakes Business Owners Make
Many business owners sign GSAs without fully reviewing the terms.
Frequent issues include:
- assuming the agreement only covers specific assets
- overlooking after-acquired property clauses
- missing restrictions on future borrowing
- agreeing to broad default provisions
These oversights can create problems later when the business needs flexibility or additional capital.
When to Get Legal Advice
A lawyer can help you:
- understand exactly what assets are covered
- negotiate narrower security terms
- identify personal liability risks
- review priority and registration issues
- structure financing to protect your business
Early advice is especially valuable during major transactions or acquisitions. If you are purchasing a company, employment and operational risks should also be considered alongside financing obligations, as discussed in buying a business in Alberta and managing employment risks.
Protect Your Business Before Signing
A General Security Agreement can be a routine financing document, but it can also have significant consequences if the business struggles or defaults.
Before signing, take the time to understand what you are offering as collateral and how it could affect both your company and your personal finances.
If you are reviewing financing documents or negotiating a loan, you can reach out through the contact page to speak with a lawyer about protecting your interests.
This article is for general informational purposes only and does not constitute legal advice. For advice specific to your situation, consult a qualified professional.
