GSA Search

One of the most common forms of personal property security that is used is the GSA (General Security Agreement).

It is used to secure commercial loans as well as other business obligations that are owed to a financial intermediary or any other creditor such as a secured party. The GSA is an efficient and effective way for obtaining security over the business assets to help secure commercial obligations.

Even though, the GSA is commonly used, the legal requirements for the security and all the supporting documents are rather complex. Besides, it is still possible for secured parties to fall into traps despite having used a GSA. This is why it is important to learn to avoid such traps.

What is the scope and form of a GSA?

The GSA can secure just about any type of future or present obligation, including guarantees and loans. There is no specific form or style for the GSA according to law that is required by secured parties. Hence, many of the financial institutions have their own format.

Here are some of the things that a typical GSA would include.

The enforcement rights in case of default.
The terms and conditions of the GSA.
Description of the personal property assets that have been secured by the GSA.
The debtor’s covenants, warranties, and representations.

However, since there are no specific laws regarding the format of a GSA, sometimes the provisions in the GSA would be inconsistent due to this reason. This leads to uncertainty and increases the likelihood of litigation.

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Review for Consistency

It is important to review both the commitment letter or loan agreement and the GSA when tailoring for a transaction to ensure that they are consistent. This includes making sure that the GSA is capable to secure the full scope of the personal property assets against the security required by the secured party. It checks the consistency of the requirements of the loan agreement or the commitment letter.

Who Will Give the GSA?

GSA is normally provided by a corporation for business borrowing. However, there are other types of business entities like co-operatives; partnerships and rarely, individuals would also be able to provide GSA security.

Regardless of what or who provides the GSA, the court might disallow the GSA security in case the debtor’s name is incorrect. It is due to this reason that it is vital to ensure that the name of the debtor who is executing the GSA to be legally correct and to ensure that the related registration has been made in accordance with regulations under the applicable laws.

Proof of Name

The lawyer or secured party that is preparing the GSA would obtain the certificate of the debtor’s status from the relevant public registry in order to verify the debtor’s legal status and name. In case it is an individual, the secured party should consider obtaining a birth certificate or change of name certificate.

Which Type of Assets Can Be Secured by a GSA?

Most types of personal property can be secured by a GSA, both future and present, including the following.

Securities such as investment accounts, bonds and stocks
Trademarks and other intellectual property
Accounts receivable
Inventory
Equipment and machinery which the debtor uses for carrying on the business

Normally, the GSA states that all of the debtor’s present and after-acquired property has been secured, along with the list of specific categories for the property charged. Furthermore, it is legally acceptable. It is important to obtain proper written authorization from the debtor to reduce any chances of misunderstanding.