A GSA is a common form of security often used to secure commercial loans or credit arrangements. It can be an effective way to obtain security over the assets (other than land) owned by a person or company.
When entering into a GSA with your bank, you or your company will often be asked to provide security over all of your present and after-acquired property. This means the bank will have security over everything you or your company own now and everything in the future. A bank could, for example, require a GSA from you or your company to secure loan monies advanced by the bank.
When entering into a GSA with one of your suppliers, you will typically provide security over just some of your assets, often the assets that they supply to you together with the sale proceeds of such assets.
A GSA will usually secure all moneys owed to the secured party now and in the future (called ‘secured moneys’). This will include collateral liability and the costs of enforcement.
The primary remedy of a GSA is that if you are in default of your obligations, the secured party can take possession of and sell the secured property. If a company defaults on a GSA, the secured party can appoint a receiver (in accordance with the Receiverships Act 1993) to manage the company’s affairs. The receiver is then able to sell off the company’s assets in order to repay debts to the secured party.
To avoid defaulting under the GSA, you will need to ensure you do not breach the specific obligations imposed under your GSA. Key obligations of the commonly used Auckland District Law Society GSA include:
A GSA is a complex legal document that imposes onerous obligations. It can provide powerful wide-ranging powers to the secured party to take control of your assets to recover moneys owed. With this in mind, a GSA should not be entered into lightly. If you have any questions, please feel free to contact us.[/fusion_text][/fusion_builder_column][/fusion_builder_row][/fusion_builder_container]