Canadian lenders engaged in cross-border financing frequently require their borrowers’ US affiliates to grant security interests in their assets. The standard practice involves using U.S.-law-governed security agreements for these US entities. However, sometimes Canadian lenders or their Canadian counsel will request that a Canadian General Security Agreement (GSA) be “converted” to a US security agreement. While the desire for contractual uniformity across all cross-border obligors is understandable, relying on a poorly converted GSA can lead to serious negative outcomes and often overlooked legal risks.
Canadian businesses regularly performing work or sending products into the United States have increased growth opportunities as a result. But doing business in the U.S. also comes with litigation risks, as the bar to commencing litigation in America is less costly than in Canada.