Guarantees Acknowledgment Act - Fact Sheet

Your Calgary lawyer to advise on personal guarantees and Guarantees Acknowledgment Act Certificate.

Personal Guarantee & GAAC  |  Bank Loan  |  Financial Obligation  |  Commercial Lease  |  Car Loan  |  Student Loan

Schedule an appointment with our law firm at 403-400-4092 or Chris@NeufeldLegal.com

1. Overview

The Guarantees Acknowledgement Act is a law exclusive to Alberta. It ensures that individuals who "guarantee" someone else’s debt (meaning they promise to pay if the original borrower defaults) fully understand the legal and financial risks before they sign.

• Primary Goal: To prevent fraud and protect individuals from unknowingly taking on massive liabilities.

• Golden Rule: In Alberta, a personal guarantee is legally unenforceable unless the guarantor follows the specific procedures outlined in the Act.

2. Who Does It Apply To?

The Act applies to individuals (natural persons) who provide a guarantee for:

• Business Loans: A business owner personally guaranteeing a corporate loan.

• Personal Loans: A parent guaranteeing a child’s car or student loan.

• Leases: An individual guaranteeing a commercial or residential lease.

• Note: It generally does not apply to corporations, as corporations are expected to have their own sophisticated legal advice.

3. The Mandatory Process

To make a guarantee binding, three specific steps must be completed:

• Appearance Before a Lawyer: The guarantor must appear before a lawyer (no longer permissible with a notary public) to acknowledge they signed the guarantee.

• Examination: The lawyer must "examine" the guarantor. This isn't a test; rather, the lawyer must be satisfied that the guarantor understands the contents and the potential consequences (e.g., losing personal assets).

• The Certificate: If satisfied, the lawyer issues a Guarantees Acknowledgement Act Certificate. This document must be signed by both the lawyer and the guarantor and then attached to the guarantee.

• Modernization: Since 2020, Alberta law allows this process to be completed via two-way video conferencing, provided the lawyer can see the guarantor sign the documents in real-time.

4. Key Legal Requirements

• Legal Standing: In Alberta, the lawyer must be an active, non-suspended member of the Law Society of Alberta.

• No Notaries: As of April 30, 2015, a Notary Public can no longer execute these certificates; only a lawyer can.

• Strict Compliance: Alberta courts are very strict. If the GAA Certificate is missing or the process was flawed (e.g., signed before a student-at-law), the guarantee is often considered "worthless" and cannot be enforced by the lender.

5. Why It Matters

• For Guarantors: It provides a "moment of reflection." It ensures you aren't pressured into a life-altering financial commitment without knowing that you are on the hook for the full debt.

• For Lenders: It is a critical due diligence hurdle. If a bank fails to ensure the GAA Certificate is properly executed, they lose their ability to sue the guarantor if the borrower fails to pay.

Important Note for Guarantors: For anyone considering becoming a guarantor, it's crucial to understand the significant financial responsibility and risks involved. They are legally obligated to fulfill the terms if the primary party defaults, and this can have serious consequences for their own finances and credit history. Consulting with legal and financial professionals before signing a guarantee agreement is highly recommended.

When you are in need of legal representation with respect to the provision of a personal guarantee for another party's indebtedness (i.e., bank loan, debt financing, commercial lease, car loan, student loan), including the proper completion of a Guarantees Acknowledgment Act Certificate, contact Calgary personal guarantee lawyer Christopher Neufeld by email at Chris@NeufeldLegal.com or by telephone at 403-400-4092 to schedule an appointment (with our law firm offering three convenient means to promptly attain a Guarantees Acknowledgement Act Certificate).