Changes to the Alberta Guarantees Acknowledgement Act

Companies which conduct business in the province of Alberta should take note of a change to Alberta rules pertaining to guarantees. Franchisors, for example, often obtain personal guarantees from the shareholders and directors of corporate franchisees and should pay careful attention to the changes when dealing with a franchise in Alberta.
The rules are governed by the Guarantees Acknowledgement Act (the “Act”), which currently requires that anyone providing a guarantee (a “guarantor”) for the obligation(s) of another person or entity must have that guarantee signed before a notary public. The notary must ensure that the guarantor is aware of and understands the contents of the guarantee and issue a prescribed certificate to that effect.

An amendment to the Act is set to come into force on April 30, 2015, which will make it no longer sufficient for a guarantor to have a guarantee signed before a notary public. Instead, when signing the guarantee, the guarantor must be in the presence of a lawyer, who is independent and not representing the interests of any other party to the transaction or anyone who would stand to benefit from the guarantee. Similar to the previous legislation, the independent lawyer must take the necessary steps to ensure that the guarantor is aware of and understands the contents of the guarantee and issue a prescribed certificate to that effect. Lastly, unlike the previous legislation, where notaries could only charge a nominal sum of $5.00 for issuing the certificate, there is no cap on the fees that a lawyer can charge to offer this service.

Any party that is seeking to benefit from a guarantee signed in Alberta should review the accompanying certificate carefully to ensure that it was issued by a lawyer who is independent of the parties in the transaction. Otherwise, the guarantee will not be enforceable.