Effective April 30, 2015, the new Notaries and Commissioners Act (“NCA”) comes into force in Alberta. As discussed in the newsletter dated April 20, 2015, the NCA contains certain consequential amendments to theGuarantees Acknowledgment Act (Alberta) (the “Act”). Since franchise agreements frequently require the principal of a corporate franchisee to provide a personal guarantee of the franchisee’s obligations under the franchise agreement, these amendments will impact many franchise transactions in Alberta.
The amendments provide that:
- an individual providing a guarantee must now appear before an active practicing lawyer, instead of a student-at-law or a notary public, and sign a “Certificate of Acknowledgment” in the presence of such lawyer acknowledging that he or she has signed the guarantee;
- the lawyer must be satisfied and certify that the guarantor is aware of the contents of the guarantee and understands it; and
- the fee payable to the lawyer for the services set forth above is no longer limited to $5.00.
As a result of these amendments, a franchisee principal who is required to provide a personal guarantee as a condition of entering into a franchise agreement will need to retain a lawyer, who will need to ensure that the franchisee understands the contents of the guarantee within the context of the franchise arrangement and the consequences of providing such a guarantee. Any guarantee not given in compliance with the Act shall be unenforceable.
Franchisors shall be required to update the “Certificate of Acknowledgment” attached to the forms of guarantees to reflect these amendments. Franchisors who grant franchises in Alberta should consider updating their Franchise Disclosure Documents accordingly.