Guarantees in Alberta given by individuals for the financial obligations of others have long been subject to certain compliance requirements prescribed by the Guarantees Acknowledgment Act(the “GAA”).1 For a guarantee (as defined in the GAA)2 to be valid and enforceable in Alberta, the personal guarantor must appear before a notary public to acknowledge execution of the guarantee and sign a certificate to be notarized.3 Before notarizing the certificate the notary public must satisfy him or herself by examining the guarantor and confirming that the guarantor is aware of, and understands, the contents of the guarantee.4 The purpose of this statute is to protect individuals providing personal guarantees by ensuring they are fully aware of their obligations and potential liabilities under the guarantee.5
The upcoming amendments to the GAA were introduced as Bill 44, Notaries and Commissioners Act (the “NCA”).6 Though a proclamation date has not yet been set, it is expected that the NCA will likely come into force on or before April 30, 2015.7
The policy rationale for the incoming changes was based on the fact that ensuring a guarantor understands and appreciates the nature and extent of what they are agreeing to do is best suited as a legal function, which act should not be performed by anyone other than a practicing lawyer.
Upon proclamation, there will be two main changes made to the GAA.
First, individuals providing a guarantee will have to appear before a lawyer, as opposed to a notary public, to acknowledge the terms of the guarantee. The NCA defines “Lawyer” as:
- with reference to an acknowledgment made in Alberta, an active member of The Law Society of Alberta, other than an honorary member, who has not been suspended, and
- with reference to an acknowledgment made in a jurisdiction other than Alberta, a lawyer entitled to practice law in that jurisdiction.8
This provision will have the effect of prohibiting notary publics and students-at-law from being able to notarize personal guarantees going forward.
Early draft versions of the NCA included a requirement that the lawyer “must not represent or be employed by a person or corporation who stands to benefit as a result of the guarantee”.9 The inclusion of this section may have created an impractical result whereby individual guarantors would have to seek out third-party lawyers not involved in the transaction and, if broadly interpreted, perhaps also outside of the acting law firm(s) or companies involved in the transaction. Upon further consideration, this requirement has since been repealed by section 7 of the Justice Statutes Amendment Act, 2014,10 which was proclaimed into force on Dec. 17, 2014.
The second substantive change to the GAA will be to repeal section 6,11 which currently provides that a notary public may not charge more than $5.00 for the issuance of a certificate under the GAA. Thus, there will no longer be any limit on the fees payable to a lawyer for notarizing a personal guarantee certificate.
The amendments will also include an updated set of forms, including a new form of certificate, to reflect the proposed changes.
It is understood that the intention of the proposed legislation was not to fundamentally alter the manner in which personal guarantees are currently completed. Rather, the policy direction was simply to ensure that lawyers, who properly understand the terms of the guarantees, are examining the individuals who are providing them. These amendments serve to greater support the purpose the GAA by providing increased protection to those providing personal guarantees and are not to be read in a way which would construe the current practice of lawyers changing in any material way.