Let’s assume that you have been persuaded to finance a restaurant for a friend or relative.
You went to a lawyer who recommended that you obtain the maximum security possible (because anything can go wrong) and this is what you have:
1) Chattel mortgage, upon specific chattels for major purchases, big ticket items, tools of the trade,
2) Assignment of Leases upon specific chattels for major purchases, big ticket items, tools of the trade,
3) accounts receivable,
4) assignment of book debts,
5) General Security Agreement,
6) Assignment of Leases upon business premises,
7) Assignment of Options to Lease upon business premises,
8) Assignment of Agreements to Purchase upon business premises,
9) Assignment of Options to Purchase upon business premises,
10) A pledge of the shares of the operating company,
11) A pledge of the shares of the holding company,
12) An assignment of the suppliers’ accounts,
13) A pledge of any intellectual property,
14) An agreement to be named as an additional insured on the insurance policy
15) An agreement by the insurer to waive its rights of subrogation,
16) An agreement to the assignment of the telephone number,
17) An agreement to the assignment of the website,
18) An Authorization to examine the books,
19) An Authorization to examine the bank accounts,
20) An Authorization to examine the HST returns,
21) An Authorization to examine the Income Tax returns,
22) An Authorization to examine the Workplace Safety assessments and payments,
23) A personal guarantee of the owner, proprietor,
24) A personal guarantee of the spouse of the owner proprietor,
25) A copy of all suppliers’ contracts, including books of accounts, inventories and entitlements.
So, now the restaurant is in financial difficulty and you need to assess your options.
Basically, you either run the restaurant, pretty much the way it was or you put it on the market. If you don’t sell it soon, you will be stuck and have to sell individual parts at liquidation prices.
So, here are your options:
1) operate the restaurant,
2) sell the restaurant,
3) liquidate the restaurant equipment.
Although each option is difficult, with the security that you have, at least all three choices are available.
Next, we’ll look at each of the choices!
Brian Madigan LL.B., Broker