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Ontario Opinions in Financing
Transactions
Lisa Mantello
October 11, 2012

Local sources of guidance
• The Toronto Opinions Group (TOROG)
A group of lawyers, primarily practicing in the Toronto office of larger
Canadian firms, that meets to develop best practices regarding
transaction opinions, as well as to produce memos and precedent
opinions
• Personal Property Security: Opinion Report (the “Green Book”)
Written by a committee of lawyers in the business law section of the
Canadian Bar Association
Provides a comprehensive analysis of the issues pertaining to
personal property security opinions, including proposed opinion
language and a sample opinion
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Reliance and duty of care
• Opinions are typically addressed to the lender and its counsel
• Opinions state that they may only be relied upon by the addressees
and their respective successors and assigns, and in connection
with the transaction to which they relate
• Duty of care
Lawyers owe a duty of care to their clients in contract and tort
A lender may be able to recover economic loss from a negligent
misstatement in an opinion provided to the lender
This may occur where the lender relied on the misstatement and such
reliance was reasonable
2

Assumptions
• Opinions typically include the following assumptions:
All signatures are genuine, all documents are authentic, and all natural
persons executing documents have the capacity to do so
Information provided by public officials or obtained through searches
of government-held information is accurate, current and complete
Information in officer’s certificates is accurate, current and complete
The description of the collateral is accurate
For any security interest granted by the borrower or guarantor, value
has been given and there has been no agreement to postpone the
time of attachment
3

Due diligence and supporting materials
• The provider of an opinion establishes facts through its own due
diligence, as well as reliance on documents provided by third
parties
• Opinions typically list documents reviewed and investigations done
• Due diligence generally includes review of:
Officer’s certificates, including board resolutions of the borrower and
guarantor. The officer’s certificates should not contain statements of
law, only statements of fact.
Certificates and other information received from public officials
Transaction documents, such as the credit agreement or security
agreement
Minute books, articles and by-laws of the borrower and guarantor
Share certificates t of the borrower and guarantor, where a share
pledge is contemplated
• Where facts cannot be verified, an assumption may in some cases
be made as to their existence
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Core opinions
• Incorporation and existence of each borrower and guarantor
• Corporate power, capacity and authorization (by all necessary
corporate action) of each borrower and guarantor to execute,
deliver and perform its obligations under the transaction documents
• Authorization, execution and delivery of the transaction documents
• Enforceability of each transaction document against the borrower
and guarantor in accordance with its terms
• Creation and validity of the security granted in favour of the lender
over the present and future assets of the borrower and guarantor
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Core opinions (continued)
• All registrations necessary to preserve the lender’s security have
been made
• Authorization and enforceability of any pledge and potential
transfer of shares of the borrower or guarantor to the lender
• Share capital of the borrower or guarantor, where the transaction
includes a pledge of the shares of the borrower or guarantor to the
lender
• Perfection by control of security granted in favour of the lender in
investment property under the Securities Transfer Act (Ontario)
6

Qualifications
• Opinions typically include the following qualifications regarding
enforceability of a debtor’s obligations:
Insolvency laws regarding the enforcement of creditors’ rights and
other similar matters
Availability of equitable remedies, such as specific performance and
injunctive relief, in the court’s discretion
General equitable principles, including those related to potential
conduct of the lender, such as undue influence or estoppel
Any provision of the transaction documents that is illegal or
unenforceable, such as a provision that is inconsistent with the
applicable Personal Property Security Act
Limitations contained in the applicable Limitations Act
• Opinions generally also include qualifications specific to the
particular transaction, such as certain registrations of security that
were not made
7

Questions?
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