Canada: Keeping Fees To A Minimum In A Financing Transaction

Introduction: The Double-Fee Dilemma

Businesses are always striving to keep costs in check in an effort to increase their bottom line. Legal fees have never been an exception, although more focus seems to be placed on them in the current economic environment. In virtually any material financing transaction, the legal fees are compounded because the borrower is required to pay for the lender's legal fees in addition to its own. Given this, it is not surprising that we have noticed a marked increase in the number of borrowers who are "fee-sensitive" in recent years. Multiple fee quotes, fixed-fee arrangements and alternative payment arrangements are now often requested and becoming more common, as businesses search for ways to keep legal costs in check.

While the "double" costs incurred in most financing transactions are always a sore spot for borrowers, there are some very simple steps that a borrower can take to ensure that legal fees on both sides are minimized. These steps generally fall into three categories: (1) collecting due diligence information and presenting it in a logical, coherent fashion; (2) keeping control of the deal status and closing timeline and being informed of, and involved in, the various aspects of the transaction, and, in particular, (3) managing third parties and chasing down the documents required from those third parties.

We provide further detail on these categories below, but, as you will see, the steps that can be taken typically involve the borrower taking the initiative to assemble information necessary for the lender and being involved in the various negotiations and communications. By doing so, it will help to ensure that all the lawyers involved receive the information and instructions necessary to order and review the required corporate and lien searches and draft and complete documents quickly and efficiently, without spending a lot of time chasing information and reaching out to third parties. This more proactive approach will also help to bring any substantive issues to the forefront, before they become more expensive challenges to deal with later in the process.

Information is Key: Due Diligence Process

As part of the lender's due diligence process, information relating to corporate structure, assets and various other matters will usually be required for each borrower and guarantor that is party to the transaction. The more of this information that can be assembled and provided by the borrower, the more it will help to reduce costs. Typically, it is helpful for a borrower to have the following information available and up to date prior to starting the process of legal due diligence with the lender:

  • An organization (with correct legal names, where possible) and share capital chart. This information is crucial to allow the lender to determine the appropriate structure of the borrower and guarantors and to facilitate the lawyers' completion of documents, including share pledge agreements.
  • A detailed list of all locations where the borrower and guarantors have any assets, including municipal address, whether owned or leased, name of landlord (where leased) and the nature of the assets at each location (i.e. inventory, equipment, books and records only, etc.). This information is used to determine required searches and third party documents, and to facilitate completion of draft documents.
  • Copies of all material contracts, including major customer/supply agreements, licence agreements, premises leases/warehouse agreements, etc. Typically, the most efficient approach will be to provide a list of material agreements at the outset, and the lender can then decide which of these documents are required to be reviewed. In an asset-based financing, for example, the lender will typically focus on the impact these agreements may have on realizing on certain assets in an enforcement scenario.
  • A list of current litigation where the borrower or any guarantor is a defendant, with a brief summary of status of each proceeding and the maximum potential judgment amount.
  • A list of intellectual property that includes jurisdictions where the registration is made, registration numbers, particulars of the trademark, patent, copyright or industrial design in question and the legal name of the entity that owns each piece of intellectual property. The lender will often require their security be registered with the appropriate intellectual property office, and having the information available makes the process much more efficient.
  • Copies of any pension-related documents, including the plan itself, as well as the most recent financial statements and actuarial reports for the plan (if applicable). The issues relating to pensions will obviously be more pronounced if the borrower has a defined benefit plan (as opposed to a defined contribution plan).
  • Copies of any insurance policies which the lender will review against the insurance certificate that is ultimately delivered.
  • A list of local counsel/contacts for each jurisdiction in which the borrower and guarantors do business.
  • Contacts for each third party that will likely need to be dealt with, including other creditors (for example, any registered lien holders and any lenders being paid out), landlords, warehousemen and insurance brokers.
  • Corporate minute books (which will include, among other things, copies of articles and by-laws and lists of officers, directors and shareholders) will be required to complete the corporate supporting documents required for closing. If the borrower's counsel is required to deliver an opinion, these records will need to be reviewed and any deficiencies corrected.
  • Copies of any shareholders' agreements (to the extent not included in the minute books). These documents may have provisions relating to restrictions on the directors' ability to authorize borrowing and the granting of security.

Keep it Flowing: Deal Status and Timing

When we get a new deal, our first question is generally: "When is the deal scheduled to close?" The typical response is "as soon as possible" or "next week." Of course, there will always be deals that are truly urgent in nature (for example, where the existing facility that is being refinanced has a hard deadline), but a realistic sense of status and timing goes a long way to managing expectations and keeping costs down in situations where there is not a true urgency to close.

Urgent deals mean there needs to be a quick turnaround time for all aspects of the transaction. This usually means more lawyers get involved on both sides, and tasks that could be delegated to more junior lawyers, clerks or even assistants get done by a more senior lawyer, all in order to meet timing demands. As well, we see a number of deals that "have to" close immediately, but are then followed by long gaps of inaction as parties realize the deal that they thought was settled needs to be negotiated further on a business level between the lender and borrower. In such cases, fees are increased because the lawyers involved need to "re-learn" the deal.

In terms of status and timing, the following guidelines will usually help minimize legal fees:

  • Require the lender to obtain multiple fee quotes from their proposed counsel and clarify that legal work should not start until the fee estimate has been agreed to. Working through the fee estimate process will also help get both sides on the same page as to exactly what is required and the timing.
  • Do not proceed with legal work until you are confident the transaction will proceed. Fees are often driven higher in transactions that stop and start, where there is no real urgency to close because the parties waste time coming back to the file over time.
  • Respond as quickly as possible to any requests from the lawyers involved relating to information gathering or document negotiation. They have likely asked the question because they need the requested information to complete a document or deal item.
  • Once a deal starts, work as quickly and efficiently as possible to complete it in a realistic timeframe, and ensure that all matters keep moving along. Deals can be completed from start to finish in a couple of weeks, but for a deal of any size, a more realistic (i.e. cheaper) timeframe is about four weeks. If your deal starts dragging much longer than that because lawyers are waiting for responses (or because one lawyer is not responding in a timely manner), chances are that costs are increasing above where they could be.

Stay in the Game: Be Informed and Involved

As any lawyer will tell you: they would rather work with an informed, involved client. This is not to say that a borrower should be doing all the work. Obviously, the lawyers should be taking the lead in the transaction, making sure everything is moving ahead in a coherent and efficient manner. However, for the borrower, being involved in three key areas can really save a lot of time and cost.

In any financing, there are anywhere from a few to dozens of third parties to deal with. These include lenders being paid out, other lenders with registered security in different collateral, equipment lessors, landlords, licensors and insurance brokers. While there are times when it makes sense for the lawyers to speak directly with third parties, being involved, and taking the lead communicating with third parties to ensure that requests are answered in a timely manner, always helps reduce costs. It is important to keep in mind that, especially with landlords and equipment lessors, third parties generally do not have the same incentives to respond quickly. Keeping the third parties up to date as to the anticipated timing for closing and continuing to follow up with them if they are not responding quickly will minimize fees.

When it comes to documents, lawyers love to negotiate, and they are good at it. The problem is, what matters to lawyers might not matter to a borrower, and those negotiations take time and can be very expensive. It is a more efficient use of resources for a borrower to speak with his or her lawyer about the issues that matter, get a lawyer's take on why something might pose a problem and decide on an effective and simple way to solve it. Fighting over every little issue, whether practical or not, is not only a waste of effort, it often hardens both sides into positions that are not conducive to getting the deal done. The reality is, most typical financing documents give the lenders a lot of discretion (for example, with respect to the eligibility of assets for borrowing base purposes). Where it is clear that a lender in a particular deal will not agree to relinquish this discretion, fighting over every minor detail is often unlikely to yield any real practical benefit to the borrower.

Finally, it pays (the borrower, not the lawyers) for a borrower to give a little thought to the logistics of closing a deal and discuss that with lawyers up front. Are there multiple signatories in multiple jurisdictions, or one signatory down the street? Will a director whose signature is needed be on vacation when a deal is closing? Are there special requirements for any documents to be signed, like notarization? Can everything be executed and scanned for closing? These may seem like almost comical questions to ask, but they all arise from issues that have come up at the last moment when trying to close. Planning the closing logistics well in advance will help avoid a lawyer (or worse for the fees, several lawyers) spending long nights in the office arranging a closing. Your lawyer will thank you for being prepared and you will be happier with the bill at the end of the deal.

The Bottom Line

To minimize costs, it is crucial that a transaction proceeds quickly and efficiently, without a lot of stops and starts, and with negotiations limited as much as possible to only issues that may have real practical impact. By collecting due diligence information up front, making sure that the deal timing is realistic and efficient and being involved where practical, a borrower's legal fees in a financing transaction will undoubtedly be reduced. While there is no way to avoid the necessity of paying legal fees to both the borrower and lender's counsel, following the guidelines set out above where possible will make for a better experience when it comes time to pay the bills.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

In association with
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.