- 2013 Amendments to UCC Article 9 - Lenders May Need To Take Action
- June 13, 2014 | Author: John P. McNearney
- Law Firm: Husch Blackwell LLP - St. Louis Office
The National Conference of Commissioners on Uniform State Laws (“NCCUSL”) promulgated significant revisions to Article 9 of the Uniform Commercial Code (“UCC”) in 2010 (the “2010 Amendments”). Most of the states adopted those revisions in 2013 with an effective date of July 1, 2013. The one-year anniversary of the 2010 Amendments is fast upon us and all lenders, including ag lenders may need to take action.
TRANSITION RULES FOR 2010 AMENDMENTS TO UCC ARTICLE 9
The 2010 Amendments provide transition rules in the new Article 9 Part 8 of the 2010 Amendments, which are intended to allow orderly transition into the 2010 Amendments. If a financing statement was sufficient under the UCC prior to the 2010 Amendments, a secured party will only need to take action to remain perfected in certain cases, which are described below.
1. The General Rule is That The Secured Party Remains Perfected. Section 9-805(b) provides the general rule that the 2010 Amendments do not render ineffective a filed financing statement that perfected a security interest under Article 9 prior to the 2010 Amendments.
a) The Individual Debtor in Alternative A States. If a secured party filed a UCC-1 in an individual’s name prior to the effective date of the 2010 Amendments, the secured party continues to have a perfected security interest against the individual in jurisdictions adopting Alternative A following the 2010 Amendments even if the name on the driver’s license differs from the individual’s name as filed. Such effectiveness would continue until the time the financing statement would have ceased being effective under pre-2010 Amendment Article 9.
b) The Individual Debtor in Alternative B States. If a secured party filed a UCC-1 in an individual’s name prior to the effective date of the 2010 Amendments, the secured party continues to have a perfected security interest against the individual in jurisdictions adopting Alternative B following the 2010 Amendments since use of the “individual name of the debtor” is sufficient under Alternative B as well as under pre-2010 Amendment Article 9. Any name that was sufficient before the effective date will also comply with the new individual name rules in Alternative B states.
c) Corporations, Limited Liability Companies, Partnerships. There are no special rules in the 2010 Amendments that have any effect on the continued effectiveness of financing statements properly filed against debtors that are corporations, limited liability companies, general partnerships or limited partnerships. If a secured party filed a UCC-1 in an entity’s name prior to the effective date of the 2010 Amendments, the secured party continues to have a perfected security interest against the entity B following the 2010 Amendments However, see the section below on Continuation Statements.
2. There are Exceptions to the General Rule. Like any general rule, there are circumstances that fall outside the rule. Fortunately, the frequency of those circumstances should be sparse.
a) Continuation Statements. Filing a continuation statement after the 2010 Amendments take place does not continue the effectiveness of a financing statement filed before the 2010 Amendments take place if the old financing statement is insufficient to perfect a security interest under the 2010 Amendments (see Section 9-805(c)). Instead, a secured party must timely file a continuation statement in accordance with the law of the jurisdiction governing perfection as provided in Article 9, as amended by the 2010 Amendments. In summary, any amendment or continuation of a financing statement that was filed prior to the effective date of the 2010 Amendments, must abide by the filing requirements set forth in the 2010 Amendments, as adopted by the applicable jurisdiction. This would include a requirement to comply with the naming rules set forth in the 2010 Amendments.
b) Business Trusts. Although the 2010 Amendments do not change the choice of law rules to determine where to file a financing statement, the 2010 Amendments do change the definition of “registered organization” to expand the types of entities that fall within the scope of that term to include business trusts (see Section 9-102(a)(71)). In rare cases this could cause a change in the governing law. Section 9-301 provides that the law of the jurisdiction where the debtor is located governs perfection and priority of a security interest. Section 9-307(b)(2) states that a non-registered organization is located at its place of business, or if it has more than one, its chief executive office. However, under Section 9-307(e), a registered organization is located in the state where it is organized. If the location of a business trust changes because it becomes a registered organization under the 2010 Amendments, the law governing perfection will become the law of the state where the registered organization was organized and the effectiveness of the financing statement will cease on the earlier of the date it would have ceased under pre-amendment Article 9 or June 30, 2018 (see Section 9-805(b)(2). If a lender has any financing statements filed against debtors that are business trusts, then it needs to determine the effectiveness of the financing statement and whether or not an “in lieu” filing is required to continue the effectiveness of a financing statement.
c) Security Interests that were Perfected Other than by Filing a UCC-1. There is also the possibility that a secured party may need to take action prior to the anniversary of the effective date of the 2010 Amendments. Section 9-803(b) provides that a security interest perfected under pre-amendment Article 9 that does not satisfy the perfection requirements of the 2010 Amendments remains perfected for only one year after 2010 Amendment Article 9 becomes effective. However, the one-year rule stated in Section 9-803(b) is subject to Section 9-805 and Section 9-805(b) pertains to a security interest perfected by filing a financing statement that satisfies the perfection requirements of the applicable governing jurisdiction under pre-2010 Amendment Article 9. Thus, if a security interest were perfected other than by filing prior to the effective date of the 2010 Amendments it is possible that the one year rule set forth in Section 9-803(b) would apply. The facts of such a situation would need careful analysis in connection with the 2010 Amendments to determine whether 9-803(b) applies.