The New UCC: Article 9's Revised Filing and Perfection Requirements


Article 9 of the Uniform Commercial Code (the "UCC") was substantially revised in 1998 by the Uniform Law Commission and was enacted in all 50 states and the District of Columbia. Over the years, it became clear that there need to be some amendments to address filing issues and other concerns. Thus Article 9 was further amended in 2010. Like the 1998 revisions, the 2010 amendments were adopted in all 50 states and the District of Columbia. This article discusses the changes to filing requirements brought about by the 1998 revision to Article 9 and the clarifications that were made by the 2010 amendments.

Overview

Article 9 of the UCC is entitled Secured Transactions and provides the rules that govern any transaction where the debtor provides an interest in their personal property to a creditor in exchange for money loaned. The interest created is called a "security interest". There are two important questions concerning a security interest and they are:

  • When does the security interest attach?
  • When is the security interest perfected?

Attachment occurs when the agreement between the debtor and the creditor provides for such an event. Say, when the loan papers are signed or when a certain event takes place. A security interest is said to be perfected when the creditor establishes their priority in relationship to other creditors who have an interest in the same personal property. Typically filing notice with a local or state agency establishes the priority for perfection, but filing is not the only method for perfection.

If these sound like simple concepts, they are not. There is nothing simple about Article 9 and its numerous exceptions. One of the goals of the 1998 revisions to Article 9 was to streamline and consolidate the wide variety of filing rules which used to exist that shifted from asset class to asset class. New filing guidelines were developed that focused on the location of the debtor, rather than the collateral. In doing so, the need for multiple filings at the state and local level was minimized, in favor of a single filing office in each state.

Location for Filing Purposes

Under revised Article 9, in most cases the proper jurisdiction for filing will be in a single office in the home state where the borrower is "located. " If a borrower is a "registered organization" (defined as an "organization organized solely under the law of a single state or the United States and as to which the state or the United States must maintain a public record showing the organization to have been organized"), its location is deemed to be the state of its organization.

In the case of domestic corporations, limited liability companies and limited partnerships, determining a borrower's "location" should be as simple as determining where the entity in question was organized. In the case of certain foreign companies (i.e., companies not registered under the laws of a state of the United States), the proper place to file will be in the District of Columbia. The exception to this general rule relates to companies organized in a foreign jurisdiction which does not provide for a central filing office for non-possessory liens.

The key concepts for filing are:

  • The proper place to file a UCC statement is determined by the location of the debtor.
  • Location is determined by physical location of the individual debtor.
  • Location for an entity is the place where it was organized.

2010 Amendments

The 2010 amendments to Article 9 clarified the name of the debtor to be provided on the UCC statement. For business entities, the proper name to be used is the name that the entity used when it filed its organization documents with the state. If the debtor is an individual, there is no single source for a correct name. The name on the financing documents can be used, but also any common source such as birth certificate, passport or driver's license.

Summary

The Article 9 revisions that took place in 1998 and 2010 streamlined and clarified filing requirements for UCC statements. However, there still are nuances and exceptions, so a thorough review of the UCC statutes in the state in which a UCC statement will be filed are necessary.