This document is intended for internal use only and may not be
publicly distributed.
UCC Frequently Asked Questions
Organizational ID Numbers
Organizational Identification Numbers
What is an organizational I.D. number and where is it found?
What constitutes an organizational I.D. number is not clearly defined in Revised Article 9. In
general, the national UCC-1 form provides that an organizational I.D. number is "assigned by the
agency where the charter document was filed; this is different from the Tax I.D. number." (However,
some states may consider the tax I.D. number to be an organizational I.D. number).
In plain English, the organizational identification number is the number that is associated to the entity
when some type of formation document is filed on the public record. The important factor in the
analysis is that the number should be associated to the entity, and not just a particular filing that
relates to an entity
Organizational I.D. numbers can be known by many different names, such as "charter number",
"corporate number", "control number", "organizational number", "business I.D. number", etc. Some
states have multiple numbers that could all reasonably be defined as "organizational I.D. numbers"
within the definition of Revised Article 9. Several states do not issue any type of number that falls
within the definition of an organizational I.D. number under RA9.
The permanent national UCC-1 form contains a field relating to the organizational I.D. number, and
the field must be filled in if the debtor is an organizational debtor. However, the filing office is not
allowed to reject the filing if the organizational I.D. number is incorrect. As long as something is
entered in the field, it should be accepted by the filing office.
The official comments to section 9-516 provide that "a filing office may not reject an initial financing
statement indicating that the organization is a state A organization and providing a three-digit
organizational I.D. number, even if all State A organizational identification numbers contain at least
five digits and two letters". Therefore, all that is required is to enter an organizational number that
helps distinguish the organizational debtor from other debtors. This could be anything.
However, since the filing office is not allowed to reject a filing if the organizational I.D. number is
incorrect, a secured party could theoretically enter “12345” as the organizational I.D. number for
every entity against whom they file.
As an FYI, it is generally accepted that the following states do not issue organizational I.D. numbers:
AL, DC, MA, NE, NH, NY, OK, SC, VT, WV. The following states do not require organizational
I.D. numbers (per their version of RA9): DE, CT, GA, NY, OH, PA, and TN.
Warning:
Be wary of any charts obtained from third party sources which attempt to define
specifically what number/letter sequence is deemed to be an organizational I.D. number in a
particular state.
Importance of Organizational ID Numbers
Some customers are not actively verifying that the organizational identification numbers exist,
or may be marking the "none" box rather than taking the time to determine the correct
organizational identification number. There is the common belief that this information will not
affect the status of the filing. Is this true?
No, this is not true. This information, if incorrect, may affect the status of the filing.
Under Section 9-506(a), a financing statement remains effective even if the statement has minor
errors or omissions. The statement is effective as long as these errors or omissions do not make the
financing statement seriously misleading. Moreover, Section 9-507 provides that if any information
on a financing statement becomes seriously misleading after the financing statement is filed, the
financing statement will remain perfected. The only exception to this is a change to the debtor name.
According to section 9-506(b), the failure to sufficiently provide the name of the debtor will render
the financing statement misleading.
Many customers apply the logic of these sections to
organizational id numbers and other organizational information (e.g. - type of organization, etc.), and
seem to assume that all information on a financing statement can be incorrect and it won't matter, as
long as the debtor name is correct.
While it is true that an incorrect organizational id number will not render a financing statement
ineffective, there is another section that discusses information that is incorrect at the time the
financing statement is filed. 9-338 addresses "a filed financing statement providing information
described in Section 9-516(b)(5) which is incorrect at the time the financing statement is filed."
Section 9-516(b)(5) requires the filer to provide the mailing address of the debtor, indication of
whether the debtor is an individual or organization, and the type, jurisdiction and identification
number of an organizational debtor.
There are instances where a subsequent secured party may have relied upon incorrect information
provided in the public record. This section subordinates a financing statement that contains incorrect
information (e.g. - an incorrect organization id number) to a conflicting perfected security interest in
the collateral. This only applies to a conflicting perfected security interest in which the subsequent
purchaser or secured party relied upon the incorrect information to his/her detriment.
The subsequent subordination of the security interest containing misinformation will not be indicated
on the public record. It is likely that the change of status will be determined through litigation.
As more customers discover section 9-338, many should begin correcting any incorrect organizational
information currently on record.
Amendments and Organizational ID Numbers
If I am filing an amendment or continuation in relation to a pre-RA9 UCC-1 filing, do I need to
add organizational information to the amendment when filing?
Technically, only if a debtor name is being added (or changed). However, there are a number of
reasons why it is important to do so.
Any time a filing is amended or continued, the secured party should amend the information on the
filing and ensure that all of the information is updated and current. There are many practical benefits
to this practice.
Ideally, the whole purpose of the public filing system is to allow subsequent searchers to locate filings
and ascertain the relative rights of the secured party(ies). In order to do so, the filing offices will need
to update and correct much of the information that currently exists on their databases. This is due to
the changes in indexing and computer search logic that filing offices are required to implement to
comply with RA9.
Many filing offices will only be able to update their information at the time amendments and
continuations are filed. This is going to be a long and difficult process in many cases, and the only
way for a secured party to avoid potential legal challenges and ensure that their interests are fully
protected is to always update their filings to comply with ALL of the requirements of RA9.
Termination in Place
Termination in Place
Why are some local filing offices not accepting “termination in place” filings? I thought
“termination in place” filings could be made in the filing office where the UCC filing was
originally filed.
The legal concepts involving “termination in place” rules are very complicated and, unfortunately,
difficult to apply. The statutes were not written very clearly, and this has led to a great deal of
misunderstanding that will likely result in litigation in the future.
In general, in order to provide a consistent message to our customers, the following recommendations
should help provide more guidance:
When terminating a pre-RA9 financing statement, the BEST method is to file an “in lieu of”
financing statement in the RA9-compliant filing office, followed thereafter by the filing of a
termination statement to terminate the “in lieu of” filing.
Should a customer still decide to file a “termination in place” filing, it should only be done if the preRA9 financing statement that is being terminated is filed in a central filing office (i.e. – the Secretary
of State)
A “termination in place” is probably not necessary in relation to a pre effective date UCC filing (Pers.
Prop.) filed in a local-level filing office in dual filing situations.
A “termination in place” cannot be filed if the financing statement that is to be terminated has already
been moved to a new filing office via an “in lieu of” filing.
Note: Many customers are very uncomfortable with the general concept that pre effective date, locallevel, personal property UCC filings can be ignored. This is to be expected.
For a very useful, detailed discussion of the “termination in place” provisions and proper procedures,
please consult our publication “The Transition Rules of Revised Article 9 of the Uniform Commercial
Code” by Harry Sigman and Edwin Smith. The discussion is found on page(s) 44-50.
What do sections 9-707 and 9-710 require regarding terminations in place? Which States do
the
What do sections 9-707 and 9-710 require regarding terminations in place? Which states do
these provisions affect?
Revised Article 9 Section 9-707 is a section of the code that was created to address the concerns of
banks and financial institutions. RA9 generally requires that any time an amendment is made to a
financing statement, it is necessary to first move the filing to the correct location (if necessary) by
filing an “in lieu of” financing statement. As originally written, this would require an “in lieu of”
filing be made prior to filing a termination. Obviously, this would create a great deal of unnecessary
cost and labor to file an “in lieu of” filing in a new jurisdiction, if it is for the sole purpose of filing a
termination.
As a result, section 9-707 was drafted, and is commonly referred to as the “termination in place”
statute. 9-707 provides that a pre-effective date financing statement may be terminated in the
jurisdiction in which the pre-effective date financing statement was originally filed. Thus, there is no
need to move the filing to the new location required by RA9 if your only intention is to terminate the
filing. A termination can be made in the location in which the financing statement is currently.
A number of states adopted a new section 9-710, which prohibits the local-level filing office from
accepting any UCC personal property filings (including terminations) after July 1, 2001. Thus, in the
following states, an “in lieu of” filing must be made in the proper RA9 location prior to terminating a
local-level filing: AR, ID, MA, NC, NJ, NM, OK, PA, WI, WY.
Note: It is always a safe practice to file an “in lieu of” filing in the correct location under RA9
and then file the termination.
In Lieu of Continuation Financing Statements
In Lieu Filing Requirements
When I file an "in lieu of" filing, do I need to attach copies of the original filings that I am
continuing?
Currently, fifty jurisdictions do NOT require copies of the original filings that are listed in the “in lieu
of” filing to be attached to the “in lieu of” filing. The sole exception to this is Alaska, which requires
that a copy of any listed filing be attached to the “in lieu of” filing.
However, it is highly recommended that each secured party should maintain a file-stamped copy
(preferably a certified copy) of each filing that is listed on and continued by an “in lieu of” filing.
Although several states have mandated that UCC records be maintained for an extended period of
time, many filing offices will continue to “purge” their UCC records. There will likely be much
litigation in the future regarding “in lieu of” filings.
It is possible that a secured party will be challenged in a future legal proceeding to prove that the preeffective date filings listed on an “in lieu of” filing actually existed and were properly recorded. It
will be up to the secured party who filed the ‘in lieu of” filing to prove that the listed filings had been
properly recorded. If the original filing office has since purged the records in question, and the
secured party did not retain copies of the original filings, it will be extremely difficult for the secured
party to produce enough evidence to properly defeat the challenge.
Therefore, a prudent secured party should maintain sufficient documentation of the public record
and/or the filings listed on an “in lieu of” filing.
Amendments in Lieu Filings
What is the best method for amending information when filing an "In lieu of" Filing? Should I
file the "in lieu of" filing and then an amendment, or should I just correct the information on
the "in lieu of" filing at the time I file it? For example, I am going to file an “in lieu of” filing in
Delaware and I need to amend the debtor name. How should I do this?
Revised Article 9 section 9-707 provides four alternatives for amending a pre-effective date financing
statement. These four alternatives are:
If the pre-effective date financing statement is already filed in the correct office according to the new
location requirements of RA9, file an amendment in that office.
If RA9 requires the pre-effective date financing statement to be moved to a new filing office (i.e. –
the filing office based upon the location of the debtor rather than the location of the collateral), there
are three alternatives:
a. file an “in lieu of” financing statement in the new filing office, followed by the filing of
an amendment in that office, or
b. file an “in lieu of” financing statement in the new filing office concurrently with the
filing of an amendment
c. File an “in lieu of” financing statement in the new filing office with all of the information
amended.
Which method to use will depend upon the secured party’s comfort with the filing system. A secured
party may choose option 2(a) above, as it provides a better “paper trail” that shows the history of the
filing. Others may choose option 2(c), as it only requires one filing be made. Likewise, option 2(c)
places the correct information on the public record and reduces the costs involved with multiple
filings.
In any situation, it is extremely important that the filing(s) meet all of the requirements of Revised
Article 9, including the proper debtor name, secured party name, and indication of collateral. In
addition, all other information that is needed to make the filing non-rejectable must be included (such
as organization information, addresses, etc.).
Amending in Lieu Data
A recently submitted in lieu financing statement omitted some of the filings related to the
transaction. How would you amend the in lieu data?
First, the client must determine whether it is absolutely necessary to include the filing on the in lieu
financing statement.
If the omitted filings are local filings from a dual filing situation (i.e. the jurisdiction adopted the third
alternative of former Article 9 section 9-401 requiring certain filings submitted at the central filing
office to be filed as a duplicate in the local filing office), the official comments of section 9-706 state
that "an identification of the filing in the central filing office suffices for purposes of subsection
(c)(2)."
Smith and Sigman in their pamphlet, The Transition Rules of Revised Article 9 of the Uniform
Commercial, emphasize that "there is no need to continue the effectiveness of the duplicative preeffective-date financing statement on file in the local office." Moreover, the authors assert that a preeffective-date financing statement filed locally is significant only when determining the perfection
status and priority under former Article 9. In relation to Revised Article 9, these local filings are
essentially ineffective and unnecessary. If this is a dual-filing situation, no action needs to be taken.
There is generally no need to list pre-effective-date filings that were filed in a local office on an in
lieu of filing, although there is no harm in and many customers feel more comfortable doing so.
If the situation exists where an in lieu of filing was filed, and a pre-effective-date filing was
accidentally omitted, either of the following options is available to the secured party:
A collateral amendment can be submitted. Technically, the pre-effective-date information is generally
indexed as a part of the collateral description as it is placed in the collateral box of the form. The filer
should check the restated collateral description option on the form and include the entire collateral
description as well as the in lieu language and filing information.
A new in lieu of financing statement can be submitted listing the omitted pre-effective-date financing
statements. When amending the security agreement, the filer must remember to make requisite
changes to both in lieu filings.
Most filers find option one to be the better choice as it decreases the number of filings to be
maintained.
Amendments
Importance of the Authorizing Party Name
How important is the authorizing party name? An amendment was filed with the Secretary of
State to correct debtor information. The filer did not provide the authorizing party (secured
party) in box 9 of the form. If the filing office accepted these documents and assigned filing
numbers, aren't the filings effective?
The correct authorizing party must be provided on the Amendment form. Section 9-510 provides that
a filed record is effective only to the extent that it was filed by a person that may file it under Section
9-509 (Person Entitled to File a Record); If the correct authorizing party is not provided, the filing
could be considered ineffective. The filing office is not able nor is the officer obligated to determine
the correct authorizing party. For this reason, an incorrect or the absence of an authorizing party
name is NOT a reason for rejection.
The fact that a filing appears on the public record plays only a small role in determining the
effectiveness of a filing. Instead, the effectiveness of the filing must be ascertained by reviewing the
laws and all related information on the public record. In the situation above, the filing office has no
obligation to reject the filing. Further, the amendment may not be effective for the following reasons:
Section 9-510 provides that a filed record is effective only to the extent that it was filed by a person
that may file it under Section 9-509 (Person Entitled to File a Record);
Section 9-509, further states that this type of amendment may be submitted only if the secured party
authorized the filing;
No authorization was provided on the form.
To amend the filing, a new amendment statement should be submitted with the correct authorizing
party.
If a debtor changes its name, how long does the secured party have to file a debtor name amendment?
If the debtor name is incorrect when the financing statement is filed, the financing statement may be
considered misleading in accordance with section 9-506(b). A financing statement that is seriously
misleading is ineffective. The financing statement must be amended immediately to update the
debtor name. Or, if no subsequent secured parties have filed notice of an interest in the collateral held
by this debtor, a new financing statement can be filed with the correct name of the debtor.
Although Section 9-507(b) states that a financing statement is not rendered ineffective if the
information becomes seriously misleading after the financing statement has been filed, there is one
exception to the rule. A change in the debtor name is the only post filing change that will render a
financing statement ineffective. If the financing statement would not be disclosed using the debtor's
correct name and the filing office's standard search logic, the financing statement can be considered
misleading, and therefore ineffective, as provided in section 9-506(c). The secured party should be
diligent in ensuring that these filings will be uncovered in a search of the newest name of the debtor.
In the case of a pure name change, the secured party is not required to submit an amendment
statement. However, the secured party's security interest will only apply to collateral acquired before
the name change, or within four months after the name change. In reality, many secured part(ies) may
feel more comfortable submitting an amendment statement anyway to ensure the filing is found.
If at any time the customer is unsure of the details of the transaction or would prefer to always take a
conservative approach, the secured party should submit an amendment statement within four months
of the name change. This will help to ensure that all after-acquired collateral remains subject to the
perfected security interest, and the statement is disclosed in a search of the records.
NOTE: This answer addresses only a pure name change. In situations where there is a new debtor or
change in the debtor name and location, other rules apply. This and other related provisions will be
discussed in a future FAQ.
Debtor Name Amendment
Is the filing officer permitted to reject a debtor name amendment if the mailing address and
organizational information are not provided?
Yes, the filing office is required to reject this filing. The modified name becomes a new debtor name
in the system and will be treated as thus by the filing officer. Because the amended name is indexed
as a new name, section 9-516(b)(5) requires the filing office to reject this amendment if the
organization information and mailing address are not provided.
The purpose of sections 9-516(b)(5) and 9-520(g) is to provide as much information as possible on
the public record. Section 9-520(g) does so by prohibiting the filing office from removing any debtor
name from the public record. Although a debtor name on record may be amended or deleted, each
pre-amendment name will remain in the index in relation to the particular filing. Thus, the sections
increase the amount of information available on the record. Based on this information, searchers, not
the filing office, are able to determine the significance and effectiveness of filed records.
When amending any debtor name, be sure to include the mailing address and the organization
information for the amended debtor name. Upon receipt of the filing, the filing office should associate
the filing with the initial financing statement. The new debtor name along with the original debtor
name will remain on the record
Is a Subordination possible under the new law ?
Subordination is not an option on the National Amendment form. Is a subordination possible
under the new law? If so, can it be accomplished using the National forms?
Subordination is a contractual relationship between two parties holding an interest in the same
collateral. In this relationship, a lender (secured party) entitled to priority permits a subsequent lender
to have a higher claim. This agreement or clause effectively subordinates the interest of the lender
with priority to a lender with a lower claim.
Generally, the Article 9 laws do not provide much, if any, guidance concerning subordination. The
law does allow a person entitled to priority to effectively agree to subordinate its claim (9-339).
However, the statute does not provide a method for effecting the subordination.
This task is normally accomplished through a subordination agreement. Subordination agreements are
common in a variety of transactions. Typically, a subordination agreement is employed when a
borrower seeking financing has granted a security interest in his property to multiple lenders. Before
the newest lender will grant a loan, the lender may require other lenders (secured parties) to sign a
subordination agreement granting the new lender priority.
Under former Article 9, the state administrators promulgated amendment forms that included a
subordination option, leading many to believe that a filing evidencing the subordination was required.
When in fact, Article 9 laws did not discuss subordinations in detail. Revised Article 9 laws also do
not require the filing of UCC forms to provide public notice of the subordination agreement.
Consequently, the National Amendment forms do not include a subordination option. Since most
states have adopted the National forms as standard, the previous method of providing notice of a
subordination is no longer an option.
If the secured party insists upon providing public notice of the subordination he/she could write the
subordination information in the collateral box on the amendment form or the miscellaneous box on
the amendment addendum page. Some customers also choose to add the party as an additional
secured party.
Filing Amendments: Timing
I am filing an amendment/continuation and the Secured Party name or address has changed.
Am I required to amend this information at the time I file the amendment? What if the debtor
address has changed? It is my understanding that the only information that I am required to
amend is a change to the debtor name. What should I do?
The issue of the appropriate methods and timing to amend the information on a financing statement is
the subject of debate. In general, it is a good idea to amend all information that has changed any time
an amendment (including a continuation) is filed. This includes changes to debtor or secured party
names, addresses, collateral description, etc.
9-507(C) provides that if the information in a financing statement was correct at the time the
financing statement was filed, subsequent changes to the information will not cause the financing
statement to become “seriously misleading” and thereby ineffective. The exception to this is in
relation to a change in the debtor name, which will cause the financing statement to become
“seriously misleading” unless it is amended within four months of the name change. Of course, this
is necessary due to the fact that UCC indexing systems are searched by debtor name, and the correct
debtor name must be maintained to ensure the integrity of the UCC indexing system.
The complications here exist due to the fact that RA9 has expanded the definition of financing
statement to include the “initial financing statement and any filed record relating to the initial
financing statement”. Therefore, any reference to a financing statement in RA9 necessarily includes
all amendments, continuations, etc.
Therefore, an argument can easily be made that any time an amendment is filed (including
continuations, amendment, subordinations, etc.), it will be considered to be the filing of a “financing
statement”, and therefore ALL information that has changed must be updated. If all of the
information is not updated, it may cause the financing statement to become seriously misleading and
therefore ineffective. A cautious secured party will accordingly ensure that all information relating to
a UCC financing statement is accurate and current.
Jurisdictional
Colorado Pre-Effective-Date Filings
I was told that in Colorado some pre-effective-date filings are effective for an additional amount
of time although the continuation statement was not filed during the six month window. Is that
true?
Yes, this is true. During Colorado's transition to a central filing system, the law was amended to
force the re-filing of certain financing statements to facilitate this transition. The law stated that
financing statements that were filed before July 1, 1996 and did not lapse by December 31, 1997
would lapse on December 31, 1997. In order to continue the effective period, a continuation
statement had to be filed after July 1, 1996 but before December 31, 1997. This continuation
extended the effective period five years beyond the original date the financing statement otherwise
would have lapsed.
For example, a financing statement filed on January 1, 1996 would have an original lapse date of
January 1, 2001. Since the filing date is before July 1, 1996, and the lapse date is after December 31,
1997, the law provided that the financing statement would lapse on December 31, 1997 if a
continuation statement had not been filed during the required period. The filer submitted a
continuation statement on December 1, 1997. The new lapse date of the filing is five years from the
original lapse date, or January 1, 2006.
In essence, financing statements continued properly will be effective for ten years beginning from the
original date of filing. Colorado's RA9 law has also been amended to include a reference (9-528) to
this re-filing policy to make filers and searchers aware of the extended effective period for these
filings. Note that the transition period will cause those statements with a new lapse date after June
30, 2006 to lapse instead on June 30, 2006. RA9 law will dictate the proper manner in which to
continue these financing statements.
New York Cooperative Filings
Are pre-effective date cooperative filings on record in New York still effective? Also, does RA9
require the filer to make changes to the form to remain effective?
In New York, ownership of a cooperative interest and physical space in a cooperative organization is
classified as personal property. Loans may be secured using the cooperative interest as collateral. In
those cases, notice is governed by Article 9 of the UCC. Revised Article 9 modified the effective
period and added additional filing requirements for cooperative filings.
Yes, cooperative interests that were effective immediately before the effective date of the law will
continue to be effective after July 1, 2001. In fact, these filings are effective for an additional five
years beginning July 1, 2001. If the filer wants the cooperative filing to remain effective beyond
these five years, certain actions must be taken.
In order to continue the effectiveness beyond five years, the filing first must be amended to meet the
regular financing statement requirements under Revised Article 9. Secondly, the law provides that,
the filer must submit a cooperative addendum form before the financing statement lapses. This
addendum is available on the Department of State's web site.
The effective period of cooperative filings have been changed from indefinite to fifty years. Filing
the cooperative addendum form with or after the initial financing statement effectively changes this
period to fifty years from the date of filing of the original financing statement. The addendum form
may be filed at any time during the effective period of the financing statement. However, the form
must be filed before the end of the five-year period or June 30, 2006.
After all documents have been submitted to update the cooperative filing according to RA9, the RA9
laws for "regular" security interests apply for amending or continuing this interest.
What is the lapse date of Maryland and Arizona financing statements filed before July 1, 2001
Under former Article 9, Arizona and Maryland had non-uniform statutory effective periods of six and
twelve years, respectively. With the adoption of Revised Article 9, both states changed their effective
period to the uniform five years. The model act's five year transition period captures and transitions
all pre-effective-date filings effectively so as not to set a premature lapse date for these filings. This
is not the case for filings in Arizona and Maryland.
Arizona and Maryland decide to approach this issue in two different ways. Arizona extended the
transition period to June 30, 2007, in order to compensate for the previous six-year effective period of
liens. A financing statement filed before July 1, 2001 will continue to have a natural lapse.
Maryland, on the other hand, adopted the uniform date of the transition period resulting in the
premature lapse of financing statements filed (or continued) before July 1, 2001. In essence, the preeffective-date financing statements filed before July 1, 2001 and after June 30, 1994 and any filings
continued after June 30, 1994, will have a new lapse date of June 30, 2006.
In the case of Maryland, it is recommended that the lapse date be changed immediately to June 30,
2006 for all filings between the dates of July 1, 1994 and July 1, 2001.
For example, the secured party filed a financing statement on January 1, 1999, at the Maryland Dept.
of Assessments and Taxation. Under former Article 9, the lapse date of the financing statement is
calculated to be January 1, 2011, or twelve years from the date of filing. The debtor is located in
Maryland and the financing statement adheres to RA9 requirements once RA9 took effect on July 1,
2001. The new lapse date of the filing will be calculated as June 30, 2006.
For a more detailed discussion of this issue, please consult our publication “The Transition Rules of
Revised Article 9 of the Uniform Commercial Code” by Harry Sigman and Edwin Smith. The
discussion is found on page(s) 25-27.
Forms
Indexing Policies for Additional Names
The California Secretary of State distributed a letter stating that "names on separately
attached pages will not be addressed as elements of the submittal for indexing purposes.” What
does this mean?
Actually, this is the case in the vast majority of jurisdictions and is exactly the result intended by
Revised Article 9. California is just reminding everyone of the new requirements of RA9.
The letter states that names on separately attached pages "will not be addressed as elements of the
submittal for indexing purposes". This means that any names, which are not listed on the face page of
the UCC-1 financing statement or the National Addendum form will not be indexed by the state.
Please remember that one of the intentions of Revised Article 9 is to embrace new technologies and
electronic data exchange. In essence, the law is written in a manner, which allows computers to do
the majority of the work that was formerly done by human filing officers. Typically, any type of
determination that requires a human judgment or analysis has been removed by RA9.
One of the primary areas that has changed relates to the indexing of information that is found in a
UCC filing. Any information that is contained in a UCC filing must be able to be identified and
indexed by a computer. In the case of a debtor name, the only method by which a computer can
properly identify and index the information on a financing statement is if the debtor name is
contained in the appropriate field on the UCC form.
In this case, the State of California is merely reminding everyone that they must enter the proper
debtor names in the appropriate spaces found on the UCC-1 financing statements and/or the UCC-1
addendum. Any debtor names that are listed in another location, such as a listing of debtors on an
attachment sheet, are not going to be indexed.
Clearly, the concern is with secured parties who enter a phrase such as “see attached listing” in the
debtor name box and thereafter attach a list of debtor names as an attachment. Is a computer able to
read and index a list of debtor names that is contained on an attachment page? The answer is no!
Therefore, RA9 requires that all debtor names be entered in the appropriate field(s) on the national
form(s).
As a practical matter, if the secured party needs to file against multiple debtors, the secured party
needs to use additional addendum pages for the purpose of entering each debtor in a designated
debtor name field.
FYI: In the case above, the filing office will actually index the debtor name “see attached listing” in
the index, and will NOT list any of the debtor names listed on the attachment page(s). In order to find
the filing in a subsequent search, a search would have to be conducted against the debtor name “see
attached listing”.
Do all states accept the newest version of the IACA National forms?
Yes, all of the fifty-one jurisdictions accept the newest version of the IACA National forms.
At the 2002 IACA conference, the state administrators proposed the modification of the National
forms and introduced new forms.
IACA adopted the amended version of the National Financing Statement, National Financing
Statement Addendum and the National Financing Statement Amendment. The removal of the tax
identification section label marks the difference between these forms and the 1998 version. While the
field still exists on the form, the previous language (Tax ID #: SSN or EIN) has been removed.
IACA revised these forms in response to public concerns and increasing legislative activity banning
the posting of social security numbers. The only states which will still require the SSN to be used
when filing UCC documents are South Dakota and North Dakota as noted in the form instructions.
These forms have a revision date of 5/22/02 and are available on the IACA website. Note that all
filing offices should continue to accept the 1998 versions of the national form(s) as well. Since many
state's version of the RA9 law requires them to accept the IACA-approved national forms, the revised
national forms should be acceptable in most jurisdictions. However, there are some states whose
administrative rules specify that the IACA forms adopted prior to or on July 1, 2001 are the standard
forms. All of these states have amended their rules to allow for the acceptance of the new forms or
have posted the new forms on their website.
The IACA organization also adopted and published the two new addendum forms to handle the
overflow of additional party names:
1) Financing Statement Additional Party Addendum (UCC-1AP)
2) Financing Statement Amendment Additional Party Addendum (UCC-3AP)
These forms will allow for the addition of three debtors and two secured parties per addendum.
Many states have not determined how they will handle these forms (particularly fees and the indexing
of information contained on the forms). So far, Tennessee and Washington have decided to accept
the forms but not index the information provided. We will provide additional form information such
as fees and proper indexing as it becomes available. As always, please keep us posted regarding any
issues/problems you experience relating to the use of these form(s).
Importance of the Record Owner Name
How important is the record owner name on real estate/fixture filings? If this name changes,
should the public record be amended to include this change? If so, how?
According to the Official Comments to section 9-502 the record owner enables financing statements
filed locally to fit into the real property search system. Most local indices are organized by the name
of the owner of the property. If the debtor is not the land owner, it would be difficult to index the
record properly. Thus, the record owner must be provided for indexing purposes. If the record
owner changes, the new record owner name must be provided to ensure that the records are indexed
against this name.
How do you amend the record owner name? Section 9-519(d) requires the financing statement to be
indexed "under the names of the debtor and each owner of record shown on the financing statement."
In order to keep the filing current, the fixture should be indexed against both names. Thus, an
amendment of the debtor name (that of the record owner) should suffice.
On the National Amendment form (UCC-3), item 1b should be checked to indicate that this record
should be filed in the real estate records. In item 5, check the boxes indicating the debtor and change
in name/address. The original record owner's name should be placed in item 6 and the new record
owner name in item 7. Be sure to provide the address information and organizational information, if
necessary, for the record owner, as this name will be indexed as a new debtor. Lastly, do not
overlook the authorizing party in item 9.
Revised Article 9 and County Offices: Signatures
A county-level filing office rejected my UCC filing because it didn't have a signature. Is this
allowed under Revised Article 9?
This is an issue we have been struggling with since RA9 took effect. Many county-level filing offices
throughout the United States are still not even aware of RA9, nor have they been trained or made any
efforts to implement new systems to deal with RA9. Unfortunately, many of the SOS offices do not
consider it their duty to inform the county filing offices of the new requirements or practices.
While the situation has improved since July, there is no telling how soon all county filing offices will
understand their obligations under RA9. Generally, whether the UCC filing is filed may depend upon
the clerk that happens to be working that day. One clerk may file a document without a signature;
another clerk may reject a document that does not have a signature. There is no way to tell what will
happen in many cases, as is typically the case when a filing office does not follow the direction of the
law.
Many county filing offices are incorrectly categorizing UCC filings as real estate filings, and do not
believe RA9 applies (hence the signature requirements, or the notarization requirement in Arkansas,
for example). Until there is a court challenge, these filing offices may or may not change their
practices. It will require a secured party whose document was wrongfully rejected to challenge the
filing office in court.
In the meantime, we have been attempting to file the documents according to the law (which will
provide a secured party greater protection should a court challenge be made in the future). In
addition, continue to enclose the letter that was drafted on behalf of the service companies with all
local-level filings. If a filing is wrongfully rejected, it would be beneficial to maintain a copy of the
rejection letter and wrongfully rejected document, and afterwards comply with whatever the filing
office is requiring in order to get the document filed.
What is the proper mailing address to use in relation to a registered organization debtor and/or
What is the proper mailing address to use in relation to a registered organization debtor and/or
secured party?
As with many other areas applicable to filing a UCC financing statement, the accuracy or correctness
of the address information will not be analyzed by filing officers. Thus, in theory, one could list
anything in this field, and the filing will not be rejected by the filing office. However, it is highly
recommended that the correct address be used at all times and that all information on a UCC filing is
current and accurate.
In relation to organizational debtors, RA9 merely requires a “mailing address”. It does not
specifically require that the address of the headquarters, or of the statutory agent, or any other specific
address be used. It requires only a “mailing address”.
The same holds true in relation to the secured party address. There is no requirement that a specific
address be used, and an inaccurate secured party address will likely not be considered “seriously
misleading” under RA9 (but see opposing point of view below). However, in a practical sense, the
secured party should be diligent in maintaining an accurate address. Typically, notices such as PMSI
notifications, foreclosure notifications, etc. will be sent to the address listed for the secured party on
the financing statement and/or amendments to the financing statement. Therefore, a permanent
mailing address should always be used as a secured party address (i.e. – a post office box number).
Proper Filing Locations
Filing Post-RA9 in former dual filing jurisdictions
In a state that was formerly a dual-filing state (i.e. - required filing at both a state-level filing
office and a local-level filing office), am I required to file an "in lieu of" filing at the central
filing office for the local-level filings as well as the state-level filings?
No, although a cautious filer would do so!
The official comments to section 9-706 provide that “ a single (in lieu of) financing statement may
continue the effectiveness of more than one financing statement filed before the effective date of
RA9”.
This section further provides that if a financing statement had been filed in more than one office in a
given jurisdiction, as is the case in a former dual-filing state, then an identification of the filing in the
central filing office suffices for the purposes of an “in lieu of” filing.
However, since multiple local-level filings can be listed on a single “in lieu of” filing, many cautious
filers are using this method to continue all of the local-level filings that they currently have on record.
This is generally an inexpensive process, as it only involves one filing and will help the secured party
avoid potential legal challenges in the future.
Note: Always file “in lieu of” filings in the filing office designated by Revised Article 9
What is the proper location for filing against a trust and what is the proper name of a trust?
This is one of the most difficult questions to address regarding the new rules of Revised Article 9.
States vary greatly in the treatment of trusts, and there are many types of complex trusts that do not
clearly fit within the rules of RA9.
In general, for the purposes of filing a financing statement, the best method may be to file multiple
filings when a trust is involved. 9-503(a)(3) and the official comments provide initial guidance to the
determination of the appropriate name to use. Since the national form requires a distinction between
an organizational debtor and an individual debtor, it may be beneficial to file against multiple names
(i.e. – the name of the trust and the name of the trustee or settlor, if any). The also applies to the
location of filing question.
Of course, always keep in mind that the UCC1 has an addendum box 17 that should be checked
should the debtor be a trust or trustee. In addition, the “miscellaneous” box on the addendum
provides sufficient space to add any additional information which can help distinguish this trust from
others bearing the same or similar debtor name. Until the courts are able to clearly define the
treatment of trusts under RA9, a prudent filer will continue to make multiple filings against all
possible debtor names and in all related locations based upon sections 9-503 and 9-307.
What is the proper location for filing against a bank/financial institution?
In August 2001, the OCC (Office of the Comptroller of the Currency) circulated Interpretive Letter
#913, which addresses this situation. Below is the text of that letter:
Subject:
Revised Article 9 of the Uniform Commercial Code.
I am responding to your inquiry of June 20, 2001 regarding the location of a national bank debtor under section
9-307 of the recently revised Article 9 of the Uniform Commercial Code. As a general matter under revised
Article 9, the location of the debtor determines which state’s law governs perfection of a security interest.
Section 9-307 determines the location of debtors for choice-of-law purposes.
For the purposes of section 9-307(f), a registered organization (which term includes a national bank) that is
organized under the law of the United States is located (1) in the State that the law of the United States
designates, if the law designates a State of location; (2) in the State that the registered organization designates,
if the law of the United States authorizes the registered organization to designate its State of location; or (3) in
the District of Columbia, if neither paragraph (1) nor paragraph (2) applies.
Under 12 U.S.C. § 22 (Second), organizers of a national bank are required to include in the organization
certificate a designation of the bank’s main office city and state. In addition, a national bank may relocate its
main office. 12 U.S.C. § 30 and 12 C.F.R. § 5.40. Accordingly, for the purpose of the location rule in section 9307(f), federal law authorizes national banks to designate their State of location. Location for such purpose is
the state in which the main office is located.
Please keep in mind that there may be other considerations for international banks, as foreign debtors
are treated differently under RA9 than resident debtors. It is advised that the sections of RA9 relating
to foreign debtors and/or foreign banks be consulted as well.
What is the proper filing location when the debtor is a foreign entity?
What is the proper filing location when the debtor is a foreign entity? For example, I have a
Canadian debtor with collateral located in the United States. Where do I file? Should I file in
D.C.?
The issue of where to file against a foreign debtor has been very confusing for many of our
customers.
Revised Article 9 provides that if the debtor is located in a foreign jurisdiction, and the foreign
jurisdiction has a type of public filing system that "generally requires notice in a filing or recording
system” as a means for perfecting a security interest, the proper place to file is in the foreign
jurisdiction. If the foreign jurisdiction does NOT have a public filing system that meets these
requirements, the proper place to file a financing statement against a foreign debtor is with the
District of Columbia Recorder of Deeds.
Note: The Precedent Department does not maintain a list of foreign jurisdictions, which have such a
“public notice filing system.” It is up to the customer to determine which foreign jurisdictions meet
these requirements.
For example, each province in Canada has its own public notice system governed by their version of
US UCC law known as the Personal Property Security Act (PPSA). Thus filing in DC is not
necessary against a Canadian debtor.
However, multiple filings may be required elsewhere. Canadian PPSA laws are similar to the US
former Article 9 laws in which the location of the collateral dictates the place of filing. Therefore,
Canadian law dictates that a filing be submitted in the US at the location of the collateral.
In contrast, RA9 law requires that a filing be submitted in the Canadian province where the debtor is
located. This is the same situation that filers experienced when RA9 became effective in all but four
states. At that time, it was recommended that filers submit filings in all required jurisdictions in
accordance with both laws in order to satisfy all legal requirements. In this case, the same logic
applies. Filings should be submitted in Canada at the location of the debtor and in the US where the
collateral is located (at the county and/or central filing office). It may also be beneficial to file in the
District of Columbia as a precautionary measure.
Note: There are additional considerations, which govern filing against foreign banks and foreign air
carriers.
Effect of registered organization’s change in principle place of business
A debtor is a corporation incorporated in New York and its principal place of business is in
New York. Recently, the debtor moved its principal place of business to New Jersey. Does the
secured party have to amend the original UCC financing statement to reflect this address
change?
If the company is registered, the principle place of business does not matter. Section 9-307(e) deems
an organization registered under the law of a state to be located in that state. The proper place to file
is the jurisdiction where organized.
If the corporation registers in the new state, section 9-316 would apply as this is considered a change
in governing law. The original financing statement would remain perfected for four months after the
change of the debtor's RA9 deemed location, or until lapse, whichever comes earlier. In order to
continue the effectiveness of this financing statement and keep the original priority, the secured party
would need to file a new initial financing statement in the new location. Generally, it is beneficial to
reference the original filing or to attach a copy of the original filing and/or security agreement to the
filing.
If the corporation remains incorporated in the original state and does not attempt to incorporate in the
new jurisdiction where the place of business has been transferred, then the financing statement
remains perfected. There is no need to change the address unless the mailing address of the debtor
changes as well. There is no time frame for updating the mailing address since an incorrect address
will not render the financing statement misleading and unperfected.
It also should be noted that certain events affecting the status of the registered organization will not
effect the RA9 deemed location. Section 9-307(g) and its official comments clarify that events such
as "the dissolution of a corporation or revocation of its charter" will not change the location of the
registered organization. If any of the actions provided in section 9-307(g) is initiated, the jurisdiction
where the organization is registered will continue to govern perfection. Any financing statements
filed in the jurisdiction will remain perfected.
The principle place of business does differ at times from the place of incorporation. This is especially
true for large corporations that are incorporated in Delaware because of Delaware's favorable
corporation laws. In those cases, the companies may use the address of the registered agent or the
principle place of business. The law only requires a mailing address of the debtor to insure that all
correspondence regarding this security interest reaches the debtor in a timely manner. It does not
specify that a particular address must be used.
It is in the best interest of the client to stay abreast of the location of the debtor and use the most
reliable and recent mailing address on all forms.
Special Topics
Bankruptcy and UCC Filings
If a debtor files for bankruptcy, how does it affect a UCC filing? Does the UCC filing need to
be continued during a bankruptcy?
As a general rule, since bankruptcy laws are federal laws, and UCC laws are state laws, bankruptcy
laws will always supersede the UCC. Thus, most questions involving bankruptcy issues must first be
addressed by bankruptcy laws (which are very lengthy and complicated) rather than the UCC.
However, there are a couple of provisions that may apply to our customers, so it is important that we
understand the basics from our customer's perspective.
At the time a bankruptcy is filed, one of the first things that happens is the “automatic stay”. This is
the bankruptcy provision, which essentially acts to “freeze” everything in place at the moment the
bankruptcy is filed. Thus, at the time the bankruptcy is filed, it prohibits any contracts from being
signed or enforced, any property from being transferred, sold, or purchased, or any legal actions from
taking place without the permission of the bankruptcy trustee.
Under former A9, section 9-403(2) provided that the lapse period of a UCC filing was “tolled” upon
the commencement of a bankruptcy proceeding. Thus, a filing could not lapse nor be otherwise
amended once a bankruptcy proceeding had been initiated.
Unfortunately, due to the fact that many filing offices were unaware that a bankruptcy proceeding had
commenced, filing offices would routinely purge records that they believed had lapsed. This gave
rise to a creation of several different types of “notice” forms (for example, Iowa created an UCC-21
that was used as a bankruptcy notification). But, most often, the records were removed from the
index and destroyed.
Revised Article 9 specifically changed this rule, and replaced it with a provision that imposes a new
affirmative burden on the secured party. The secured party is now required to file continuations, etc.,
during a bankruptcy proceeding to ensure the financing statement does not lapse. In addition, the
secured party does not need permission from the bankruptcy trustee in order to do so.
Additional Note relating to Bankruptcy:
Often, during bankruptcy, there will be property (both real and personal) sold or transferred as part of
the liquidation/reorganization of the bankrupt company. Thus, there will often be UCC filings made
in relation to these transfers/sales.
Under section 1146 of the bankruptcy code, there are provisions that seem to indicate that such
transfers are exempt from any “stamp tax” or “documentary stamp tax”. Thus, you may have
customers attempting to file documents (without including the tax payment) in a particular
jurisdiction that requires such taxes (i.e. – FL). If a filing office every rejects a document in this
situation, please let the Precedent Department know.
My client would like to search for EFS Filings. Does RA9 affect EFS filings? Are EFS filings
still required?
Although the filing purpose and requirements are similar for EFS and A9 filings, the same laws do
not govern the two types of filings. To begin, let's discuss the law that governs EFS Filings.
Food Security Act
The Federal law, the Food Security Act, requires states to provide some methodology to make
potential purchasers of food products aware of security interests in farm products. State laws do not
provide any protection for potential purchasers especially if they are unaware of security interests.
Furthermore, the drafters of the federal law discovered that state laws actually permit the secured
lender to enforce liens against the purchaser even if the purchaser:
(1) does not know that the sale of the products violates the lender's security interest in these products;
(2) lacks any practical method of discovering the existence of the security interest;
(3) has no reasonable means to ensure that the seller uses the sales proceeds to repay the lender.
As a result, the purchasers become subject unfairly to liens/security interests on farm products and
may be burdened with double payment if the seller (debtor) fails to repay the lender (secured party).
The purpose of the Food Security Act is to provide some protection for farm product purchasers by
creating a methodology for discovering liens on farm products and placing the burden of notice on the
secured lender and debtor.
What are EFS Filings?
The Food Security Act (FSA) requires states to create either the direct notification system or the
central filing system. The direct notification system requires the secured party or seller to notify the
potential buyers directly of the security interest in the farm products of interest. In contrast, the
central filing system allows buyers, commission merchants or selling agents to identify farm products
that are subject to a security interest through the filing of Effective Financing Statements (EFS). The
system also requires buyers, commission merchants and selling agents to register with the Secretary
of State to receive master lists of information provided in the EFS filings. While the direct
notification system is the most widely used, there are 10 or more states that currently employ the
central notification system.
Under the central notification system, the Secretary of State maintains the database of information
provided in the EFS filings for review by potential buyers and distribution to registrants. If a buyer
fails to register with the Secretary of State prior to purchase of the farm products AND the secured
party files an EFS filing to cover the products being sold, the buyer is subject to the security interest
created by the seller. It is in the best interest of both the lender and potential buyers to register with
the central filing system.
Article 9 versus Food Security Act
Because of the similar notice requirements, certain CFS states make mention of the CFS Secretary of
State duties in the Article 9 laws. Most jurisdictions created a separate section of law to address the
central filing system. Consequently, the Article 9 revision did not substantially affect the central
filing system and EFS filings. For those states that included FSA central filing requirements in the
former Article 9 laws, most added the FSA CFS requirements to the revised laws continuing the FSA
central filing system.
In addition, minor changes may have resulted due to the adoption of RA9 law. For example, under
the former A9 law, most states promulgated their own forms to be used as both UCC Financing
Statements and Effective Financing Statements. The adoption of the National Forms as the sole form
and the elimination of state UCC forms eliminated the dual purpose forms for some jurisdictions.
Alabama was the only state to make substantial changes to the previous FSA laws. The legislature
adopted the RA9 bill that removed the central filing system language. Alabama became a direct
notification system state for a short period. During this time, EFS filings were not required. A few
months later, new legislation was passed re-instating the central filing system language.
Overall, Revised Article 9 has had no substantial effect on EFS filings. If the CFS remains in effect
in a particular jurisdiction, the EFS filings are still required. It is the responsibility of the client to
determine which states continue to use the central filing system for farm products and file or search
accordingly.
What is the “searcher safe harbor”?
The searcher safe harbor refers to the "safety net" that RA9 provides to a party searching the UCC
records. As you may know, former A9 did not require a great deal of specificity in relation to the
proper debtor name to use when filing a financing statement. Thus, people would often file financing
statements listing tradenames, d/b/a's, f/k/a's, etc. as debtor names. As a result, when someone
performed a search of the UCC records, it was often necessary to search for a large number of
different names just to ensure nothing was missed. Of course, this resulted in expensive and
comprehensive UCC searches.
In order to help make the UCC searching system more exact, simplified, and inexpensive for
searchers, the "searcher safe harbor" was created for filings made after RA9 took effect. Essentially,
the searcher safe harbor provides that a searcher is only required to conduct a search against the exact
legal name of the debtor, and any UCC filings that are found when doing so are considered to be the
sole "official" record. If filings made against tradenames, d/b/a's, etc. are NOT found when a search
is conducted against the exact legal name, those filings are considered to be ineffective. Thus, the
concept is that a filing should only be made against the exact legal name of the debtor, and therefore a
search only needs to be conducted against the exact legal name.
The legal analysis (in case you enjoy such things!):
Section 9-503 defines the exact method for determining the exact legal name of the debtor (for
example, if a debtor is a registered organization, the exact legal name is found on the organizational
documents in the jurisdiction of organization).
Section 9-506 provides that if someone conducts a search against the exact legal name of the debtor,
using the filing office's "standard search logic", any filings that are found during the search are NOT
considered to be "seriously misleading", and are thus considered to be legally effective filings.
However, if someone conducts a search against the exact legal name of the debtor, and the filing is
NOT found during the search (i.e. - because the correct debtor name is not used, or a tradename is
used, etc.), the filing is considered to be "seriously misleading", and thereby ineffective.
Note: A financing statement that is seriously misleading (i.e. - it is not found when a search is
conducted against the exact legal name of the debtor, using the state's search logic, and searching the
state's records) is ineffective even if it is disclosed by (i) using a search logic other then that of a filing
office, such as a an internal search system maintained by a service company, or (ii) using the filing
office's standard search logic to search a database other than that of the filing office (i.e. - such as a
database of UCC records maintained by a service company).
Example:
A company is incorporated in Delaware, and the Articles of Incorporation in Delaware provide that
the exact legal name of the corporation is "ABC Excavation, Inc."
Secured Party A files a UCC-1 financing statement against the name "ABC Excavators, Inc." It is
filed and indexed by the filing office.
Secured Party B later conducts a search against "ABC Excavation, Inc." and the filing office returns a
clear report (i.e. - no records found).
Later, the company declares bankruptcy. Secured Party A claims that it has a filing on the record.
Secured Party B claims that the filing made by Secured Party A is ineffective, because it was not
made against the exact legal name and was not found when a search was conducted using the exact
legal name of the debtor.
Who will win?
Due to the searcher safe harbor, Secured Party B will win because the filing made by Secured Party A
will be deemed to be "seriously misleading" and thus ineffective.
FINAL NOTE: This is why it is always recommended that our customers conduct post-filing
“searches to reflect” to ensure their filings will be found according to the searcher safe harbor rule
Searches during the Transition Period
My debtor is located in Alabama (which adopted RA9 with an effective date of January 1, 2002)
and the collateral is located in Texas (which adopted RA9 with an effective date of July 1, 2001),
where should I search for UCC filing? Alabama law instructs filers to file in Texas (i.e. - the
location of the collateral) and Texas law instructs filers to file in Alabama (i.e. - the location of
the debtor). Therefore, there is no appropriate location to file! What should I do?
Believe it or not, RA9 does not provide guidance in this situation, as RA9 was drafted based upon the
assumption that all states would adopt substantially identical versions on the same day (July 1, 2001).
No provisions were made to address situations in which a state does not adopt, or as is the case here,
adopts with a non-uniform effective date.
In the situation described above, the secured party should file in both jurisdictions to ensure
perfection. While there may be some complications that arise under applicable choice of law rules,
the issue will eventually come down to a court choosing which state’s perfection rules apply. If a
filing is made in both locations, the secured party should be perfected no matter which state law is
applied.
A search should be completed in both jurisdictions to ensure that all possible filings will be found.
What is the difference between the filing officer statement and the correction statement?
Correction statements were added in the most recent revision of Article 9 as a means to notify the
public of corrections to or errors on the public record. The purpose of the correction statement is to
combat the misuse of the public record and serve as a debtor's remedy for bogus or erroneously filed
documents. The filing officer statement is used to publicly correct errors on the public record.
Filing Officer Statement
Filing officer statements normally address records that were wrongfully rejected but proven to be
fully effective. These statements are used to provide notice of the effective date for these filings.
When a filing officer wrongly rejects a filing for a reason other than that which is provided in section
9-516, the financing statement is effective as a filed record. The administrative rules place the burden
on the secured party to provide reasons that a filing should not have been rejected. If the filing office
is satisfied with the arguments presented, the officer will then accept the filing.
As provided in Section 208 of the Administrative Rules, the filing officer should include in the public
record a filing officer statement that provides the effective date of the filing as the date and time the
UCC record was originally submitted. It should be noted that procedures vary among jurisdictions.
Though some filing officers use only the filing officer statement to communicate this information,
many filing offices may choose to only backdate the financing statement (i.e. - amend the actual
index) to the original date it was submitted. Some filing offices may both amend the actual index and
add a filing officer statement to the record.
Correction Statement
Originally, the filer's correction statement was intended for use only by the debtor to notify the public
of wrongly filed or inaccurate filings. However, the usage of the correction statement has evolved
and now is filed by both debtors and secured parties to address a variety of issues. Currently, these
statements provide a method for filers and debtors to challenge on record the integrity of a public
record as well as notify the public and the filing officer of the filing officer indexing errors. Once the
debtor or secured party determines that a record is wrongly filed, rejected or indexed, the party then
completes and files the correction statement form also known as the UCC-5.
How will these statements be indexed?
Article 9 and the Administrative Rules offer no specific guidelines for indexing correction statements.
One can only make assumptions based on the procedures that are addressed. For instance, the
Official Comments for section 9-102 define a record as "whatever is filed in the Article 9 filing
system, including financing statements, continuation statements, and termination statements."
Section 9-519(a) further states that a record filed in the filing office shall be assigned a file number
and indexed accordingly. In accordance with section 9-519(c), the filing office must index all
records relating to an initial financing statement in a manner that associates it with the initial
financing statement and all related records.
Correction Statements may be indexed in the same manner as a UCC-1 or UCC-3, and may be listed
separately on the index. However, be aware that some jurisdictions may only attach the correction
statement to the currently existing UCC record. The indexing status of the filing officer statement
remains unclear. The administrative rules do state that the statement will be filed in the public record.
Since it is filed, it can be defined as a record. At the least, this record should be associated with the
initial financing statement to which it relates. Depending on the jurisdiction, both statements should
be a part of the public record.
NOTE TO SEARCHERS: Since filing officer statements and corrections statements may contain
vital information that reflects the true legal status of a filing, it is imperative that our search reports
provide information relating to such filings. As many filing offices do not index such filings
separately, reviewing only listings or face pages may not uncover such filings. Such information may
only be uncovered by reviewing copies of all filings and related documents.
One Year Perfection Rule
My client wants to know whether it was necessary to update his Pre-RA9 filings by June 30,
2002. What should I tell him?
It is probably useful to re-examine the infamous "one-year" re-filing period for UCC filings under
Revised Article 9 of the UCC. At this point, I thought it might be beneficial to remind everyone of
the history of this provision, and communicate the current interpretations of this important provision.
Several years ago, when Revised Article 9 was still a theory and only a handful of states had adopted
it, there were many interpretations of Revised Article 9 and its potential effect on our business. Two
particular sections of Revised Article 9 were of particular importance to our company. Sections 9703 and 9-705, when read together, seemed to imply that there would be a one-year period in which
all UCC filings that did NOT comply with new Revised Article 9 requirements (i.e. - regarding exact
legal names, collateral descriptions, etc.) would need to be re-filed or lose their perfected status.
Since sections 9-703 and 9-705 were only theories at the time, and no one knew how the law would
actually be applied, we were forced to try to interpret how these sections would play out in the long
run. Thus, when most folks from CT would present seminars or discuss RA9 with customers, we
would discuss the possible implications of section 9-703 and 9-705. In doing so, we always
communicated to the customers the potential one-year re-filing rule. As a result, many customers
began a systematic and lengthy process of reviewing/re-filing their filed UCC financing statements.
Since the adoption of Revised Article 9, many UCC commentators and practitioners have rejected the
one-year re-filing requirement as a misinterpretation of law. Harry Sigman (who was the individual
who actually drafted much of the transition section of RA9) explicitly states in the publication that he
wrote for CT that the one-year re-filing requirement in 9-703 and 9-705 does not apply to the filing of
financing statements. (The Transition Rules of Revised Article 9 of the Uniform Commercial Code,
Harry Sigman and Edwin Smith, page 19). This interpretation was later contradicted by the Kansas
USBC opinion, "In Re Michael Erwin." In the introduction of this case, the judge applies the one
year perfection rule to filings and uses the rule as one of the reasons for hearing the case. This
provides a precedent and gives some legitimacy to those analysts who continue to believe that the one
year rule applies to filings.
This involves some very difficult legal concepts. There are some customers (including some very
large law firms) who have read the provisions, had lengthy discussions regarding the provisions, and
still believe that the one-year re-filing requirement exists.
As with all interpretations of statutes, particularly when there have been no judicial determinations
regarding the statutes, it is clearly up to the customer to make this determination. However, we
must be very careful to avoid misleading our customers in this regard, in addition to being
inconsistent with our own published materials relating to this provision.
Pre-RA9 Filings and Perfection
An original financing statement filed in Texas was due to lapse on December 28, 2001. The new
place of filing as provided by RA9 is the Alabama Secretary of State. RA9 laws do not become
effective in Alabama until January 1, 2002. The secured party filed a continuation statement to
continue the perfection. Once the new law became effective in Alabama, an in lieu financing
statement was filed with the Alabama Secretary of State. Is this correct? Will these filings continue
the perfection of the original Texas filing?
Its hard to say especially considering that RA9 provides no guidance in this situation. If disputed, the
courts will determine if the filing remains perfected. The secured party should make every effort to
comply with the laws of the involved jurisdictions.
Let's examine the issue more closely:
a. The original financing statement cannot be continued in the collateral location state
(Texas), as RA9 will not allow this.
b. Filing in the debtor location state (Alabama) will not be effective until RA9 takes effect
on January 1, 2001.
c. Filing an “in lieu of” filing will not work, as RA9 requires that the pre-effective date
financing statement must “remain effective” when the “in lieu of” filing is filed.
What can be done? The rules do not work in this situation so the secured party should make every
attempt to preserve perfection by exercising every possible option. This way, should the validity of a
filing ever be contested, the secured party can argue that every possible attempt was made to preserve
perfection and a filing was made in every possible office where a potential searcher would search.
Therefore, the following is a possible “overkill” course of action:
a. File an “in lieu of” filing in the debtor location state (Alabama) before the initial
financing statement lapses
b. File a continuation statement in the collateral location state (Texas),
c. File a new financing statement in the collateral location state (Texas),
d. File another “in lieu of” filing in the debtor location state (Alabama) after the
continuation is made in the collateral location state (Texas)
Will this work? It's hard to say, but at least every attempt was made to comply with the laws of all
jurisdictions.
Filing Office Policies
Filing Offices and Multiple Secured Parites
On record with the Florida central filing officer is a financing statement listed as having two
secured parties. The first secured party recently terminated its interest. The second secured
party also would like to terminate its interest but notices in the search results that the office has
listed the financing statement as terminated. Is it necessary to file a termination statement?
Yes! The second secured party must file its own termination statement in order to terminate its
security interest. 9-510 specifically provides that the actions of one secured party do not affect the
rights and powers of another secured party that is indexed as an additional secured party. Although
the first secured party has terminated its interest, this in no way affects the second secured party's
interest.
Also, this brings up another great point. Although the filing office has listed the financing statement
as terminated after the first secured party submits the termination statement, the entire security
interest is not terminated. In order to make a proper decision regarding the effectiveness of a filing, it
is necessary to search and view all amendments pertaining to the financing statement. The public can
no longer rely on the filing office to determine the legal status of the financing statement. For this
reason, most central filing officers maintain all records on file for examination.
Note: The Florida Secured Transaction Registry has (among other things….) adopted a policy by
which they will not accept multiple terminations of a filing, which is clearly not compliant with the
law. Please let Maurita Miller and Timothy Hall know if you experience this or any other issues with
the Florida Secured Transaction Registry.
Revised Article 9 and Response Times
After five days, the local filing office returned my acknowledgment. Shouldn't all filing offices’
“turn around” time be two days, as required by Revised Article 9?
Before Revised Article 9 became effective, there was no statutory provision addressing the amount of
time the filing offices used to complete tasks or respond to filers and searchers. For a minority of
states, response time was determined by administrative rule. For most jurisdictions, this time period
was created by default due to the efficiency or limitations of the filing office system, often resulting
in ridiculously long response times. In order to remedy this problem and further simplify the filing
process, the RA9 drafters included two sections that require a two-day limit for the completion of
certain filing office functions. The time period for the completion of indexing procedures and the
response to information requests are addressed by sections 9-519(h) and 9-523(e).
While the model act limits the filing office "turn around" time to a two-day period, not all states have
adopted this requirement. Instead, some states have adopted a longer time period to accommodate
adjustments to the new law and filing systems. Others chose to limit this specified time period to the
central filing office only. These requirements are subject to change at any time, and there are
currently several bills pending which will amend the response time requirements.
Please note the following adopted variations to the model time periods:
5 business days:
Arizona (Information requests only); Colorado; Connecticut
Pennsylvania; Virginia (Information requests only); Wisconsin
(Information requests only);
3 business days:
Florida; New Hampshire (Indexing only); New Mexico (Information requests only); North Carolina
Time Period not provided in the Code:
Delaware; Georgia (Indexing only); Maryland; Nevada; New Hampshire (Information requests only);
Ohio (Indexing only)
The Model act also provides states the option of excluding the local filing offices from the required
time periods for filing office functions. While most states chose to exclude the local filing office
from the required indexing time period, a small number also opted to exempt the local filing office
from the required response period for information requests.
Please note the following state
requirements:
Indexing Time Period Applicable to Both Local and Central Filing Offices (For all other states,
time period is limited to central filing office only):
CO, DC, DE, GA, HI, IA, LA, MO, NM, ND, WV, WI
Information Request Time Period Applicable to Central Filing Office Only (For all other states,
local filing offices are included in the required time period):
AK, AZ, CA, CT, FL, ID, IL, ME, MA, MI, MS, NV, NM, NY, NC, OR, PA, TN, UT, WA
Note: Due to limitations of the state computer system or staffing issues, these statutory
requirements may not always be applied in practice. Section 9-524 allows for delays by the
filing office in many situations, including a delay when the filing office “exercises reasonable
due diligence under the circumstances”.
This document is intended for internal use only and may not be
publicly distributed.