Amendments to UCC Article 9 Effective July 1, 2013
Article 9 of the Uniform Construction Code (the “UCC”) governs secured transactions and is an integral part of most business and commercial transactions. UCC Article 9 was substantially revised in 1998 and eventually adopted in all 50 states. Now, more than a decade on, UCC Article 9 is being revised again to clarify some issues that remained uncertain after the revisions of the late 1990’s. The new changes will be effective July 1, 2013 in at least 26 states, including Maryland and New York. Pennsylvania currently has legislation pending to adopt the amendments, but the legislation may not be adopted until after July 1, so Pennsylvania creditors will need to stay tuned.
UCC Article 9 currently requires the name of a party on a UCC financing statement to match the name of the entity on a “public record.” Because of the uncertainty about what constitutes a “public record,” the amendments to UCC Article 9 provide for using the name that appears on a “public organic record” which will include records filed with or issued by the state to form the entity (i.e., articles of incorporation, certiifcate of organization or certificate of limited partnership).
The amendments to UCC Article 9 will also clarify the identification of individual debtorsto be named on a financing statement. The amendment offers two alternatives for each state:
- Alternative A (the “only if” option) provides for the use of the debtor’s name as it appears on a driver’s license issued by the state where the financing statement is to be filed. If the debtor does not have a driver’s license, either the debtor’s actual name or the debtor’s surname and first personal name may be used.
- Alternative B (the “safe harbor” option) provides that any of the above-mentioned three options may be used.
These amendments will give secured parties more certainty when determining the proper names to use on a financing statement and should provide an additional level of comfort to filers.
The amendments to UCC Article 9 also clarify the rules for determining where to file against a federally-organized entity (e.g. banks and other legal entities created by federal charter or statute). Under the new rules, the financing statement will be filed in the organization’s “main office” or “home office.”
The amendments to UCC Article 9 also eliminate the requirement that a financing statement include the debtor’s type of organization, jurisdiction of organization and organizational identification number. The changes will make it easier to file a financing statement without fear of it being rejected. We, however, still recommend a secured party include this information to more clearly identify the debtor. The information has proven very useful in past transactions to differentiate between debtors when doing lien searches.
The amendments to UCC Article 9 also change the name of the UCC-5 Correction Statement to an Information Statement which may now be filed by a debtor or a secured party when information contained on a financing statement needs to be clarified. Despite the name change, the Information Statement will continue to have no legal force or effect.
The amendments to UCC Article 9 will also provide greater protection for an existing secured party having a security interest in after-acquired property when a debtor relocates to another state or merges with another entity.
The Uniform Law commission has also proposed new national forms for UCC filings that incorporate these changes.
Remember the revisions to UCC Article 9 will go into effect on July 1, 2013 in most states. Creditors with debtors in Pennsylvania stay tuned for the effective date!
If you have any questions regarding the amendments to UCC Article 9, or for any other secured transaction matters, please contact Andrew Miller, at email@example.com or (717) 845-1524, or visit the Business and Commercial Law Practice Areas of our website.