Revised
Article 9
Maintaining Perfection after July 2006Revised Article 9 (RA-9)
of the Uniform Commercial Code (UCC) provides that perfection is completed by
filing financing statements (or UCC filings) with appropriate filing offices.
Historically, UCC filings were made everywhere the debtor had tangible property
or offices and/or was otherwise conducting business. As of July 2001, UCC Article
9 and state laws in all 50 states were revised in an effort to simplify filing
requirements. Revised Article 9 ("RA-9") was adopted by all 50 states,
the Commonwealth of Puerto Rico and the U.S. Virgin Islands with staggered effective
dates though most are effective July 1, 2001. Revised Article 9 simplified
the filing of financing statements making only one filing required in many cases
(with the exception of fixture filings affecting real estate which are still filed
in the office where the mortgage is recorded). The appropriate place to file under
Revised Article 9 is the office of the secretary of state in the jurisdiction
of incorporation or organization of the debtor (or the domicile or principal place
of business, if an individual or an unincorporated entity). Foreign
Debtors
A financing statement to be filed under Revised Article 9 against
a foreign debtor, without a principal place of business in the United States is
filed in Washington DC. If the foreign debtor maintains a principal office in
the United States, the financing statement is filed in the state in which it is
registered. In Lieu Of Continuation Statements Section
9-705(c) provides that a financing statement filed in accordance with old
Article 9 that met the requirements of perfection when filed, cannot be invalidated
simply due to the adoption of RA-9. Such previously filed financing statements
will lapse on the earlier of (a) their natural lapse date unless continued and
brought into compliance with RA-9, or (b) June 30, 2006. Upon the adoption
of Revised Article 9 in 2001, if a change in the filing office or a change in
principal office occurred, in order to maintain perfection the secured party needed
to file an "In Lieu of Continuation Statement." An "in lieu of
continuation" serves as a new statement with reference to the old filing
information (i.e. the old filing office, dates of filings, and filing numbers
as well as its most recent continuation statement) and can generally be filed
any time before the old Revised Article 9 filing expires or before June 30, 2006.
The length of perfection then extends to five years from the filing of
the "in lieu of" statement, rather than the initial date of filing in
the old Article 9 jurisdiction. To assure all filings have been uncovered and
are brought into compliance with Revised Article 9, it may be wise to search in
old Article 9 jurisdictions. Controversy Surrounding UCC Revised Section
9-705. There is controversy regarding certain continuation filings under
section
705(c) of Revised Article 9. This is a complicated issue that applies
to only an estimated 20% of secured parties currently on file. Generally, the
issue applies to financing statements that: - The proper place of filing
did not change under the old and Revised Article 9;
- The transactions
require effectiveness for longer than 10 years; and
- The filing
of a continuation statement was made in the second half of 1996.
Additional information can be found at: PEB
Report - Maintaining Perfection Beyond June 30, 2006 IACA
UCC Section 7-905 Information Provided that attention is paid to the
issue prior to June 30, 2006 all secured parties seeking to maintain perfection
can avoid risk of ineffectiveness by filing the continuation statement during
the "Safe Harbor Period" which is: (i) no earlier than six months
before the effectiveness of the financing statement would otherwise lapse without
regard to the June 30, 2006 cutoff date indicated in section 9705(c)(2), and
(ii)
no later than June 30, 2006. Summary Revised Article 9-705(c)(2)
provides in part that financing statements filed under former Article 9 will cease
to be effective at the earlier of: 1) the time the financing statement would have
ceased to be effective under the law of the jurisdiction in which it was filed;
or 2) June 30, 2006. Three states adopted non-uniform cut-off dates. They
are:
- Alabama - December 31, 2006;
- Arizona - June 30, 2007; and
- Mississippi
- December 31, 2006.
For more on the discussion of how non-uniform cut-off
dates may effect perfection, see this Heller
Ehrman post by Steven O. Weise and Neil B. Cohen. Legal professionals
have a little over a month to assure that all required continuations have been
filed in the appropriate jurisdiction under Revised Article 9.
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