ucc 101: the basics of ucc searching and filing

UCC 101:The Basics of Searching and Filing

November 8, 2017

Meet Your Presenter

Lacey Bower

Financial Account Manager, CSC®

• Speaker on UCC searching and filing best practices

• Works with banks of all sizes, lenders, lessors, and manufacturing companies

Proprietary and Confidential 2

We are the business behind business

• Founded in 1899

• Global company headquartered in Wilmington, Delaware

• Over 60 years serving financial industry

• Over 6 million UCC transactions processed annually

• Over 8 million UCC transactions monitored

CSC is the largest U.S.–owned provider of:

• Lien Related Services

• Registered Agent

• Entity and Litigation Management

• Digital Brand Services


Agenda


• Questions to ask

• Searching

• Filing

• Monitoring

• Arm Yourself: CSC Resources

• CSCFinancialOnlineSM Demo

• Q&A

Questions to Ask

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Questions to Ask


• Are you following searching and filing best practices?

• Are you filing against the right debtor names every time?

• Are you monitoring your portfolio for changes that may affect your lien position?

Searching


Review: Searching Best Practices


Registered Organizations

Individuals

Collateral administeredby decedent’s

personal representative

Use the Public Organic Record.

The starting point for every UCC search conducted on an individual is the driver’s license.

Search the name of the decedent.

Collateral held in a trustthat is not a registered

organization

Search on the name put forth in the trust documents. If there is no name, search on the settlor.

Review: Searching Best Practices


Registered Organizations

Individuals

Collateral administeredby decedent’s

personal representative

Use the Public Organic Record.

The starting point for every UCC search conducted on an individual is the driver’s license.

Search the name of the decedent.

Collateral held in a trustthat is not a registered

organization

Search on the name put forth in the trust documents. If there is no name, search on the settlor.

ALWAYS include name variations for due diligence purposes.

State Search Logic: What You Must Know

• State’s search logic… in minute detail




• How the search will perform in ALL circumstances




• How the search will perform in ALL circumstances

• State’s historical indexing practices


Filing

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Filing: Get the Debtor Name Right


• Understand the impacts of the 2010 Amendments

• Follow best practices for filing against individuals and registered organizations

Individual Debtor Name


Only If Safe Harbor

Debtor name must be exactly what appears on the individual’s driver’s license

Name can be what appears on drivers license, but other names may work as well

Sometimes called “Alternative A” Sometimes called “Alternative B”

Very Strict for filer More forgiving for filer

If license is expired or not issued by filing state, default to safe harbor

Individual Debtor Name


Only If Safe Harbor

Debtor name must be exactly what appears on the individual’s driver’s license

Name can be what appears on driver’s license, but other names may work as well

Sometimes called “Alternative A” Sometimes called “Alternative B”

Very Strict for filer More forgiving for filer

If license is expired or not issued by filing state, default to safe harbor

Enactments and Legislative Status of the2010 Amendments to UCC Article 9


RIMA

CTNJ

DEMDDC

AK

HI

AZNM

ND

FL

LA

WVCA

OR

WA

MT

ID

NVUT

WY

CO

SD

NE

KS

OK

TX

MN

IA

MO

AR

WI

IL

MI

IN OH

KY

TN

MS AL GA

SC

NC

VA

PA

NY

MENHVT

Enacted with Alternative A/ Only If

Enacted with Alternative B/ Safe Harbor

Legislation Failed or Not Introduced

PR


Case Studies

Crossing Your t’s and Dotting Your i’s

In re: Markt, 2017 Bankr. LEXIS 472 (Bankr. S.D. Ind. Jan. 23, 2017).

As of July 1, 2013 the sufficiency rules in most states require a financing statement to provide the name of an individual debtor

exactly as it appears on their active, state driver’s license.

• A borrower named Ronald Mark Nay financed two pieces of equipment.

• His driver’s license actually contained a typo and listed his name as “Ronald Markt Nay”

• Mr. Nay filed bankruptcy and the secured party lost it’s claim on the equipment as the name on the filing was found to be seriously misleading.


Crossing Your t’s and Dotting Your i’s

Fill in the Form Correctly!

In re: Voboril, 2017 Bankr. LEXIS 715 (Bankr. E.D. Wis. March 17, 2017).

A loan was made by First Bank Financial Centre to Stephen R. Voboril granting a security interest in a promissory note payable to the debtor.

• The UCC was filed, but the financing statement listed the debtor’s name in the “Organization’s Name” field of the record.

• The debtor filed for bankruptcy and the filing was determined to be misleading as the debtor’s name was “not properly provided.”


The Savings Clause

In both of these cases, the Savings Clause was brought up.

• The Savings Clause §9-506(c) states that if a search in the public record, using the filing office’s standard search logic on the correct debtor name discloses a financing statement that fails to sufficiently provide the debtor’s name, the filing is not seriously misleading

• The savings clause did not apply to these situations.

Searching on name variations will always be essential because of:

• Indexing Errors

• Filer Errors made effective by later changes in the search logic

• Not all filers subject to same rules


Review: Corporate Debtor Name Best Practices


Government charter entity(Farm Credit Bank)

Corps/LLCs

Business trusts(Massachusetts)

Charter document

Public organic record

Record filed with the state under state law

Entity created bylegislation (ex: Fannie Mae) Statute that created the entity

Name on UCC Must Match Articles of Incorporation

In re: Alvo Grain and Feed, Inc. (Bankr. Court, D. Nebraska, 2009)

• Articles of Incorporation: Alvo Grain and Feed, Inc.

• Debtor name on the UCC: Alvo Grain & Feed, Inc.

• The financing statement was found to be seriously misleading and the secured party lost a large claim.


UCC Filings: Where to File

General Rule

• File in central filingoffice where debtor is located

• Exceptions: GA, LA

Collateral Exceptions

• Fixtures

• Timber to be cut

• Minerals to be extracted

Filing Location for Collateral Exceptions

• Office where a mortgage would be recorded on the affected real property


File at parish level

File at county level

LA

GA

UCC Filings: Location Of Debtor


Registered Organization Under State Law

Individual

Registered Organization Under Federal Law

Where organized or incorporated

Location of principal residence

Where designated by law or D.C.

Other Non-Registered Organization

Jurisdictions Without Filing Requirement

At place of business – chief executive office if more than one

District of Columbia

Monitoring


Portfolio Monitoring


• Changes in your debtor’s name or status can affect your lien position.

• It’s crucial to monitor your portfolio for changes and to prevent lapsed filings.

• There are simple, automated ways to receive alerts when things change.

Expiration Tracking


• Email notifications of approaching dates

• Copies of acknowledgements

• Filing numbers auto-populated into UCC-3

• Flexible reporting

• The notification frequency of your choice


Case Study

The most common post-perfection event that requires prompt secured party action is a change in the debtor’s name.

In Re: Lifestyle Home Furnishings, LLC

Failure to File Debtor Name Amendment Leaves Lender Partially Unperfected

2010 Bankr. LEXIS 111

(D. Idaho, Jan. 14, 2010)




(D. Idaho, Jan. 14, 2010)

• Ownership of Factory Direct, LLC changed




(D. Idaho, Jan. 14, 2010)


• New owners changed name from “Factory Direct, LLC” to “Lifestyle Home Furnishings, LLC”




(D. Idaho, Jan. 14, 2010)



• Debtor did not notify bank of name change




(D. Idaho, Jan. 14, 2010)




• Consequently, the bank did not file an amendment or new financing statement




(D. Idaho, Jan. 14, 2010)





• On April 7, 2008, the Debtor filed for Chapter 7 bankruptcy


Failure to File Debtor Name Amendment Leaves Lender Partially Unperfected 2010 Bankr. LEXIS 111

(D. Idaho, Jan. 14, 2010)





• On April 7, 2008, the Debtor filed for Chapter 7 bankruptcy

• Trustee filed an adversary proceeding to avoid the bank’s security interest and moved for a partial summary judgment on the grounds that the bank became unperfected four months after the Debtor changed its name

Corporate Tracking


Notifies you when a corporate debtor:

• Changes their corporate name

• Falls out of good standing

• Dissolves or merges

Debtor Tracking


• Alerts you to new filings against your debtor, including new lending and terminations (even yours!)

• Send email alerts with links to the tracking results

• Allowing you to evaluate findings and request copies if needed

Bankruptcy Tracking


Any delay in responding to bankruptcy filings can be costly.

Monitors court records and compares them to your…

• Debtor Name

• Street Address

• City

• State

• Zip Code

Arm Yourself: CSC Resources


Secured Party Representation(SPRS)


• UCC financing statements are public record

• Anyone can access your customer list

• Using a secured party representative prevents competitors from identifying filings

• SPRS centralizes inquiries

CSCTransactionWatch


• CSC provides you with an archive of filing office closings and communications, pending and new legislation, UCC Article 9 updates.

• July 1, 2017 – Mississippi now requires electronic filing for all UCC Filings, including agricultural liens

• August 1, 2017 the state of Delaware increased its filing fee from $30 to $50

CSCglobal.com/resources

• Whitepapers

• Filing guides

• On-demand webinars


CSCFinancialOnlineSM

Demo

Questions?

Lacey Bower

Financial Account Manager, CSC®

(800) 927-9801 x.63363

[email protected]

Additional resources: cscglobal.com/resources

Thank you for attending!



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