Briefly Speaking: UCC Article 9 Filing Essentials

Addresses, Indications, and Other Information


When it comes to UCC filings, the failure to complete a financing statement correctly can result in harsh consequences for the secured party. Filers should have a full understanding of how to complete all sections to avoid any issues and manage the risk of errors. Join us to gain a better understanding of the information required on a financing statement.

During Briefly Speaking: UCC Article 9 Filing Essentials – Addresses, Indications, and Other Information, we’ll discuss:

  • Debtor address
  • Secured party information
  • Collateral
  • Alternative indications
  • Real estate-related information

Webinar Transcript:

Disclaimer: Please be advised that this recorded webinar has been edited from its original format, which may have included a product demo. To set up a live demo or to request more information, please complete the form to the right. Or if you are currently not on CSC Global, there is a link to the website in the description of this video. Thank you.

Annie: Hello, everyone, and welcome to today's webinar, "UCC Article 9 Filing Essentials, Addresses, Indications and Other Information, the fourth in our seven-part Paralegal Series. My name is Annie Triboletti, and I will be your moderator.

Joining us today are Paul Hodnefield and Helena Ledic. Paul is the Associate General Counsel for CSC, where he is responsible for advising the company regarding real estate recording, notary, Uniform Commercial Code, and other public record transaction services. Helena is the Associate General Counsel for CSC in the Chicago office. She is a business attorney, advising senior management and law firms on strategy, business, legal, and technology matters. And with that, let's welcome Paul and Helena.

Helena: In our previous segments, we discussed some of the most important parts of the UCC filing process. In this session, Paul is going to take us through other important UCC record information. The agenda that we'll be covering today is the debtor address, secured party information, collateral, alternative indications, real estate-related information. And lastly, we'll finish off with a question and answer session.

Paul: Thank you, Helena. As we mentioned, a financing statement must provide more than just a debtor name. It has to include the debtor's address. It has to include the name and address of the secured party and then indication of the collateral. So I'm going to talk about these different items.

First of all, with the debtor address. Now, a UCC financing statement must provide a mailing address for the debtor. The address is required just to avoid rejection by the filing office. It's actually not even required for a sufficient financing statement. If you could file a financing statement without the debtor address, it would still be effective. However, it would be difficult to get it filed because filing offices are pretty good about rejecting financing statements that are filed without that information.

Now, as far as what is a sufficient mailing address for the debtor, Article 9 is generally very generous to the secured party. Just about anything goes as long as it's a mailing address. There is no "the" address for the debtor or "the mailing address." There's no single address that necessarily is the correct mailing address for the debtor. It is simply a mailing address that has to be provided, and as such, it can be a P.O. box. It can be the street address of the debtor. And it can be any one of several mailing addresses for the debtor as long as it's a mailing address for the debtor.

There are a couple words of caution about that, though. One is that whatever address is provided it must be a correct mailing address at the time of filing. If the address is incorrect at the time of filing, under Section 9-338 of Article 9, it is possible that the security interests that provided the incorrect mailing address for the debtor could be subordinated to a secured party, that filed later, that reasonably relied on the incorrect address.

Also, take caution that the address of a statutory registered agent for the debtor, such as the registered agent for a corporation or an LLC, is not a mailing address for the debtor. It's a mailing address for the registered agent, and as such, it shouldn't be provided for the debtor.

The financing statement must also provide a name and mailing address for each secured party that's provided. So it's important to know what's sufficient as the name of the secured party.

When it comes to secured party names, it's important to know that Article 9 doesn't hold those to the same high standard that it does for the accuracy of debtor names. And there's good reason for this, and I'll get into that in a second.

But the important thing to remember is that when it comes to secured party names, there's a lot of wiggle room. And variations of the secured party name are generally allowed, even variations that would not be acceptable for a debtor name. And the reason for this, as I mentioned, is that UCC records simply aren't indexed by secured party name. They're not searched by secured party name. So the accuracy of the secured party name or the correctness of a secured party name has no effect on whether a record can be retrieved through a search using the Article 9 criteria, which is a search by debtor name or search by initial financing statement file number. So for this reason, the secured party has great flexibility in what it can provide as a secured party name.

So all the financing statement has to do is provide the name of the secured party, or it can even be a representative of the secured party. And surprisingly, if the name of a representative is used, the financing statement does not even need to indicate that representative capacity.

So in summary, what it all adds up to is that as long as the secured party can be reached through the name and the address that are provided on the financing statement, that's generally enough to satisfy the Article 9 requirements.

So some of the secured party name variations that are acceptable that would not be acceptable in a debtor name are, for instance, an indication of capacity. So

"As Agent" or "As Trustee," something like this, that would work in a secured party name where it would not in a debtor name.

Descriptive information indicating how the party is involved, as "Successor in interest" or "Formerly known as," other types of things like that.

As I said, it can be the name of a representative. It can also be a trade name for the secured party. The trade name is not sufficient as the name of the debtor. But remember, these things are not retrieved by secured party name. So there's no harm in allowing the secured party to use its trade name as the name of the secured party.

And likewise, errors in the name, a typo or any other type of deviation from the correct name of the secured party generally is not going to render a financing statement seriously misleading. And again, that's because it does not interfere with the ability of a search to retrieve the record.

When it comes to the secured party address, the rules are pretty much identical to that for a debtor address. It's only required so that the filing office does not reject the record. It is not there for the sufficiency of the record. If it was filed without a secured party name, the record would still be effective. And, you know, the subordination issue I talked about for debtor addresses doesn't apply to the secured party address. It is generally a good idea to provide a correct secured party address however, because that's what people are entitled to use as the address for sending notices to which the secured party is entitled under Article 9.

A financing statement must also describe the collateral subject to the security interest. Now, that is a requirement for sufficiency of the record. Curiously, although it's required for sufficiency, the lack of a collateral indication on a financing statement is not a reason for rejection. If it's mistakenly sent in without any collateral, the filing office will still accept and index the record. It just won't be effective unless an amendment is filed to add collateral. But then the amendment is only effective from the date the amendment is filed. So it's always best to have the collateral on that initial financing statement.

Now, when it comes to sufficiency of the collateral statement, again Article 9 is very generous for how the secured party can describe the collateral, and there are oftentimes multiple ways to describe the same collateral. And that's because the rule for sufficiency under Article 9 is that the financing statement must simply reasonably identify the collateral subject to the security interest.

So what does it mean to reasonably identify? Well, it can be a very specific listing. It can be, you know, a bulldozer, Serial Number 1234, Model JD 350, you know, very specific identification of particular items.

But it can also be by type. It could be equipment, inventory, consumer goods. There are all sorts of different defined collateral types in Article 9. As long as it's a type of collateral defined in Article 9, that's sufficient description. It can even be a supergeneric description, such as all assets or all personal property of the debtor.

It's actually very common to describe collateral by type. Now, as I mentioned, it must be a type of collateral defined by the UCC, not necessarily just Article 9. And there are a number of different types of collateral that are defined by the UCC. These include accounts, goods, fixtures, inventory, equipment, general intangibles, and investment property.

There are, however, some types of collateral that cannot be described by type under Article 9. These include commercial tort claims, and in a consumer transaction, consumer goods and certain other types of collateral related to the consumer transaction. These types of collateral have to be described with more specificity so that they can be more easily identified by those who take a look at the financing statement.

A financing statement does not have to include a statement about after-acquired collateral, although it is common. Whether a financing statement covers after-acquired collateral is really a matter of contract interpretation. Article 9 is silent on collateral descriptions including after-acquired collateral. It is very common, however, to see collateral statements that say things such as "All assets now owned or hereafter acquired." There is nothing wrong with providing that type of statement in the collateral, although, arguably, it isn't necessary.

A financing statement can also describe the collateral supergenerically. If the collateral includes substantially all of the debtor's assets, the financing statement can say that. But I want to explain one important thing. The description of "all assets" is not sufficient as a collateral description for the purposes of the security agreement.

Now, the security agreement is the contract that creates the security interest, and it's not part of the public record. But because it's what creates the security interest and defines the rights of the parties, under Article 9 a supergeneric description does not sufficiently describe the collateral for purposes of the security agreement.

However, when we're talking about the filing process, we're not talking about security agreements. We're talking about financing statements. And as a notice, "All assets" is sufficient for purposes of a financing statement, and that's expressly stated in UCC Section 9-504. It can be all assets or all personal property of the debtor, and that will be sufficient, but only for purposes of the financing statement. This underlying security agreement we'll still need to more specifically describe the collateral.

Because of the discrepancy here, the difference between the standard for a security agreement and a financing statement, many secured parties were reluctant to use the supergeneric description for a long time. But it's been growing in acceptance and is now commonly found on filed UCC financing statements.

Next, I want to talk about some of the special requirements that apply when filing a UCC record at the county level in the real estate records, what's also known as a fixture filing. There are certain types of collateral that generally require filing in the real estate records or at least it's a good idea, and these include fixtures, timber to be cut, and minerals to be extracted.

"Fixtures" is a defined term in Article 9. It means goods that either have been or will be so related to particular real property that an interest in those goods arises under real property law.

"Fixture filing" is also a defined term under Article 9. That means the filing of a financing statement in the real estate records. And the financing statement must also satisfy not just the normal financing statement requirements but also some special requirements under Section 9-502(b). The basic requirements are name of the debtor, name of the secured party, and an indication of the collateral.

But under 9-502(b), there are some additional requirements. These requirements include an indication that the record is to be filed in the real estate records. Now, this is required for sufficiency of a fixture filing. The idea here is that, in some cases, filing offices serve a dual role at the local level, especially under former Article 9 going back to the 1990s. But this is instructing the county recorder, or whoever receives it, that it is to be indexed in the real estate records and it is a requirement for sufficiency of a UCC fixture filing. And that indication is made using Item 13 in the addendum.

It also must indicate that it covers this type of collateral. For example, if you have a collateral description that says "All assets," it doesn't say fixtures or timber to be cut or minerals to be extracted. So there are checkboxes for this purpose on the addendum in Box 14.

It also has to describe the affected real property. And this is because the county recording offices are property focused, and they generally need this information to properly index the record. The legal description is normally what's required. It should be provided in Item 16 of the addendum form. However, if it's a longer legal description, there's nothing wrong with incorporating it by reference and attaching the legal description as an exhibit or schedule.

The financing statement for a fixture filing must also provide the name of a record owner if the debtor does not have an interest of record. For example, if the debtor is the lessee of a piece of property, and the lease has not been recorded, so that their name is in the grantor or grantee index, or maybe the grantor is the beneficiary of a trust that actually owns the property, in that case, the debtor' name isn't going to be in the grantor or grantee index. So they require a name of the record owner so they know where to index it and how to index it in the grantor or grantee index.

Helena: Mm-hmm.

Paul: Here's an example of the UCC1 Addendum Form. Now, if you look carefully here, you will see the checkboxes. Here's the checkbox for indicating it's to be filed in the real estate records. In Item 14 here, we have checkboxes to indicate the type of collateral if it's not already indicated in the collateral statement. You have timber to be cut, minerals to be extracted, and fixtures.

There is a field here for the record owner if there is not an owner of record, and an indication or . . . I'm sorry, a spot for the legal description.

Financing statements also allow the filer to make certain types of other we'll call them alternative designations. These are indications that are provided for the benefit of the searcher and indicate, for example, that it's a different type of transaction than a normal security interest or serve some sort of other purpose. The important thing to remember about these is that these alternative designations are entirely optional. If one of them is checked, that's fine. It may indicate that it's a consignment, or that it's a seller and buyer transaction, and that it's filed just as an informational purpose. But under Section 9-505 of Article 9, if a court later determines that it was a disguised security interest that required the filing of a financing statement, even if the box is checked, it will serve to perfect that security interest.

The financing statement also includes checkboxes related to the debtor and collateral status. And these are for purposes of the sufficiency of the debtor name. There are two checkboxes for this purpose. One is to indicate that the collateral is held in a trust, and the other is to indicate that the collateral is being administered by a Decedent's Personal Representative.

Now, these checkboxes are very important. They're found at the very bottom of the financing statement. And the purpose of these is to make the indications required for certain types of debtor names, and because these are part of Section 9-503(a), which apply to the sufficiency of debtor names, arguably these checkboxes must be used for these types of debtor names or the financing statement is not sufficient. So if the collateral is held in a trust that is not a registered organization, this checkbox needs to be checked when filing to make that indication because it's a requirement of the debtor name sufficiency provisions.

Now, it's also important to know that these boxes cannot be amended. If an error is made or they're omitted, best practice is file a new financing statement right away that provides the correct use of the checkboxes.

Finally, at the very bottom of the financing statement, we have a section that's called Optional Filer Reference Data. This is an optional field that never has to be completed. But this Optional Filer Reference Data field is important for many filers, because this is where the filer can enter information to allow them to cross-reference the UCC acknowledgement copy with a particular file or a particular matter. It's provided solely for the benefit of the secured party. It allows the secured party to link that particular record to the file or to a particular transaction because it is not unusual in a transaction to have multiple financing statements filed as part of it.

So it is indexed or it is used there for the secured party's information. This field is typically not indexed or searchable, meaning that you can't search for UCC records by this information. It will be displayed in most states if the record has been filed with this information, so the whole world can see it, but it's not a searchable field.

And one word of caution here when providing this type of information. Make sure that the optional filer reference data does not include non-public, personal information of the debtor or an entity if it's an organization debtor. It should not provide Social Security numbers or bank account numbers or perhaps even loan numbers. It certainly shouldn't be identified as such. In fact, if certain types of number combinations are provided in this field, some states will actually redact the information and only be available to the filer to allow them to associate this with the proper file.

Helena: Paul, thank you very much for walking us through the "UCC Article 9 Filing Essentials with Addresses, Indications and Other Information."