Corporate Practice Perspectives Webinar Series: UCC Article 9 Filing Basics and Fundamentals

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Caitlin: Hello, everyone, and welcome to today's webinar, "UCC Article 9 Filing Basics." My name is Caitlin Alaburda, and I will be your moderator.

Joining us today is Julie Dallmann and Julia. Julie is the Chicago-based Product Management Director of Corporate and Legal Transactions with CSC. She is a liaison between clients and CSC's service, technology, and product teams to ensure CSC is not only meeting but exceeding client needs. She advises clients as to CSC's transactional and UCC services and assists in product implementation and onboarding. Julie is a graduate of the University of Illinois and DePaul University College of Law. Julia is a sales engineer at CSC. She joined CSC in 2006, and has an extensive background in UCC filing and searching, customer service, and training. As a sales engineer, Julia works hand in hand with our technology, sales and service teams to ensure CSC clients receive world-class service and leading-edge technology. Julia will walk through a demonstration towards the end of today’s presentation of CSC’s Lien Perfect.

And with that, I’d like to welcome Julie and Julia.

Julie: Thank you, Caitlin, for the introduction and welcome, everyone, to today's webinar. Before we get started, I wanted to talk a little bit more about CSC and what we offer.

For more than 120 years, CSC has been the partner of choice for companies around the globe, trusted to handle everything from incorporating a company through maintaining compliance to corporate transactional work, protecting digital assets from the threats of the online world, and everything in between. We offer the solutions and technology that keep businesses running in the background, allowing clients to focus on the important work of growing their business. We are the trusted partner for more than 90% of the Fortune 500 and over 10,000 law firms.

CSC has offices and capabilities in more than 140 jurisdictions across Europe, the Americas, Asia-Pacific, and the Middle East. We're a global company capable of doing business wherever our clients are, and we accomplish that by employing local experts in every business we serve.

We are the business behind business. As you can see from the solutions listed here, we are the partner of choice for global companies needing expertise in business administration and compliance, fund solutions, transactions and lending, which we'll talk about today, capital markets, and domain security and brand protection. Whatever your firm needs to stay in compliance, transact business, and become secure against threats of the online world, we can help.

Our agenda today covers the following topics. We will be talking about essential Uniform Commercial Code filing concepts, and we're also going to talk about filing basics and best practices. We'll give you some additional resources, and we'll also include a demo of our UCC platform. And then we'll save some time at the end for Q&A.

Before we dive into the details of a UCC filing, let's first discuss the overarching concept of a UCC. There are two essential concepts behind a UCC filing — perfection and priority.

Perfecting a loan is most commonly handled by filing a UCC financing statement. Perfection is important because it makes a security interest enforceable against the claims of third parties. When a claim or claims are made, priority then comes into play, which is the order in which competing claims are satisfied. Generally speaking, priority rank is determined by the earlier time of filing or perfection.

With that being said, a UCC is a notice filing system that merely indicates that a security interest may exist. And it's worth noting that UCC records themselves are not enforceable documents. UCC records provide minimal information, such as the debtor and secured party, but do not provide all of the details of the transaction. It's important then for interested parties to take on the duty of further inquiry and not rely solely on the contents of a filed UCC record to make their claim.

UCC filings are filed at their respective filing office. So please keep in mind that the role of the filing office is ministerial. Their duties include indexing records for retrieval by debtor name or file number, rejecting filings if they don't meet certain requirements, and reporting only on records that exactly match the search criteria after applying the standard logic, if any. Therefore, a filing office has no duty or power with respect to perfection, priority, or effectiveness of a file.

Now let's shift gears and discuss the basics of filing UCC filings and best practices to follow. Generally speaking, financing statements are effective for five years from the time of filing. There are certain exceptions for Wyoming, public finance and manufactured home transactions, and transmitting utilities.

The effectiveness of a filing may be extended for an additional five years by the filing of a continuation statement. Additional continuation statements may be filed every five years thereafter. It's important to note that continuation statements must be filed within six months before the lapse date.

Where the financing statement is filed is important as well. Generally speaking, the law of the state where the debtor is located governs perfection and priority. Where a financing statement should be filed depends on the type of debtor and their formation. And you can see the several examples on this slide.

There may be instances where the debtor's location lacks a filing system. Generally speaking, a financing statement should be filed in the jurisdiction or jurisdictions only if it has a filing, recording, or registration requirement to obtain priority over the rights of the lien creditor. If the debtor's location lacks a filing system, then it's possible to file the financing statement in the District of Columbia. Some examples where this may come into play is when a debtor is located in a foreign country or within some tribal jurisdictions.

When filing within a state, the general rule is to file at the central filing office, secretary of state, or equivalent. Of course, there are exceptions to this when filing in Georgia or Louisiana. If real estate related collateral is involved, such as fixtures, timber to be cut, or minerals to be extracted, the filing location could be filed where the goods are located and it also governs the perfection of the fixture filing, or filed in the office where a mortgage would be recorded on the affected real property.

In a financing statement, the name and address of the debtor and secured party are provided by the filer as well as an indication of the collateral. The purpose of the debtor name field allows for the retrieval of the record using clear and consistent rules. The debtor name that's provided on a financing statement is solely for the purpose of the financing statement. So it doesn't necessarily have to be the actual name of the debtor.

The filer has the responsibility of providing the correct name for the debtor, and it's critical that the exact name of the debtor is provided in the correct name field. In this slide, we can see where the filer may have inadvertently caused an issue with their filing by incorporating all of the debtor names into a field meant for one debtor name, or by putting "SEE EXHIBIT A" in the debtor field, or by putting an individual name into the field meant for an organization name.

For registered organizations, such as corporations, LLCs, trusts, etc., the filer should provide the name exactly as it appears in the public organic record. For individuals, the filer should provide the name indicated on the debtor's driver's license or state ID if allowed. If the collateral is administered by personal representative, then the filer should use the individual name of decedent and check the corresponding box to indicate the status of the collateral. If the collateral is held in trust, the filer should provide the name of the trust, if it has a name, or the name of the settler or testator and indicate the collateral is held in a trust. There are other examples of which a debtor name where it needs to be used.

As mentioned before, the debtor name is critical. Even minor deviations can make the financing statement seriously misleading. The filing office cannot make that determination, so the responsibility falls on the filer. There are some instances where certain deviations are permissible, but the general rule of thumb is to ensure that the debtor name is exact.

Now there are certain examples where certain states will normalize the name of the debtor upon recording. In this slide, you can see an example where the filer had entered in the correct name, but the state had normalized the name upon recording the filing.