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UCC Article 9 Filing Basics for Financial Professionals

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Uniform Commercial Code (UCC) filing requirements differ by state, making it challenging to file without errors. Let CSC’s UCC experts be your guide!

Join UCC expert Russ Lash for a refresher course on UCC Article 9 Filing Basics, designed to explain the fundamentals of the Article 9 filing process including an overview of essential UCC concepts, filing basics, and best practices. This webinar will provide valuable guidance to financial professionals who prepare and file UCCs.

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.

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

Joining us today is Russ Lash. Russ is a financial account manager at CSC. He is responsible for building relationships with customers, and since joining CSC in 2010, Russ has improved the customer experience by shortening workflow turnaround times and decreasing processing times. And with that, I'd like to welcome Russ.

Russ: Thanks, Caitlin. Welcome, everyone. Before we dive into the content, first some fun facts about CSC. We've been around for over 120 years. The photo on the right is our global headquarters in Wilmington, Delaware. We've been involved in the UCC world for more than 60 years. We process more than 6 million UCC transactions per year and monitor more than 9 million UCCs per year. And I have over 3,000 self-service UCC and due diligence customers. CSC is the largest U.S.-owned provider of lien-elated services, like UCC, registered agent, entity and litigation management, and also digital brand services.

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, capital markets, and also domain security and brand protection. Whatever your company needs to stay in compliance, transact business, and become secure against threats of the online world, we can help.

Today's agenda, we're going to cover UCC filing concepts, then filing basics and best practices, show additional resources, and then conclude with questions and answers.

Essential Concepts: Perfection and Priority. What do these mean? First, with perfection, it protects third parties that are not subject to the security agreement. Most common method would be to file a UCC financing statement, which makes security interest enforceable against the claims of third parties.

Second, with priority, that's the order in which competing claims are satisfied. General rule with priority would rank from the earlier time of filing or perfection. You want to refer to Article 9, Section 322. There is an exception to that, however, and that is with Purchase-Money Security Interests, also referred to as PMSI, we call that. That's essentially a super priority. More information about that you'd want to check out Article 9, Section 324.

More Essential Concepts: Notice Filing. The UCC is a notice filing system, which means it merely indicates that a security interest may exist. And UCC records are not enforceable documents. UCC records provide minimal information. The UCC records do not provide all details of the transaction, which leads to the duty of further inquiry. Interested parties are not permitted to rely solely on the contents of filed UCC records.

Role of the Filing Office. The role of the filing office is ministerial. Article 9 removed filing office discretion from the filing process. It's a machine process, which means the filing office does not check the UCC filing form for errors or make corrections. They file the UCC as is when submitted.

Duties. Index records for retrieval by debtor name or by filing number. The filing will reject only for a reason set forth in Article 9-516(b).

The filing office has no duty or power with respect to perfection, priority, or effectiveness. The onus would be on the secured party.

All right, everybody, next up, Filing UCC Basics and Best Practices. Duration and effectiveness of a UCC filing. The general for duration of effectiveness, financing statements are effective for five years from the time of filing. There are some exceptions with that, Wyoming. Wyoming, instead of a 5-year effective period, does have a 10-year effective period. Public finance and manufactured home transactions, that would be 30 years. And in the event of transmitting utilities, it's effective until terminated. Transmitting utilities would involve pipelines, electricity, rail, things like that.

The continuation of effectiveness, the effectiveness may be extended for an additional 5 years, or an additional 10 years in Wyoming, by the filing of a continuation statement. Additional continuation statements may be filed every 5 years or every 10 years in Wyoming. The caution to that would be a continuation statement must be filed within six months before the lapse date. Outside of this six-month window may result in a rejection of your UCC.

UCC Filing Location. Where should I file my UCC? The governing law, Article 9, Section 301, generally, the law of the state where the debtor is located under Article 9, Section 307 would govern the perfection and priority. Now there's a few situations down here involving the location of the debtor. If it involves a registered organizations, such as corporations, LLCs, etc., it'd be located where organized. You want to refer to Section 307(e). Other organizations outside of the registered organizations would be located at a place of business, or if more than one place of business, the chief executive office, Section 307(b)(2) and (3). And then for individuals, it'd be located at the state of principal residence, 307(b)(1). And then for other debtors outside of these, special rules would apply for a registered organization under federal law, a foreign bank branch or agency, foreign air carrier in the United States.

A filing location exception, debtor's location would lack the filing system. If the need to file in a jurisdiction where a debtor is located only if it has a filing, recording, or registration requirement to obtain priority over the rights of a lien creditor. If not, the debtor is located in District of Columbia, per Article 9, Section 307(c). A couple examples are if a debtor is located in a foreign country or if the debtor is located within some tribal jurisdictions.

Filing office within a state. The general rule, 501(a)(2), would be to file in the central filing office, secretary of state, or equivalent office. A couple exceptions to the central filing would involve the states of Georgia and Louisiana. Georgia, be filing at the county, Louisiana, at the parish level.

Some other exceptions to central filing involving real estate-related collateral would be the three items here — fixtures, timber to be cut, and minerals to be extracted from the earth. Filing location to these exceptions would be the law of the state where the goods are located governs perfection by a fixture filing, Section 301(3)(A), and you'd want to file in the office where a mortgage would be recorded on the affected real property, Section 501(a)(1).

The UCC financing statement needs these contents — debtor information, secured party information, and collateral. It is crucial to get the debtor name correct, more about that soon.

Essential Debtor Name Concepts. The purpose of the debtor name field is to allow retrieval of the record by a search using clear and consistent rules. Debtor name requirements in Section 503(a) would provide the requirements of the debtor name for purposes of the financing statement. Required name is not necessarily the actual name of the debtor. And requirements are based either on the type of debtor or the status of the collateral.

Essential Debtor Name Concepts. Filer is solely responsible for providing the correct name. The filing offices must index the debtor name exactly as it appears on each name field on the record. Filing offices only index names provided in the record name fields, which, kind of going back to what I said earlier, they will not edit or correct the name. They will file it as submitted.

The consequences to that are all contents of the name field become the debtor name, whether intended or otherwise. A debtor name is not provided unless it's provided in the debtor name field. A name provided in the wrong debtor name field is not provided. So, as you can see, it's very important to make sure the debtor name is entered on a UCC filing in the correct manner, as you want to make sure you file it correctly at the jurisdiction.

Correct name must be correctly provided. Format errors can be just as bad as spelling errors. So it's very important.

Section 503(a) Debtor Name Requirements. So for registered organizations, that would include corporations, LLCs, business trusts, etc., you want to provide the name exactly as it appears in the public organic record. And again, you want to refer to 503(a)(1) for that. For individuals, provide the name as indicated on the debtor's driver's license, or if there's no driver's license, an ID card issued from the state for non-drivers. And again, that's from Section 503(a)(4). For collateral administered by a personal representative, you want to use the name of the decedents, the deceased person, and then you want to check a box to indicate the status of collateral.

Some more debtor name requirements. Collateral held in a trust, the name of the trust, if it has the name. Otherwise, the name of the settlor or testator. Refer to Section 503(a)(3). In a separate part of the financing statement, you want to provide additional information to distinguish the trust from other trusts having one or more of the same settlors or testators. Indicate the collateral that's held in a trust by using a checkbox. And I can show you, later on, how that works with the checkboxes between the decedents and the held in a trust.

Other organizations, you want to provide the name or names that could be correct after conducting sufficient due diligence. What if the debtor has no name? You want to provide the names of the individuals and entities that comprise the debtor as if each was the debtor.

UCC Debtor Name Sufficiency. The debtor name must comply with Article 9, Section 503(a). Even minor deviations can make the financing statement seriously misleading. That name is not determined by the filing office discretion. So it is, again, on the secured party to be responsible for making sure that it's correct.

The savings clause. Search on correct name discloses financing statement that fails to sufficiently provide the debtor name. Permissible deviations in most states could be spacing, punctuation, noise words, and the beginning "the" of the debtor name.

Next up, everyone, CSC Resources. CSCFinancialOnline, this is our web portal to assist you with accurate and efficient UCC and due diligence workflows. I'll show you a demo of this later on, that you'll find useful.

CSCFinancialOnline was designed specifically for the financial services industry and has the industry's largest online UCC database. You can access more UCC records, including tax lien searches and debtor searches. You experience faster results than any other UCC filing service, make your life and job easier. And also it is secured.

File with accuracy. Real-time validation, draft filings are evaluated based on jurisdiction rules, including required forms, character limits, and jurisdiction-specific data capture requirements. This is also within our CSCFinancialOnline tool, and that is called the Validator. More about that later.

Party and collateral description library. Frequently used secured parties and collateral statements can be stored for reuse, eliminating data entry errors. So, essentially, what you can do is you can set up, and this is also in CSCFinancialOnline. It's a tool called Clipboard. I'll show you more about that in a bit, where you can store frequently used information, so you can autofill that information on your UCC filing form, saving you time, and also for accuracy measures.

And then auto-populated continuations and terminations. The original filing, the UCC1 information is automatically transferred into newly created UCC3 filings, whether it's a continuation, amendment, or termination. And that's called Filing Duplication, and that's also within the CSCFinancialOnline tool, which I'll show you in a little bit.

And security. The world's largest banks trust CSC. In fact, more than 3,000 financial institutions trust CSC largely because of our security measures. Why? All CSC applications and data are maintained on CSC servers and are SOC-audited. SOC 2 Type II assessments are conducted annually by third-party auditing firms for CSC. And we also employ stringent data access processes and controls and have business continuity and disaster recovery in place to ensure no interruption in your daily workflow.