UCC Essentials: The Next Era of Filing Best Practices

Disclaimer: Please be advised that this recorded webinar has been edited from its original format, which may have included a product demo and other engagement features. To set up a live demo, please complete the form above on our website. If you currently are not on our website and are watching this on our YouTube channel, there's a link to the website in the description of this video. Thank you.

Annie: Hello, everyone, and welcome to today's webinar, "UCC Essentials: The Next Era of Filing Best Practices." My name is Annie Triboletti. I'll be your moderator kicking things off today.

So joining us today are Russ Lash and Julia Cleaver. Russ is one of CSC's financial account managers, and Julia is one of CSC's senior sales engineers. So with that, I would like to welcome Russ and Julia.

Russ: Thanks, Annie, for the introduction. Welcome, everyone. Before we look at the UCC content, first some facts about CSC. CSC is the leader in UCC services. So you can see here there are a lot of good things to look at. We monitor over 9 million UCC transactions annually. We process 7 million UCC transactions annually. A hundred and twenty-five plus companies moved to CSC from competitors. So that's good news. Five thousand plus financial accounts in UCC self-service.

Ninety-one percent NPS. If you're not familiar with NPS, it's Net Promoter Score. Net Promoter Score is a key metric used to gauge how likely customers would recommend our products and services to others. So to give you another point of reference, 70% and higher is considered world-class service. So we're sitting at 91%. We have the largest UCC industry database and nationwide coverage for state and county-level UCC services, and over 75 years of experience in UCC.

More about us. We are the world's leading provider of business administration compliance solutions. Look to the right, there's an image of the world. So we have a global reach across five continents. We have expertise in 140 jurisdictions worldwide. We are a trusted partner of choice for more than 90% of Fortune 500 companies, over 10,000 law firms. And we have over 125 years under common ownership in Wilmington, Delaware. We were started in 1899.

Again, more detail about our global footprint. Here it gives you a little more granular look at where our offices are located. As you can see, we are spread across the world in five different continents again. We are headquartered, again, in Wilmington, Delaware.

CSC not only provides UCC and due diligence solutions, but also business administration and compliance, like formation and incorporation, registered agent, entity management, annual reports. Also fund solutions, like fund administration open and closed end funds, compliance services, like know your customer. Also capital markets, like escrow agents and SPV administrative and management. And then also the what we call DBS, domain security and brand protection, services like brand monitoring, email fraud defense, anti-phishing solutions, which are obviously big nowadays due to combat with bad actors.

Today's agenda, we'll look at essential UCC filing concepts. Then we'll move over to UCC filing basics and best practices, then the CSC Lien Perfect for Lenders demo presented by Julia, and then we'll wrap up with questions and answers.

Two important items to know about UCC filing are perfection and priority. Sometimes I hear the term "perfect your lien," "perfect your UCC." First, with perfection, it protects third parties that are not subject to the security agreement. Most common method is by filing a UCC financing statement, which makes the security interest enforceable against the claims of third parties.

The second item is priority, which is the order in which competing claims are satisfied. The general rule is that priority ranks from the earlier time of UCC filing or perfection, as indicated in Section 322. The exception is the purchase-money security interest, or commonly referred to as PMSI. Sometimes with PMSI, it is also the element of a super priority with PMSI.

Next, notice filing. The UCC is a public notice filing system. The UCC merely indicates the security interest may exist. And UCC records provide minimal information. So they don't provide all the details of the transaction. So as a result of that, there's duty of further inquiry. Interested parties are not permitted to rely solely on the contents of filed records. So more due diligence efforts may be needed.

Next, this is important because I receive questions about this. Role of the filing office. The role of the filing office is ministerial. Article 9 removed filing office discretion from the filing process. And filing is a machine process, which means that the filing office will receive your completed UCC filing form, but will not check for errors, omissions, or inaccurate info.

Duties. The filing office index records for retrieval by debtor name or filing number, and will reject only for a reason set forth in Section 516(b), which will then need to be resubmitted. The filing office has no duty or power with respect to perfection, priority, effectiveness. These items are the responsibility of the secured party.

Next up, Filing UCC Records, Basics and Best Practices. UCC Filing: Duration and Effectiveness. The general rule for duration of effectiveness. UCC financing statements are effective for five years from the time of filing. Of course, there are some exceptions. These exceptions are Wyoming. Wyoming has a 10-year effective period. Transactions involving public finance, manufactured homes. This has a 30-year effective period. And then also transmitting utility UCC filings, these are effective until terminated. I get questions from these from time to time as far as the effective period of a transmitting utility, and yes, effective until terminated. When thinking of transmitting utilities, think along the lines of electrical distribution, oil and gas pipelines, railroads, telecommunications, and the like.

Continuation of effectiveness. Effectiveness may be extended for an additional five years by filing of a UCC3 continuation statement. Additional UCC3 continuation statements may be filed every five years. Note, some caution. The UCC3 continuation statement must be filed within six months before the lapse date.

Next up, UCC Filing Location. Governing law, Section 301. Generally, the law of the state where debtor is located under Section 307 governs the perfection and the priority of the UCC filing.

Location of the debtor. A few different scenarios here. For registered organizations, such as corporations, LLCs, etc., the location is where organized. For other organizations, other than a registered organization, the location is place of business, or if more than one place of business, be the chief executive office. For individuals, location will be the principal residence. And for other debtors, special rules would apply for a registered organization under federal law, a foreign bank branch or agency, a foreign air carrier or the United States.

More essential concepts, perfection and priority. What if the debtor's location lacks filing office? You want to file in the jurisdiction where the 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. So some examples of this would be if the debtor is located in a foreign country, or if the debtor is located within some tribal jurisdictions.

Filing office within a state. General rule, Section 501(a)(2). Central filing office, secretary of state, or equivalent is where to file. Now there are some exceptions to this too. The exceptions would be Georgia, Louisiana, Oklahoma. Another exception to central filing would be real estate-related collateral, such as the different types would be indicated here, fixtures, timber to be cut, and minerals to be extracted. The filing location of these types will be the law of the state where the goods are located governs the perfection by a fixture filing. The second part here, this is important because I receive questions about this, you want to file in the office where a mortgage would be recorded on the affected real property. So that would be like a fixture filing.

UCC Financing Statement Contents. There are three key areas here. You notice that there's a big teal arrow pointed right here at the debtor name. The debtor name is very important on the UCC filing. So here, the three key areas, you have the debtor information, the name and address, you have the secured party information, the name and address, and also the indication of the collateral. The responsibility to fill out the UCC filing form accurately and completely lies within the secured party.

More Essential Debtor Name Concepts. Purpose of the debtor name field is to allow retrieval of the record using clear and consistent rules as the UCC records are public and searchable by anyone. Some debtor name requirements, Section 503(a) provides the requirements of the debtor name for purposes of the financing statement, and 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.

More Essential Debtor Name Concepts. The filer is solely responsible for providing the correct name. Filing offices must index the debtor name exactly as it appears in each name field on the record. Again, the filing office is a machine process. Filing offices only index names provided in record name fields. They don't check for errors, omissions, or inaccuracies. They just receive the completed UCC filing form and file it and record it.

Some consequences. All contents of the name field become the debtor name, whether intended or otherwise. A debtor name is not indexed unless it's provided in the debtor name field. So these are important consequences to take note of. And a name provided in the wrong debtor name field is not provided. Correct name must be correctly provided. Formatting errors can be just as bad as spelling errors. Debtor name is so important.

Some Debtor Name Requirements. So for registered organizations, that would include corporations, LLCs, business trusts, etc., you provide the name exactly as it appears on the public organic record, as indicated in Section 503(a)(1). So public organic record, kind of think of articles of incorporation. For individuals, you provide the name indicated on the debtor's driver's license, or if authorized by a particular state's law, it would be the state ID card issued to the non-drivers. For collateral administered by a personal representative, use the individual name of the decedent. There is a checkbox on the UCC filing form to indicate that.

More Debtor Name Requirements. For collateral held in a trust, you want to use the name of the trust if it does have a name. Otherwise, the name of the settlor or testator, see Section 503(a)(3). And a separate part of the financing statement provides the additional information to distinguish the trust from other trusts having one or more of the same settlors or testators. Also, you want to indicate the collateral is held in a trust using the checkbox. So that's also on the UCC filing form. For other organizations, you want to provide the name or names that could be correct after conducting sufficient due diligence. And then for a debtor who has no name, provide the name or names of the individuals and entities that comprise the debtor as if each were the debtor.

And UCC Debtor Name Sufficiency. Debtor name must comply with Article 9, Section 503(a). Even minor deviations can make the financing statement seriously misleading. So, again, we go back to the debtor name. The debtor name is so, so important on a UCC filing. There's some due diligence needed as far as getting the debtor name correct. That is very important. The debtor name is not determined by the filing office discretion. Again, the filing office does not correct the debtor on the UCC. They just receive the UCC filing form and record it.

Savings Clause. A search on the correct name discloses financing statement that fails to sufficiently provide debtor name. And some permissible deviations in most states for this would be spacing situations, punctuations, noise words, lots of different types of noise words out there, like it could be "and," "an," and "of," and then beginning "the," as in The XYZ Company.

All right. Next is CSC Lien Perfect for Lenders Overview. CSC Lien Perfect for Lenders is the next-generation platform designed to redefine how lenders manage Uniform Commercial Code filings. So the thought put into this with the Lien Perfect for Lenders, it was looked at internally, right? We looked at our subject matter experts, product people. We looked at it to see how we can create the most powerful and efficient UCC workflow in the industry. And we also looked outward to customer feedback. We got ideas. This is designed to create efficiencies, make your life easier when filing UCCs and other UCC services.

So we employed a user-centric design. Lien Perfect for Lenders was developed with direct client feedback, combining the advanced technology with financial-grade security. Also, a streamlined, centralized platform, reducing risk. That's what you want to do with these UCC filings. You're reducing risk. You're enhancing speed and minimizing errors. We wanted to create that solution for our customers. And then market leadership. CSC is the industry leader in UCC services, backed by decades of expertise and unparalleled user support.

We also offer business-to-business integrations. We work with a lot of customers that employ our B2B. B2B simply means we can securely integrate your existing customer relationship management system, your CRM or a loan processing or origination system (LOS) with Lien Perfect for Lenders for greater accuracy and efficiency. A lot of customers come to us as their volume scales and they grow. It's very efficient to plug into our B2B, to use that in concert with Lien Perfect. So as you can see, there are some systems down here — Salesforce, Odessa, LaserPro, InfoLease. We can also integrate with your proprietary system. You build a proprietary system, we can integrate with that also.

Security. Security is very big here at CSC. The world's largest banks trust CSC. In fact, more than 3,000 financial institutions trust us because of our security measures. We are SOC compliant, and we also employ stringent data access processes and controls. We have business continuity and disaster recovery in place to ensure there's no interruption to your daily workflow.

And then also, with CSC Lien Perfect for Lenders, we see kind of a wheel and spoke image here. Lots of different advantages to using Lien Perfect for Lenders, lots of different features that help with efficiency, help with your workflows, make this an easy, accurate process. I'm going to touch on just a few of them. I've got so many here.

We have CSC Entity Check at the very top. CSC Entity Check is an awesome tool that will validate your corporate debtor name against a state database when you're filing your UCC. The dual filing view, kind of like over here at the 9:00. The dual filing view is really cool. It's like a split view version of where you can enter in the information on the UCC in text boxes, and then on the right side, you'll see it enter on the form in real time. So you can see that. It's a very nice visual image of that.

We also offer state and county validators. What that'll do is that'll ensure that you're meeting jurisdictional rules at the state and county. It'll flag a possible error, something that could cause a rejection with your UCC filing before you submit it. So that's good to be aware of those kinds of things that are going on before you submit it.

And then also the self-import template. You have existing UCC filings, you want to come over to CSC, you can import them into the self-import template within Lien Perfect, so then we can start tracking your UCCs for expiration and other debtor activities, like bankruptcy tracking, corporate tracking, and also debtor tracking.

And file with accuracy. So three key areas here. Real-time validation, draft filings are evaluated based on jurisdictional rules, kind of talking about the whole validator that I talked about before, including required forms, character limits, and jurisdiction-specific data capture requirements. Every jurisdiction is different. They have their different set of rules and what they want and what they don't want. So it's very important Lien Perfect for Lenders has that watching out for that.

And then also, secondly, the party and collateral description library. I didn't really touch on this before, but that would have been another feature on that wheel and spoke on the previous slide. But the great thing about that is frequently used secured parties and collateral statement information, so you can save your debtor information, secured party information, and collateral information. It stores into the party and collateral library. You can set them as default if you have one in the autofill into your UCC filing form, or if you have multiple ones, it'll create a dropdown, which then you can select and it'll populate into your form. So that can really cut down on your time when doing it. And also the fact that sometimes it's very easy to key in something quickly and in haste and make a mistake. But if you have that information already saved in there, then it's very easy. It's saved. You've proofread it. It's correct, very easy. You don't have to worry about keying that information in.

And then UCC3 amendment filings, you can create a UCC3 filing using our linked UCC filing view to pull the most recent party information as well as collateral, that's a big thing, legal descriptions, and filing information onto your UCC3 filing. So that is a very distinct advantage to have that with the linked view and Lien Perfect for Lenders.