Head's up!! UCC financing statements are changing as of July 1, 2013. Lenders and borrowers need to take extra care to ensure that they have correctly prepared UCC financing statements and, of course, consult with an attorney as necessary. UCC filings are of critical importance in any secured loan transaction, whether it involves asset based loans, technology lending, construction financing, equipment financing, and even real estate lending where fixture filings may be an integral part of the transaction or personal property may be included in the collateral pool. Accordingly, changes in UCC forms affect every lender, secured party and borrower. In a problem loan, loan workout or bankruptcy situation, the validity of the lender's security interest becomes of paramount importance.
For lenders, the basic rule for perfecting a lien or security interest in most types of assets is to file a UCC-1 Financing Statement with the Secretary of State where the debtor or borrower is registered. If the borrowing company happens to be in San Jose or Palo Alto, California, for example, and is registered as a California corporation, the UCC-1 is filed with the Secretary of State in California. As of July 1, a revised form of UCC-1 is to be used in most states, including California and Delaware.
The changes to the form are driven by privacy concerns and primarily involve eliminating entries for a company's registration number and an individual's social security number. Such identifying information has not been required - in fact, social security numbers have automatically been redacted or made unreadable - for a while now in California. One thing the change highlights, however, is the ever-increasing importance of getting the debtor's name correct on the UCC form, character by character, as other references to a borrower or debtor no longer appear.
California says that it will continue to accept the "old" form of UCC-1 for the present, but that may change with the old forms entirely eliminated in the future once new forms are widely circulated. Other states have announced that the period for accepting old forms will be phased out just 30 days after July 1, after which time only new forms will be accepted for all UCC filings.
The information appearing in this article does not constitute legal advice or opinion. Such advice and opinion are provided by the firm only upon engagement with respect to specific factual situations. Specific questions relating to this article should be addressed directly to the author.