Copyright 2009 Norman M. Powell. All Rights Reserved.

WORKING WITH UCC ARTICLE 9

Presented to

Personnel and Guests ofIncorporating Services, Ltd.

at

Washington, D.C.

June 29, 2009

by

NORMAN M. POWELL, ESQUIREYOUNG CONAWAY STARGATT & TAYLOR, LLP

The Brandywine Building1000 West Street

P.O. Box 391Wilmington, DE 19899-0391

Phone: 302-571-6629Fax: 302-576-3328

Email: npowell@ycst.com

mailto:npowell@ycst.com

Copyright 2009 Norman M. Powell. All Rights Reserved.

Table of Contents

I. Introduction..1

II. Filing and Searching................2

III. Getting the Debtors Name Right....7

IV. Non-Uniformity: Statutes and Administrative Rules Vary... 14

V. What Is the Financing Statement Number? . 16

VI. Conclusions And Practice Tips..... 17

Supplement Possible Revisions to RA-9 .. S-1

Appendix Contact information for state filing offices................................................A-1

1Copyright 2009 Norman M. Powell. All Rights Reserved.

I. Introduction.

A. Filing and searching.

1. Filling out the form.

2. Did you actually file?

3. What appears in the record?

4. What, exactly, did you file?

5. Proper inferences from the absence of rejection.

6. Searching.

7. Article 9 isnt everything.

B. Getting the debtors name right.

1. Sufficiency of debtors name.

2. Seriously misleading the search logic test.

3. Whats a name?

4. A different approach.

C. Non-Uniformity.

1. Statutes.

2. Administrative rules.

D. What is the financing statement number?

1. Different from state to state.

2. Different over time.

E. Conclusions and practice tips.

F. Supplement Possible Revisions to RA-9.

G. Appendix State Filing Offices

2Copyright 2009 Norman M. Powell. All Rights Reserved.

II. Filing and Searching.

A. Filling out the form.

1. Comply with any non-uniform, local requirements.

2. Initial filings:a. Put the debtors name in the correct box.

(i) Box 1a is for organization debtors.(ii) Box 1b is for individual debtors.

b. Put nothing other than or in addition to the debtors name in the debtors name box.

(i) XYZ, LLC, a Delaware limited liability company - incorrect.

(ii) XYZ Investments, settlor of that certain trust u/a/d 3/15/05 - incorrect.

3. Amendments:a. Must identify, by its file number, the initial financing

statement to which the amendment relates. RA 9-512(a)(1) [both alternative A and alternative B].

b. Amend carefully. Heller Ehrman and the $50 million checkmark.

(i) Banks filed a financing statement in 1991 to perfect security interests.

(ii) Banks continued the financing statement every five years by filing an amendment and checking the box to indicate a continuation of the financing statement.

(iii) In August, 2007, the banks filed an amendment and inadvertently checked the termination box instead of the continuation box.

(iv) After recognizing the mistake, the banks purported to file a correction statement.

c. Distinguish correction statements.

(i) Can be filed only by the debtor. RA 9-518(a) and Official Comment 2 thereto.

(ii) Have no legal effect. RA 9-518(c) and Official Comment 2 thereto.

3Copyright 2009 Norman M. Powell. All Rights Reserved.

B. Did you actually file?

1. Communication to a filing office of a record meeting all the requirements of applicable RA 9-516(b), or acceptance of a record by the filing office, constitutes filing. RA 9-516(a).

2. A wrongfully rejected record is effective as a filed record except as against a purchaser of the collateral who gives value in reasonable reliance upon the absence of the record from the files. RA 9-516(d).

3. If a filing office refuses to accept a record, it shall communicate tothe person that presented the record:a. The fact of and reason for the refusal, and the date and time

the record would have been filed had the filing office accepted it,

b. At the time and in the manner prescribed by filing-office rule. RA 9-520(b).

C. What appears in the record?

1. In the case of a written record, if the filer requests an acknowledgment of the filing:a. The filing office will send an image of the record showing

its file number and the date and time of the filing; orb. If the filer furnishes a copy, the filing office may instead

note upon the copy the file number and the date and time of the filing of the record, and send the copy to the filer. RA 9-523(a).

c. This first alternative offers the filer an opportunity to verify that information in the written record was entered correctly into the filing offices database, while the second alternative does not.

2. In the case of a record other than a written record, the filing office shall communicate to the filer an acknowledgment that provides:a. The information in the record,b. The file number assigned to the record, andc. The date and time of the filing of the record. RA 9-523(b). d. Thus, the filer has an opportunity to verify that information

in the record was entered correctly into the filing offices database.

3. After filing a record, consider checking to see that its information was entered correctly into the filing offices database.

4Copyright 2009 Norman M. Powell. All Rights Reserved.

a. Note that the failure of the filing office to index a record correctly does not affect the effectiveness of the filed record. RA 9-517.

b. Thus, the risk of filing-office error is generally borne by those who search, rather than those who file. RA 9-517, Official Comment 2.

D. What, exactly, did you file?

1. By definition, you filed what was communicated to the filing office.

2. That, unless rightfully rejected, is now the filed record.

3. Did you file the UCC1 or UCC3, complete with multi-page collateral description and painstakingly verified debtor name, which you checked and rechecked late into the night?

4. Or was that merely a source document from which your filing agent retyped the submission so as to make an electronic filing?

5. Can your filing agent provide you a file copy of the actual text he or she submitted on your behalf?

6. If you gave a perfection opinion, what is the opinion based on? What does the opinion say it is based on?

E. Proper inferences from the absence of rejection (or, no news is no news).

1. A filing office shall refuse to accept a record for filing for a reason set forth in Section 9-516(b) and may refuse to accept a record for filing only for a reason set forth in Section 9-516(b). RA 9-520(a).

2. If a filing office refuses to accept a record for filing, it shall communicate to the person that presented the record the fact of and reason for the refusal. . . RA 9-520(b).

3. Under Old Article 9, some filing offices considered themselves obligated to review the form and content of filings and refuse those they determine are legally insufficient. RA 9-520, Official Comment 2.

4. Under RA-9, filing offices are not expected to make legal judgments and are not permitted to impose additional or other conditions or requirements. RA 9-520, Official Comment 2.

5Copyright 2009 Norman M. Powell. All Rights Reserved.

5. The fact that a filing is accepted is no assurance of its effectiveness.

6. The permitted bases for rejection are limited to those that prevent the filing office from dealing with a record, e.g.a. Requisite information is missing or cannot be deciphered, b. Transmission by a method the filing office does not accept,

or c. Improper tender of fee.

7. All that can be safely concluded from the absence of rejection is that, a. Something now appears of record, which

(i) may or may not be effective, and(ii) may or may not include all information submitted to

the filing office; and

b. The filer has tendered the filing fee.

F. Searching.

1. Where to search.a. Debtors location at all relevant times.

(i) four month rule where debtors location changes to another jurisdiction. RA 9-316(a)(2).

(ii) one year rule where collateral is transferred to a person who thereby becomes the debtor and is located in another jurisdiction.

b. Central and non-central filing offices.

2. What to search.a. Debtors current name.b. Certain former names four month rule. RA 9-507(c).

G. Article 9 isnt everything.

1. An RA 9-523 search report may disclose any federal tax liens filed in the searched office naming the indicated debtor.

2. But the debtors location for federal tax purposes may differ from its location for Article 9 purposes, and its name for federal tax

6Copyright 2009 Norman M. Powell. All Rights Reserved.

purposes may be rendered with greater variation than its name for Article 9 purposes.

3. Federal tax liens.a. Created upon the neglect or refusal to pay taxes due after

demand. 26 U.S.C. 6321.b. Perfected valid against a purchaser, secured party,

mechanics lien or judgment lien creditor upon filing of a federal tax lien notice in the proper office. 26 U.S.C. 6323(a).

c. Scope all property of the debtor, real and personal.d. The requisite filing.

(i) IRS Form 668. 26 C.F.R. 301.6323(f)-1(d).(ii) In the state in which the property is located

(determined under federal law).(A) Real property is located in the state in which

it is situated. 26 U.S.C. 6323(f)(2)(A).(B) Personal property (tangible and intangible,

regardless of physical location) is deemed located at the taxpay