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Amendments to UCC Article 9: FAQs on Filings Following the July 1, 2013 Transition

on Tuesday, 6 August 2013 in Banking Update

In 2010 the Nebraska legislature adopted amendments to Article 9 of the Uniform Commercial Code (the “Amendments”). To preserve the effectiveness of pre-Amendment records and to allow secured parties to bring affected records into compliance with the new requirements, the Amendments provide rules for an orderly transition. The transition rules are found in Part 8 of UCC Article 9. The transition period began on July 1, 2013. This article will discuss several questions that lenders frequently ask about the transition period.


Q: Do the Amendments impact all financing statements?

A: No. Only in limited cases will a secured creditor need to take action to remain perfected. For example, there are rare instances where the Amendments change the requirements for how a secured creditor must designate a debtor’s name on a financing statement. Further, there are rare instances where the Amendments change the governing jurisdiction.


Q: In what instances will the Amendments change the requirements for a debtor’s name on a financing statement?

A: The Amendments clarify how secured creditors should designate the debtor’s name when the debtor is an individual, a registered organization, a personal representative, or a trust. If the debtor is an individual with an unexpired Nebraska driver’s license, then the financing statement must provide the individual’s name as it appears on the driver’s license. If the debtor is a registered organization, the financing statement must list the debtor’s name as it appears on the registered organization’s “public organic record.” When collateral is administered by a personal representative, the financing statement must provide the decedent’s name as the debtor’s name. Finally, when collateral is held in a trust that is not a registered organization, the financing statement must provide the trust’s name as it appears on the trust’s organizing document. Only when a secured creditor’s already-filed financing statement does not conform to the Amended rules will a secured creditor need to take action. 


Q: If the Amendments do impact how a secured creditor should designate a debtor’s name, does a secured creditor need to immediately amend the financing statement to reflect the Amendment’s changes?

A: No. So long as the financing statement satisfies the requirements for perfection under Nebraska law as it existed before July 1, 2013, the Amendments do not immediately impact filed financing statements. However, if the Amendments impact an already-filed financing statement, the secured creditor only has until the financing statement lapses (or until the secured creditor files its continuation statement) to make necessary changes.


Q: Do the Amendments change the jurisdiction in which a secured creditor must file its financing statement?

A: Only in rare circumstances. The Amendments expand the types of entities that fall within the definition of “registered organization” to include business trusts, entities created by legislation, and entities created by the issuance of a charter by a division of government. Prior to the Amendments, these types of entities generally did not qualify as registered organizations. Under the pre-Amendment location rules, these entities were located at their principal place of business or chief executive office. After the Amendments take effect, however, these registered organizations are located where they were organized. Thus, if the debtor’s principal place of business or chief executive office is in a different state than where it was organized, there will be a change in governing law.


Q: What should a secured creditor do if the governing law does change?

A: First, it is important to note that the pre-Amendment financing statement does not cease to be effective on July 1, 2013, simply because the Amendments change the governing law. The pre-amendment financing statement remains effective until it would naturally lapse (i.e. five years after filing). After the Amendments take effect, however, the secured creditor should discontinue filing any UCC record in the former jurisdiction. Any further UCC record filed in the former jurisdiction, including a continuation statement, has no effect. If the secured creditor needs to amend or continue a financing statement filed in the debtor’s former jurisdiction, then it will need to “move” the financing statement to the new jurisdiction. The transition rules allow the secured party to do this by filing an “In Lieu” in the new state. An In Lieu is simply a financing statement with some additional information. In addition to the financing statement requirements listed in 9-502(a), an In Lieu must identify the office in which the original financing statement was filed, identify the file number and file date of that financing statement and, if applicable, the most recent continuation. Finally, the In Lieu must indicate that the original financing statement remains effective.


Q: How should a secured creditor prepare for the Amendment’s transition period?

A: Secured parties should modify procedures to include a review of potentially impacted records when making continuation decisions. To be most effective, that process should begin early. The secured creditor should allow sufficient time for the due diligence necessary to prepare any amendments it must file. Then, the secured creditor must be sure to file those records prior to the scheduled lapse date.

Eric J. Adams

Emily Z. McElravy

Read the Full Newsletter: Banking Update August 6, 2013


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