Recent Amendments To Article 9 Of The Uniform Commercial Code: What Creditors Need To Know
Amendments to Article 9 of the Uniform Commercial Code (the 2010 Amendments) are set to go into effect in most states as of July 1, 2013. The 2010 Amendments respond to several issues that arose in practice over the twelve plus years that the current version of Article 9 has been in effect. This article summarizes several important statutory changes contained in the 2010 Amendments.
Debtor Name. The 2010 Amendments provide guidance on what name is to be provided on a financing statement with respect to an individual debtor, offering states two alternatives. Alternative A, also known as the “Only-If” rule, requires the filer to provide the debtor’s name on the financing statement as it is shown on the debtor’s unexpired driver’s license issued by the resident state. If an individual debtor does not have an unexpired driver’s license, the financing statement must provide either the individual name of the debtor (the legal name) or the debtor’s surname and first personal name. Alternative B, also known as the “Safe Harbor” rule, provides that any of the following shall be sufficient: (a) the debtor’s name exactly as it appears on the debtor’s unexpired driver’s license issued by the resident state, (b) the individual name of the debtor (the legal name) or (c) the debtor’s surname and first personal name. The 2010 Amendments allow some states to use the debtor’s name as shown on a non-driver identification card if the debtor does not have a driver’s license.
Secured parties have always required debtors to notify the secured party of any name change. As a result of the 2010 Amendments, secured parties filing in jurisdictions adopting Alternative A need to be vigilant as to when a debtor’s driver’s license expires or when the name on a debtor’s driver’s license changes (for example, as a result of a change in marital status), as either of those events could cause the filing to become “seriously misleading” with respect to the debtor’s name and result in the security interest becoming unperfected. Legislation currently pending in New Jersey and Pennsylvania adopts Alternative A, while legislation enacted May 3, 2013 in Delaware adopts Alternative B.
With respect to debtors that are “registered organizations”, current Article 9 requires that a financing statement provide the name of the debtor “indicated on the public record of the debtor’s jurisdiction of organization”. This requirement led to confusion as to the public record on which a secured party should rely. The 2010 Amendments specify that a financing statement sufficiently provides the name of the debtor only if it provides the name that is stated to be the registered organization’s name on the “public organic record” (i.e., the document filed with or issued by a state or the United States to form or organize an organization and any record filed with or issued by the state or United States which amends, restates, or corrects the initial record) inclusive of the record most recently filed with or issued or enacted by the registered organization’s jurisdiction of organization which purports to state, amend, restate, or correct the registered organization’s name. A certificate of good standing is not a “public organic record” and should not be relied upon. As a result, secured parties are advised to require a recent certified copy of the debtor’s public organic record (and not merely the original document of formation) in order to be sure that they obtain the debtor’s name as it appears on the most recent public organic record.
Change of Governing Law. The 2010 Amendments also deal with the effect of a change in the governing law of a debtor. While a debtor is located in a jurisdiction, the local law of that jurisdiction governs perfection, the effect of perfection or nonperfection, and the priority of a security interest in collateral and a secured party must file in accordance with the law of the jurisdiction in which the debtor is located in order to perfect its security interest. Under current Article 9, if a debtor changes location, the security interest remains perfected for four months after a change of the debtor's location to another jurisdiction, but only with respect to collateral in which the secured party had a perfected security interest at the time of the debtor’s change of location. The 2010 Amendments are more beneficial to creditors; security interests remain perfected with respect to collateral in which the secured party had a perfected security interest at the time of the debtor’s change of location as well as to newly acquired collateral to which its security interest attaches in the four month period.
Further, the 2010 Amendments provide that if an original debtor under an existing security agreement with a secured party (SP1) is succeeded by a new debtor (for example, pursuant to a merger) and the new debtor is located in a different jurisdiction, a security interest will be perfected with respect to collateral acquired by the new debtor before, and within four months after, the new debtor becomes bound. However, if the new debtor grants another secured party (SP2) a security interest in collateral obtained by the new debtor within the four month period and SP2 perfects its security interest by filing in the jurisdiction where the new debtor is located before SP1 perfects in the jurisdiction where the new debtor is located, SP2’s security interest has priority over SP1’s security interest in the newly acquired collateral. As under the current Article 9, creditors are advised to perfect their security interest by filing in a new jurisdiction as soon as possible if a debtor is undergoing a merger where it will be succeeded by a new entity in a different location.
Other Simplifications. The 2010 Amendments also eliminate the requirement that a financing statement provide the type of organization of the debtor, the jurisdiction of organization of the debtor or the organizational identification number of the debtor, and the recorder’s office may not reject a financing statement due to its lacking any of the foregoing information.
The foregoing summarizes select portions of the 2010 Amendments set to go into effect July 1, 2013. For further questions regarding the 2010 Amendments, and questions regarding the continued effectiveness of financing statements filed prior to July 1, 2013, please contact Meredith Bieber (email@example.com).
 As of the date of this Article, the 2010 Amendments have been adopted by most but not all states. Legislation is currently pending in Pennsylvania. Legislation has not yet been introduced for New York.
 “Location” being determined with reference to Section 9-307 of the UCC. A registered organization that is organized under the law of a State is located in that State. A debtor who is an individual is located at the individual's principal residence. A debtor that is an organization and has only one place of business is located at its place of business, and a debtor that is an organization and has more than one place of business is located at its chief executive office. See Section 9-307 to determine the location of additional debtor types.
 With certain exceptions, e.g., in the case of a possessory security interest, fixture filing, timber to be cut, or as-extracted collateral.