UCC Revised Article 9: Statutory Changes

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UCC Revised Article 9 Statutory Changes
Impact on Filing Searching
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Introduction

• John A. Gale Secretary of State
• Greg Lemon Deputy Secretary of State
• Deb Pester UCC Administrator
• The purpose of this presentation is to facilitate
  understanding of the changes brought about by
  the passage of UCC Revised Article 9 and LB 54
  which will take effect on July 1,
  2001.

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Introduction

• Purpose of Legislation
• 1. Simplifying where to file laws, thus
  reducing both filing and searching costs which
  are passed down to customers, thereby reducing
  the cost of obtaining credit
• 2. Clarifying the rules for perfection, priority
  and enforcement of security interests for both
  agriculture and commercial lenders and
  
• 3. Promoting electronic commerce

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Introduction to New Filings and Fee Reductions

• I. Amendments
• A. Amendments now include the following
  Continuations, Assignments, Terminations and
  Amendment Changes. The filing office will be
  filing these actions on the record in the same
  manner as we always have in the past An
  Amendment serving as a Continuation will be noted
  as a Continuation on the history records of the
  Financing Statement an Amendment serving as a
  Termination will be noted as a Termination on the
  history records of the Financing Statement, etc.
• Note 1.) Each action filing (Continuation,
  Amendment Change or Assignment) must be submitted
  on a separate Amendment form. We will NOT accept
  multiple amendments on one form.
• 2.) Continuations may only be filed within the
  6 month window prior to lapse.
  

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• II. Correction Statements
• A. Who is entitled to file a correction
  statement? Any person may file in the filing
  office a Correction Statement with respect to a
  record indexed there, under that persons name,
  if the person believes that the record is
  inaccurate or the record was wrongfully filed.
• Note 1) Secured Parties should continue to
  file a Amendment to effect changes to the initial
  Financing Statement.
  
• 2) The filing office will file the
  Correction Statement on the record, but will NOT
  change, add or delete any indexes

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• III. Debtor Terminations
• A. When may a Debtor file a Debtor authorized
  Termination Statement? When a Secured Party
  fails to file or send a Termination Statement
  based on criteria in 9-513 or when a Debtor did
  not authorize the filing of the initial Financing
  Statement
• Note 1) Filing Office will only file a Debtor
  Termination against UCC records (NOT Federal or
  State Tax Liens, Judgments, Mortgages, E.F.S.,
  etc. since these are not Article 9 Filings)

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• IV. Filing Office Statements
• A. A record added to the history of a
  Financing Statement when a filing office error
  occurs or is discovered
  
• Note 1) When a filing office errors indexing a
  debtor name, filing office will file a Filing
  Office Statement on the record, noting the date
  the error was discovered and what the incorrect
  index had previously shown on the database.
• 2) When a filing office wrongfully rejects
  a document, upon return and filing of the
  rejected document, filing office will the same
  day file a Filing Office Statement noting the
  date time the document would have been filed
  had it not been wrongfully rejected.

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• V. Fee Reductions
• A. We are moving from a compound indexing fee
  structure to a flat fee, plus attachments.
  Complete fee schedule is included in your
  packets.
• Note 1) Paper filing fees 6.00 flat fee
  (regardless of the number of debtor indexes),
  plus .50 per page of attachments.
  
• 2) Electronic filing fees 5.00 flat fee

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II. Open Drawer

• Open Drawer is one of the major concepts to be
  emphasized in Revised Article 9. We, as the
  filing office, are now mandated to do the
  following
• I. Only add debtor indexes and secured party
  information into the information management
  system. (From July 1st forward, no debtor or
  secured party names will be removed from the
  index.)
• Example John Mary Doe were indexed on the
  initial Financing Statement, subsequently they
  divorce, and John remarries Ann. The lender
  amends to delete Mary add Ann. All 3 debtors
  will remain on the searchable index. Searchers
  will need to obtain copies to ascertain status of
  debtors.

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• II. Filing Office will retain information in the
  database even if a Termination has been filed on
  the Financing Statement record until lapse 1
  year. (This includes Debtor Terminations)
• RA9 statutes give specific mandates for
  maintaining records for search purposes in the
  filing office information management system.
  These rules are NOT retroactive for filings on
  the record prior to
• July 1, 2001.
• Example A Financing Statement that was
  terminated on 5-7-2001 remains terminated under
  current law and wont be reported.
  

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• III. Active Filings are Financing Statements
  that have not reached their lapse date. These
  will be reported on UCC searches, both through
  the UCC filing office and through Nebrask_at_
  Online.
• Remember Even if a Financing Statement has
  been Terminated (after 7-1-2001), it will remain
  on the active record until its lapse date.
  
• Example A Financing Statement is filed on
  July 3, 2001. A Termination is filed on July 16,
  2001. The financing statement will remain in the
  Active records until July 3, 2006its lapse
  date.

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• IV. Inactive Filings are financing statements
  that have lapsed. These filings will be kept on
  our records for 1 year beyond lapse. Searchers
  wanting these records reflected on searches will
  need to submit to the Secretary of States Office
  a separate request for an Inactive search of
  the filing office records.
• Note Lapse 1 year only applies to UCC
  Financing Statements. Transmitting Utility
  filings and Mortgages are effective until
  Terminated and will be maintained in the database
  indefinitely until Terminated 1 year.

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III. Accurate Indexing

• Its imperative that lenders use the exact legal
  name of the debtor Corporate or Individual.
  Failure to follow this mandate could result in
  hidden liens, i.e. liens in the database that
  could have been found had the exact legal debtor
  name been stated correctly formatted on the
  form. The following are changes to the indexing
  rules
• I. To conform with new indexing rules, the
  filing office staff has
  
• 1) gone through all debtor indexes and
  separated names into individuals v.s.
  organizations 2) parsed individual debtor
  names into last name, first name, middle initial,
  and suffix fields and
• 3) changed our previous index standards so
  that John Doe Co. will now be found under John
  Doe Co. These changes will not be evident until
  closer to or on July 1, 2001.

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• II. Indexing of debtor names on the National
  Standard Form (IACA), the form pictured in
  statutes, is straightforward, and, if followed
  precisely, should result in an accurate debtor
  name indexing (into the system) and conversely,
  accurate search results produced (by the system).
  Again, the lender must use the debtors exact
  legal name.
• Note Several examples of accurately v.s.
  inaccurately completed debtor index information
  on the Standard Forms are provided in your
  packet.

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Document Numbers

• Let us review the components of the current
  document number scheme.
  
• I. First 2 digits County (1-93), State (99) or
  NOL efiling (98)
  
• II. Second 2 digits Year initial Financing
  Statement was filed.
  
• III. Third 6 digits Document number assigned
  by the respective filing office.
  
• NEW!! Fourth single digit Check digit. Check
  digit is a mathematically derived single digit,
  system assigned, based on a calculation made
  against the other digits in the document number.

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• All documents filed after 7-01-2001 will have a
  check digit assigned to them. The most important
  check digit will be the one assigned to initial
  Financing Statements as you will have to
  reference (on paper filings) or key it in
  (efilings) when filing the various Amendment
  filings against these Financing Statements.
  Legacy Financing Statements (filed pre 7-1-2001)
  will not have check digits assigned to them so
  you will continue to reference the original 10
  digit document number assigned at the time of
  filing.
• Note On all Amendments filed beginning July 1,
  2001 it is mandatory that ALL 10 or 11 digits be
  given when referencing the initial Financing
  Statement because 1.) filing office name
  (county or state) is no longer required on the
  form 2) debtor name(s) are not specified on
  the form unless amending to change the debtor
  name 3) Providing the exact initial financing
  statement number is crucial or the filing will be
  rejected.

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V. Rejections

• Statutes 9-516 specifically details rejection
  criteria. A sample of the new rejection form is
  enclosed in your packet and perhaps would serve
  as a guideline for comparison, prior to
  submitting liens for filing.
• Criteria 1 complete Debtor 1 complete Secured
  Party Filed Lien
  
• Be sure to carefully check your Filing
  Acknowledgement and compare it to your lien
  filing. The information (indexes) shown on the
  Acknowledgement is indicative of how the filing
  is indexed in the database.
• The filing office will attach a Notification
  Statement to a filed document if we were unable
  to index a debtor(s) or secured party(ies) due to
  incomplete information. If you determine that an
  index needs to be included on the filing record,
  you may want to file an Amendment to add the
  index to the record.

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VI. Reminders

• I. Model Administrative Rules Our office is in
  the process of adopting Nebraskas Model
  Administrative Rules. A copy of the Proposed
  Draft of these rules will be available on our
  website.
• II. Electronic Filing of additional types of UCC
  records will be available after July 1, 2001 We
  have informational brochures and subscription
  information from Nebrask_at_ Online. We also hope
  to have E.F.S filings online in 2001.
• III. Images of documents will be available
  through Nebrask_at_ Online.

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• IV. Filing in other jurisdictions Other states
  may or may not have adopted RA9 legislation in
  their states, so do your homework in these
  instances. States that have passed RA9 may have
  legislated
• non-uniform sections so you will want to be
  aware of their laws and Model Administrative
  Rules.
  
• V. Indexing on E.F.S. documents Although RA9
  indexing rules dont apply to E.F.S. documents,
  weve been lenient on debtor indexing. You would
  be well advised to be as watchful on E.F.S.
  filings as you will be on UCC and notice that on
  E.F.S. that Boxes 1,2 3 are for individual
  debtors (1 debtor name per box and type as Last
  Name, First Name, Middle Initial) and Box 4 is
  for organizational (entity) debtors.

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Summary

• Use the legal name of the debtor
• a. Organizational Exactly as it appears on
  the Articles of Incorporation or Organization
  
• b. Individual Legal Name
• File in the correct Jurisdiction
• a. Registered Entities File in the State of
  Incorporation
  
• b. Non-Registered Entities File in the State
  where the CEO is maintained
  
• c. Individuals File in the State where their
  residence is maintained.
  
• Use the Standard Forms
• a. This should help you properly fill out
  Debtor Secured Party indexing.
  
• b. No Termination Statement (3rd copy of
  carbon pack, usually pink or white) will be
  allowed for filing Terminations.
  

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Summary (cont)

• 1 complete Debtor 1 complete Secured Party
  Filed Lien
  
• No Signatures are required of either Debtor or
  Secured Party.
  
• Enclose fee payment or type account in Secured
  Party box or filer info box at top of form (if
  provided) or both to preclude rejections for
  insufficient fees.
• Check your Acknowledgement of Filing letters for
  Debtor/Secured Party indexing
  
• a. If Debtor/Secured Party names are missing,
  file an amendment.
  
• b. If filing office has made an error, contact
  them in writing detailing discrepancy.
  

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• This concludes our presentation about RA9. Our
  address, phone, website and email address are
  listed below.
  
• Uniform Commercial Code Division
• Nebraska State Capitol, Suite 1301
• Lincoln, NE 68509
• [phone] (Voice) [phone] (Fax)
• http//www.nol.org/home/SOS
• Email address sos07_at_nol.org