RADICAL CHANGES IN FILING OF FINANCING STATEMENTS
By: John Newman, Winter 2005
Effective July 1, 2001, Article 9 of the Uniform Commercial Code of New Jersey (and of many other states) was replaced. The new Article 9 dramatically changes the form, execution and filing of Financing Statements.
All Financing Statements except fixtures filings must be filed with the Division of Commercial Recording of the State where the debtor (not the collateral) is “located.” Any entity debtor registered with a state, such as a corporation, limited liability company or limited partnership, is “located” in the state of its organization. Thus, for example, if the debtor is a Delaware corporation with principal offices in New Jersey, the only place for a UCC filing will be with the Division of Commercial Recording of Delaware.
In listing the debtor’s name on the Financing Statement, only the actual name as set forth in the Certificate of Incorporation, Certificate of Limited Partnership or Certificate of Formation can and should be used. Adding trade names is superfluous. Filing only in the name of a trade name is meaningless. Lenders should obtain current copies of entity organizational documents (and any available amendments), preferably from the filing office, before preparing a Financing Statement.
A Financing Statement will not have to be signed by the debtor as long as the Security Agreement authorizes its filing, which will facilitate e-mail filing. The debtor’s execution of the Security Agreement automatically authorizes the filing of a conforming Financing Statement. The new form of Financing Statement should be used effective immediately.
Collateral in the Financing Statement can be listed generically as “all assets” or “all personal property” (if applicable), although the Security Agreement must include an adequate description of it.
There are comprehensive transition rules. First, if you filed a Financing Statement before July 1, it will be effective when filed and will remain effective after the new law takes effect.
Second, you may file an initial Financing Statement in lieu of a continuation statement or an “in lieu of” statement. An “in lieu of” Financing Statement is a form of initial Financing Statement, not an amendment; it acts to some extent like a continuation statement; and it may contain amendments. The purpose of the “in lieu of” Financing Statement is to provide a mechanism to transition pre-effective date filings to a new filing office after July 1.
Using the previous example, if the initial filing was with the New Jersey Department of the Treasury, after July 1 the correct location for filing would be the Office of Commercial Recording in Delaware. To properly continue the Financing Statement, a secured party must file an “in lieu of” Financing Statement with the Division of Commercial Recording of Delaware either before July 1 or before the expiration of the original financing statement.
The “in lieu of” statement must have the correct name of the debtor, identify the pre-July 1 financing statement by filing location, date and number, the filing information for the most recent continuation statement, and state that the pre-July 1 Financing Statement remains effective.
Any other change in circumstances which would require an amendment of a Financing Statement now requires a filing of an “in lieu of” Financing Statement. If collateral consists of goods, you must file the “in lieu of” statement before the goods are moved to a new jurisdiction.
If the proper filing office for pre-effective date filing does not change under the new Article 9, use the national standard UCC-3 to file amendments. If a pre-effective date filing needs to be terminated, you can still file a termination statement in the office where the initial financing statement was filed.
The most important part of documenting any secured transaction, whether secured by real estate or personal property, is the proper perfection of the security interest. Adjust quickly to the dramatic changes; keep in mind that thorough searches may require extra-jurisdictional inquiries in order to examine home state filings.
This publication is intended for general information purposes only and does not constitute legal advice. The reader should consult legal counsel to determine how the law may apply to specific situations.
Effective July 1, 2001, Article 9 of the Uniform Commercial Code of New Jersey (and of many other states) was replaced. The new Article 9 dramatically changes the form, execution and filing of Financing Statements.
All Financing Statements except fixtures filings must be filed with the Division of Commercial Recording of the State where the debtor (not the collateral) is “located.” Any entity debtor registered with a state, such as a corporation, limited liability company or limited partnership, is “located” in the state of its organization. Thus, for example, if the debtor is a Delaware corporation with principal offices in New Jersey, the only place for a UCC filing will be with the Division of Commercial Recording of Delaware.
In listing the debtor’s name on the Financing Statement, only the actual name as set forth in the Certificate of Incorporation, Certificate of Limited Partnership or Certificate of Formation can and should be used. Adding trade names is superfluous. Filing only in the name of a trade name is meaningless. Lenders should obtain current copies of entity organizational documents (and any available amendments), preferably from the filing office, before preparing a Financing Statement.
A Financing Statement will not have to be signed by the debtor as long as the Security Agreement authorizes its filing, which will facilitate e-mail filing. The debtor’s execution of the Security Agreement automatically authorizes the filing of a conforming Financing Statement. The new form of Financing Statement should be used effective immediately.
Collateral in the Financing Statement can be listed generically as “all assets” or “all personal property” (if applicable), although the Security Agreement must include an adequate description of it.
There are comprehensive transition rules. First, if you filed a Financing Statement before July 1, it will be effective when filed and will remain effective after the new law takes effect.
Second, you may file an initial Financing Statement in lieu of a continuation statement or an “in lieu of” statement. An “in lieu of” Financing Statement is a form of initial Financing Statement, not an amendment; it acts to some extent like a continuation statement; and it may contain amendments. The purpose of the “in lieu of” Financing Statement is to provide a mechanism to transition pre-effective date filings to a new filing office after July 1.
Using the previous example, if the initial filing was with the New Jersey Department of the Treasury, after July 1 the correct location for filing would be the Office of Commercial Recording in Delaware. To properly continue the Financing Statement, a secured party must file an “in lieu of” Financing Statement with the Division of Commercial Recording of Delaware either before July 1 or before the expiration of the original financing statement.
The “in lieu of” statement must have the correct name of the debtor, identify the pre-July 1 financing statement by filing location, date and number, the filing information for the most recent continuation statement, and state that the pre-July 1 Financing Statement remains effective.
Any other change in circumstances which would require an amendment of a Financing Statement now requires a filing of an “in lieu of” Financing Statement. If collateral consists of goods, you must file the “in lieu of” statement before the goods are moved to a new jurisdiction.
If the proper filing office for pre-effective date filing does not change under the new Article 9, use the national standard UCC-3 to file amendments. If a pre-effective date filing needs to be terminated, you can still file a termination statement in the office where the initial financing statement was filed.
The most important part of documenting any secured transaction, whether secured by real estate or personal property, is the proper perfection of the security interest. Adjust quickly to the dramatic changes; keep in mind that thorough searches may require extra-jurisdictional inquiries in order to examine home state filings.
This publication is intended for general information purposes only and does not constitute legal advice. The reader should consult legal counsel to determine how the law may apply to specific situations.
