Effective July 1, multiple amendments to the Uniform Commercial Code (UCC) became effective in Connecticut, Maine, Massachusetts, New Hampshire, Rhode Island and 39 other states. Efforts are underway in the six remaining states – Alabama, Arizona, California, New York, Oklahoma and Vermont – to approve the same amendments.
For many of our clients, the amendments are a non-event. For clients who file UCC financing statements, judgments or statutory lien notices with a UCC division of a Secretary of State, however, the amendments may require important changes to their filing, searching, and due diligence practices. Set forth below are some of the amendments those clients will especially want to review.
The Name of the Debtor on the UCC-1 Financing Statement (UCC § 9-503)
In the past, a fair amount of confusion has existed over what name should be used in a financing statement filed against an individual debtor. Should it be the name of the debtor appearing on his or her driver’s license, birth certificate or social security card? Or perhaps it should be the name of the debtor appearing on some other reliable form of identification, such as a military identification card. What about nicknames (Margaret v. Meg; Joseph v. Joe), alias names and middle initials? To eliminate this confusion and the litigation it has spawned, the drafters of the UCC have given states two options:
Alternative A: If the debtor has an unexpired driver’s license (or state issued non-driver identification card), then the financing statement may use the name on such unexpired license or identification card. If (and only if) the debtor does not have an unexpired driver’s license or state issued non-driver identification card, then the financing statement may use the debtor’s first personal name and surname.
Alternative B: The financing statement sufficiently names the debtor by providing (a) the debtor’s individual name as determined by state law, (b) the debtor’s surname and first personal name, or (c) the name on an unexpired driver’s license (or state issued non-driver identification card).
Maine, Massachusetts, and Rhode Island, like the vast majority of the other states, have adopted Alternative A. Connecticut and New Hampshire have adopted Alternative B.
In Alternative A states, the name on the UCC-1 financing statement must match the name on the driver’s license or state-issued identification card, even if that name is incorrect or has changed since the license or identification card was issued. Cautious creditors will see to it that these names match on their filings.
Individual UCC filings that were effective prior to July 1 will not be rendered ineffective as of July 1 because of a state’s adoption of Alternative A or Alternative B. A non-conforming existing UCC-1 financing statement will, however, need to be amended (by filing a UCC-3 amendment statement) to reflect the correct debtor name if the secured party wishes to continue that financing statement prior to its expiration.
While a UCC filing under the name on the debtor’s driver’s license will always be correct in an Alternative A state, searching under other names may be necessary in order to determine the accurate state of the record. This is because other non UCC liens, such as judgment and statutory liens, are also filed with the Secretary of State, and the statutes dealing with these lien filings have not been amended to provide the bright line test applicable to UCC filings. Thus, in searching the Secretary of State’s records, it will be necessary to search under a debtor’s driver’s license name, and for UCC-1s filed prior to the amendment and for other types of liens, under any other name the debtor may have used.
In the case of registered organizations, such as corporations, limited liability companies and limited partnerships, it has always been advisable to verify the legal name of the debtor by looking at its formation documents (i.e., its articles of incorporation, articles of organization or certificate of limited partnership) and any amendments to those documents that purport to change the registered organization’s name. In practice, however, that is not always how a debtor’s legal name is verified, with many filers relying instead, for example, on a Secretary of State name index or a Certificate of Good Standing to verify the debtor’s legal name. Effective July 1, filers relying on anything other than the actual filed Secretary of State documents will do so at their own risk. Under amended Section 9-503 of the UCC, a financing statement naming a registered organization as debtor will sufficiently name the debtor “only if the financing statement provides the name that is stated to be the registered organization’s name on the public organic record [i.e., its articles of incorporation, articles of organization or certificate of limited partnership] most recently filed with or issued or enacted by the registered organization’s jurisdiction of organization which purports to state, amend, or restate the registered organization’s name.” Cautious creditors will therefore always request to see a copy of the articles of incorporation, articles of organization or certificate of limited partnership and not simply rely on the information contained in a good standing certificate.
Change of Location of Debtor or Merger (UCC § 9-316)
Debtor Moves to a New State
Under Section 9-316 of the UCC, a secured lender can become unperfected if its debtor moves to another state and the secured lender fails to re-perfect its security interest in the debtor’s new state within four months after the debtor’s move. The trap for the unwary created by the new amendments is that this four month grace period previously did not apply to after acquired property. As a result, under the prior regime, secured lenders only needed to search the UCC records in the debtor’s old state if they wished to take a security interest in property of the debtor existing as of the date of the move. But since the four month grace period now also applies to after acquired property, due diligence for such loans will require UCC searches in the filing offices of the debtor’s former and current location.
Prior to the effective date of the UCC amendments, the four month grace period found in Section 9-316 of the UCC did not apply to post merger acquired property. Thus, a new, post-merger secured lender did not need to search the UCC records in the filing office of the state in which the acquired organization was located to ensure priority in its security interest in property acquired by the merged entity following the merger. That is no longer the case, however, since the UCC amendments provide for automatic perfection in property of the merged entity acquired within four months following the merger.
Changes to National UCC Forms (UCC-1 and UCC-3)
Along with changes to the UCC come changes to the forms used to make UCC filings. Copies of the new forms are available at:
The grace period for using the new forms varies among the states. In Maine, Rhode Island and Massachusetts, the grace period is thirty days; in New Hampshire, the grace period is 60 days. In some states, such as Illinois, Colorado and New Jersey, there is no grace period.