Number One Priority – Understanding Changes that Impact Securing and Maintaining Priority as a Secured Creditor (Recent Amendments to Article 9 of the Uniform Commercial Code)


Florida joined with a majority of states in adopting the 2010 changes to Article 9 of the Uniform Commercial Code (Ch. 679, Fla. Stat.), which governs security interests in personal property. Consistent with the targeted uniform effective date, Florida’s changes (which include certain minor modifications from the uniform law changes) (the “2013 Amendments”) took effect on July 1, 2013. Although these changes are not dramatic, they will affect secured parties’ practices concerning the filing of UCC-1 financing statements in Florida and the searching for persons who might have a filing in Florida that creates a prior secured position in collateral.
Below is a brief summary of some of the key changes in Florida resulting from the 2013 Amendments.

Proper Names for Debtors
The 2013 Amendments reaffirm that UCC-1 financing statements (which are the statements that secured parties file to perfect their security interests in the most typical types of collateral, such as personal property) must set forth the proper name for a debtor in order to perfect the security interest in the identified collateral. These amendments provide greater clarity for determining a debtor’s proper  name. For debtors that are entities and registered organizations (e.g., corporations, limited liability companies, limited partnerships), the name on the financing statement must match the entity’s name in the “public organic record,” which is the defined to be the record initially filed with the state to form or organize such entity or organization, or the most recent amendment to such record (e.g., the articles of incorporation or organization). The previous law only specified that entities’ names were those in the public record, but did not specify as to which types of records qualified as public records, sometimes leading to some uncertainty.

For individual debtors (i.e., natural persons) where the filing is required to be made in Florida, the financing statements must now list the name on the debtor’s unexpired Florida driver’s license or identification card. Previous law did not specify where you obtain the name of an individual debtor, again, sometimes leading to some measure of uncertainty. For such individual debtors without an unexpired Florida driver’s license or identification card, this uncertainty still exists because the financing statement must then list the individual name of the debtor or the surname and first personal name of the debtor, but the statute does not specify where you obtain these names.

It is important to comply with these requirements with respect to debtor names, because the failure to file under the correct name leads to a presumption that the UCC-1 financing statement is “seriously misleading,” and thus ineffective. This presumption can only be overcome if a search using the correct name (under standard search logic) would disclose the noncomplying statement. 

For persons (such as an existing secured party or a person proposing to become a secured party) wishing to conduct due diligence on potential debtors and search for prior secured parties, until July 1, 2018, they should conduct searches on both the debtor’s name pursuant to the new rules, along with any name that may have been effective under the prior law. This is because many UCC-1 financing statements filed prior to July 1, 2013 will continue to be effective, even if they do not meet the requirements as set forth by the 2013 Amendments after July 1, 2013. However, if after July 1, 2013, a secured party is amending or continuing a UCC-1 financing statement that was filed prior to July 1, 2013, the filing requirements set forth in the 2013 Amendments must be followed. UCC-1 financing statements are effective for 5 years, which effectively means that by July 1, 2018, all UCC-1 financing statements will need to be in compliance with the new rules.  

Change in Location of Debtor
Under both pre July 1, 2013 law and the 2013 Amendments, if a debtor moves to a new jurisdiction (or merges with a new entity or converts to a new jurisdiction), a secured party holding a security interest in that debtor’s property perfected by filing has a period of up to 4 months (1 year in the case of a change to a new entity) to continue the perfection by filing or otherwise perfecting in the new jurisdiction (or under the new name in the case of a merger). Under pre July 1, 2013 law, this grace period did not apply to any after acquired property (whether acquired by the debtor during the four month grace period or following the end of the grace period). Under the 2013 Amendments, after-acquired property of the debtor acquired during the grace period counts as part of the collateral covered by the earlier perfection. With respect to the after-acquired property, similar to pre July 1, 2013 law as to existing property, if the secured party fails to perfect in the new jurisdiction or under the new name within that 4 month or year period, their security interest will be deemed never to have been perfected as against purchasers for value.

Other Changes
In order to eliminate certain information which was previously required on financing statements, such as the organizational identification number of entity debtors, the forms for the uniform financing statements have been amended.  To comply with the new rules, the new forms of financing statements must be used.  

For secured parties who lend to transmitting utilities, they may now need to file in each state where goods are located to have a perfected fixture filing. Previously, filing in the state of the utility’s principal place of business was sufficient.

The 2013 Amendments also clarify that if a debtor authorizes a UCC-1 filing which was unauthorized at the time of filing, that earlier time of filing (as opposed to the time of authorization) controls for purposes of determining priority among competing security interests.  

Under current law, “correction statements” may be filed by debtors to provide limited public notice as to errors in a financing statement or as to an unauthorized financing statement.  The 2013 Amendments change the name of this statement to an “information statement” and allow it to be filed by secured parties as well. Note, however, these statements still have no legal effect on the original financing statement, and are not a mechanism to correct errors or otherwise render prior statements ineffective. 


DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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