Adopting amendments to the Uniform Commercial Code Article 9, relating to secured transactions, recommended by the National Conference of Commissioners on Uniform State Laws

However, filing a financing statement is not the only method for perfection, depending upon the kind of property that is collateral. Possession of collateral by the secured party is an alternative method of perfection for many kinds of collateral, and "control" is the method of perfection for certain kinds of collateral.

This bill adopts the 2010 amendments to UCC Article 9 approved by NCCUSL.

Among the changes to UCC Article 9 are the following:

1. The bill makes modifications with respect to how a debtor's name must be identified on a financing statement. Most significantly, if the debtor is an individual to whom the Department of Transportation (DOT) has issued an operator's license or identification card that has not expired, the financing statement, to be sufficient, must provide the name of the individual as it appears on the operator's license or identification card. If the debtor is an individual who does not hold an unexpired DOT-issued operator's license or identification card, the financing statement must provide the individual name of the debtor or the surname and first personal name of the debtor. The bill also makes changes as to how the debtor's name must appear on a financing statement whenever collateral is held in a trust and also requires certain additional information on the financing statement if collateral is held in a trust or is being administered by a personal representative. The bill makes other minor modifications or clarifications relating to how debtor names must appear on financing statements.

2. Under current law, the law of the jurisdiction (state) where a debtor is located, while the debtor is located there, governs perfection of a security interest, the effect of perfection or nonperfection, and the priority of a security interest in collateral. If the debtor moves to a new state or collateral is transferred to a new debtor in a new state after a security interest is perfected, the security interest remains perfected until the earliest of the following, as applicable: the time perfection would have ceased under the law of the original state; the expiration of four months after the change of the debtor's location to the new state; or the expiration of one year after the transfer of collateral to a person that becomes a debtor and is located in the new state. If the security interest becomes perfected under the law of the new state before any of these time periods elapse, the security interest remains perfected; otherwise, the security interest becomes unperfected and is deemed never to have been perfected as against a purchaser of the collateral for value.

The bill includes provisions applicable to the filing of a financing statement when the debtor has changed location to a new state and a security interest attaches within four months after this change of location. The bill specifies circumstances in which a financing statement filed before the change of location under the law of the original state is effective to perfect a security interest and specifies when the security interest remains perfected under the law of the new state. The bill also includes provisions applicable if a financing statement naming an original debtor is filed under the law of the original state where the debtor was located and a new debtor is located in a new state. The bill specifies circumstances in which a financing statement is effective to perfect a security interest in collateral acquired by the new debtor before, and within four months after, the new debtor becomes bound by the security agreement and specifies when the security interest remains perfected under the law of the new state.

3. Under current law, among the reasons a filing office (usually DFI) may refuse filing of an initial financing statement or certain amendments is that, if the debtor is an organization, the financing statement or amendment does not provide a type of organization for the debtor, a jurisdiction of organization for the debtor, or an organizational identification number for the debtor or indicate that the debtor has no such number. This bill eliminates these omissions as reasons for refusing to file an initial financing statement or amendment to a financing statement.

4. Under current law, if a person believes that a filed record indexed under the person's name is inaccurate or was wrongfully filed, the person may file a correction statement. This bill changes the term from "correction statement" to "information statement." The bill also specifies that a secured party of record may file an information statement, containing certain information, relating to a filed record if the secured party believes that the person that filed the record was not entitled to file it.

5. Under current law, certain agreement terms involving account debtors (persons obligated on an account, chattel paper, or general intangible) or in promissory notes relating to the debtor's consent to certain matters affecting a security interest are ineffective except with respect to the sale of a promissory note or payment intangible. This bill narrows this exception so that it does not apply if the sale is a disposition of collateral after default or is an acceptance of collateral in satisfaction of the debtor's obligation.

6. The bill makes changes relating to a secured party's control of electronic chattel paper by specifying that, for a secured party to have control, a system employed for evidencing the transfer of interests in the chattel paper must reliably establish the secured party as the person to which the chattel paper was assigned.

7. The bill includes several definitional changes, including changes to improve compatibility of provisions with the use of electronic records. The bill also creates a new term and definition of "public organic record" for public records relating to entity formation or organization.

8. The bill makes various minor and technical changes to UCC Article 9 and replaces current UCC forms with updated UCC forms that incorporate the changes in Article 9. The bill also includes transitional provisions relating to the applicability of the bill's changes to existing security interests.