June 30 is the deadline to file, but some states aren’t as ‘uniform’ as the code name would imply
Bullivant Houser Bailey
bligations secured by personal property are generally controlled by Universal Commercial Code (UCC) Article 9, a relatively uniform body of law adopted by all 50 states. Despite its "uniform" status, each state decides for itself what changes, if any, it will make to the uniform law. Consequently, the uniform provisions of UCC Article 9 are not uniform in every state. This makes doing business with businesses organized in other states interesting and tricky.
Some of the final transition rules to Revised UCC Article 9, adopted by all states in 2001, are now taking effect and businesses that file UCC financing statements to secure payment should take a moment to double check their continuation statements. The big deadline is here.
Generally, under the new version of Article 9, financing statements that were filed prior to July 1, 2001, lapse on the earlier of either the date that the financing statement would have lapsed under former Article 9 or June 30, 2006. For most applications, continuation or renewal financing statements must be filed in the proper state no later than this date. If you have complied with these dates in a proper jurisdiction under the revised code, you should be fine. But what if you didn’t? Is it too late? Depending upon where your debtor is located or organized, your security interest may still be perfected and you may still have time to file what needs to be filed.
If you did not file the renewal or continuation financing statement before the June 30 cut-off, all may not be lost. Alabama, Arizona and Mississippi have adopted non-uniform cut-off dates. If your debtor is located in one of these states, that state’s cut-off date may apply instead of the June 30 date. Non-uniform cut-off dates, perfection, priority and effectiveness problems also can exist in states that have or had a non-uniform period of effectiveness of financing statements under former Article 9, such as Arizona and Maryland. Further, some states adopted a revised Article 9 but they did not make the revisions effective until after July 1, 2001, which may extend your deadline if your earlier financing statement has not lapsed by its own terms. These states are Alabama, Connecticut, Florida and Mississippi. If you do business with companies organized in any of the non-uniform states, make sure that your financing or continuation statements from those companies are renewed or continued in the proper states by the proper cut off dates.
The final transition rules under the new revised Article 9 are too complex and convoluted to address here. However, review the UCC-1 financing statements for the companies with whom you do business, particularly those who are organized in other states. Make sure that the financing statements are properly recorded on time in those jurisdictions. If your financing statement has lapsed, take the necessary steps to record, in the proper jurisdiction, your new financing statement. Finally, order a search of the UCC records in that jurisdiction to familiarize yourself with your relative position of priority regarding your customer. The last thing you want to do is to extend credit or ship product, only to later find out that you are really unprotected.
Russ Garrett is a shareholder and corporate attorney in the Vancouver office of Bullivant Houser Bailey P.C. He focuses on commercial litigation and creditors’ rights in addition to general business and real estate matters. He can be reached via e-mail at email@example.com or by calling 360-737-3363.