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    36 views4 pages

    BarCharts Secured Transactions PDF

    Uploaded by

    kurt

    Copyright:

    © All Rights Reserved
    Download as PDF or read online from Scribd
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    REVISED ARTICLE 9 OF THE UNIFORM COMMERCIAL CODE Ere PURPOSE & SCOPE Article 9 governs the relationship beoween Debtors and Creditors in certain transactions “DEFINITION T. Revised Article 9 generally applies tow transac- ‘on, regardless of is form, tht creates & Security Ingetes in personal property or fixtures by con- tract, agricultural len: sale of accounts, chattel, Paper, payment intangibles, or promissory notes: j consignment; or Security Interest arising out of certain appropriate sections ofthe UCC [91090] This body of law not only regulates consensual interestsand financing transactions but also applies to agricultural statutory Hens and consignments ‘+ TRANSACTIONS EXCLUDED FROM ARTICLE. ‘9 THROUGH SCOPE OR CONFLICT OF LAW 1910940) 1 Leas Landlords len and statutory liens Exception: Agricultural lens ae included Wages: Assignment ofa claim of wages, salary, oF ‘other compensation of an employee Sale of sinew: Sle of certain tangible papers or notes as part of sale of busines in which they arose Collection: Assignment of accounts oF pupers for Purpose of collection only Assgament: Assignment of right to payment under s contract to assignee lso obligated to perform Under contract: assignment of single account oF Paper to an assignee in flor partial satisfaction Sf a preening indebledness transfer of interest in of assignment of claim under un insurance policy other than health-care provider. signe ‘eat of tight represented hy judgment: right of Ud CY CLASSIFICATION OF COLLATERAL To properly attach Collateral to loan and ereate a Security Interest, Collateral must be classified no the correct Article 9 clasfcation +Goops Allthings that are movable when a Security Interest sztaches P1024) 2 Each clas of goods is mutually exclusive Wath excepsion of farm products, Debtor's use controls elasifiation 4 Potential goods may actually be Fixtures when hey become so related to particular real estate sn intrest in them arses undet real estate ly ands 5 Farm products 9102634) «Crops. livestock. or supplies used or produced in farming operations: ae » Prodets of erops or livestock in their unmane= actual states 6 Consumer goods [9-102(a)23):. Goods used or ought primarily for personal, Family, oF house: purpose Inventory [9-102(a\(48): Goods other than farm products hed forsale or lease, raw materials, Sorkin progress oF materials consumed in busines 5. Fquipment 9-102(0)33)] Goods other than farm products, consumer goods or inventory 8. Generally considered a “catchall” classification, as only determined tobe equipment by elimina ing other choice ‘ecoupment or soll or assignment of a deposit 6. Real property: Creation or transfer of interest in Jin on real property. including leases) oF ren() 7. Torts: Assighment of s claim arising in tort, Exception: Commercial or elaims ate inchoded 1p-105(0)2) CONSIGNMENT, LEASES & PLEDGES Any financing transaction may be held subject 0 “Artcle9f purpose i 10 create a Security Inverest in Cotara 10H 1. Consigaments! Transactions, regardless of form in which person delivers goods to merchant for purpose of se, with certain limitations on the merchant; consignments are PMSI in Debtor's inventory limited to consignors rights regarding Creditors and Buyers from consignet, not elation ship between consignor and consignee Pledges: Property kept in Creditors contol until loan tepaid by Debtor: constitutes a possessory Security Transition Lenses A tre lease i not a Security Interest and not suet to Article 9, but some lease obligations fre treated as disguised sues with a Security Interest, by evaluating details of arrangement, including the period of theless, renewal options, and ers TERMINOLOGY & DEFINITIONS 9-102(a) defines most Ariel 9 terms: 98-1024) cross- references definitions that may be relevant to Article Dut are defoned nother sections ofthe UCC +SECURED PARTY [9-102(a)72)} 1 Lender Seller. or other party in whose favor there isa Security Interest, including & person to whom ‘accounts orchaltel paper have Been sold 2, May include Crior who creates Security Interest Creditor to whom Security Interest has been assigned *SEMEINTANGIBLE © INTANGIBLE PERSONAL PROPERTY 1. Sembintanibles: Collateral that is a ight eve enced by a writing 4 Chatel paper [91026210 iCWoiting that evidences monctary obligation and Security Interest in specific ods ii Generally contains both Security Agreement and an instrument such asa promissory note 4i,Contains an indispensible writing but may also be electronic [9-102(4030) 1 nstrument[102(0X47) iC Writing that evidences a right to the payment ‘of a monetary obligation and is not a Security ‘Agreement doesn grant a Security Tnteres) ii Writing that is transferred by delvery in ordi= nary couse of business ii.Does not include investment propery, lters ‘of crit or writings that evidence right t0 payment using out of use of ert card js. Contains an indispensible weting «Documents [9-102(0)30), i: Waiting that sa document of title ora receipt ii Contains an indispensible writing 2. Intangibles: Collateral that isa Hah wher ings not needed Accounts [9-1023)2)] i Right to payment for monetary obligation for property, series insurance policy, secondary Obligation, ener, use or hire of vessel use of freditor charge cad, winnings in wlotery and health-care insurance reeivables ii, Does not incade rights to payment evidenced by chattel paper or instrument, commercial tort claims, Gepost accounts investent prop- rig letters of creditor rights to payment for 3, Does nor include unsecured Creditor, whose Fights are not governed by Article 9 + DEBTOR j9-102(a)28)] One who owes payment or other performance of the obligation soured 2, Seller of accounts oF chattel paper 3. Often referred to as "Obligors Agreements “CREDITOR 1. Includes General Creitor, Secured Creditor, Lien (Creditor. and any other representative of Creditors, including taste in bankruptcy 1201013), “COLLATERAL. 1. The property subject tow Security Interest ‘+ SECURITY AGREEMENT [9-102(a)(73) 1. The contract between the Debior and Secured Party that creates or provides for a Security Interest 2. Purpose of Security. Agrecment is to altach the Collateral to the loan + SECURITY INTEREST Security Interest refers to_an interest in personal property or fixtures, securing payment, of perfor ‘ance ofan obligation: also includes any interest (of a consignor and a Buyer of accounts, chattel ‘pape, payment intangible or promissory note in & Iranséction subject to Article 91-2010) 2. A Security Interest i created in Collateral “PURCHASE MONEY SECURITY INTEREST (PMH (9-103) 1 Taken or retained by Seller of Collateral fo secure samount due and gain greater nights than other Creditors {Loam aiven must be in fist used by Debtor to buy goods in which Security Interest i reated PMSI holders are given greater advantages over ‘ordinary Secured Creditors when certain rules are allowed fin Security ‘money or funds advanced or sold, olher than Fights arising out of creditcard li. No writing necessary ‘Intangibles not needing writings include but are not limited to "Deposit accounts 9102/29) are demand, time savings passbook, or similar accounts main- tained with bank, not including investment property sscounts evidencd by an instrument Commercial tort claims [9-102a)13)} are ‘laims arising in tort when claimant is an orps- nization or an individual, but the clams arose fut of business and are not personal injury © Genel imangibles 9102042), Any. personal property other than chattel paper instrument, accounts, commercial tort ‘sins, deposit accounts investment property, Teters of credit, documents, money. and of as or other minerals before extraction i, Does include payment intangibles and software (a) Payment intangible 9-102(ax61) is general intangible under which account Debtor's Principal obligation is monetary 6) Software 9-102) computer program and any supporting information But not a program include in deiition of goods ii. Nether aright to.a good nora rit 0 a pay- rent: instead, a ght to something ee in, Collateral is only lassied asa general intan- tpble when all other classiiatons have been tliminated CREATING A SECURITY INTEREST + ATTACHING THE DEBT I.the Debtor gives a Secured Party a Security Interest in described Collateral through contract, known as the Sectrity Agreement 2. Objectvely evidences the partes “intent” To Brant 8 Security Interest iti the partis’ contracts EX: Debtor hereby grants to Secured Party Security Interest in Collateral” 3, Exoept as otherwise provided by UCC. a Security ‘Agreement isefetve according tities between ‘the parties 10 control thee rights and obligations 4. Is planning too: Wil also contain other clauses, suchas defining default and remedies available to the Secured Party 5. Sulfiency of description A description of property generally is sulicient if ‘reasonably identifi whats describe 108) Reasonably identifying can include specially isting the Collateral or describing by category ot {ype of Collateral as defined inthe UCC «, Collateral hasan invalicient description when: {cTeis a supergenerie description 9-108] Tei std only by ype i is 8 commercial tort, ‘him or other typeof Collateral sted in 9.108) ATTACHMENT [9-203 ‘Creates the Creditors ability to enforce its interests ‘against the Debior only Ehcep as others provided 20%) attache rent makes the debt enforceable against the ebior immediatly i a. Vala has been given 'b Debior has rights in Collateral or power to Wane fer rights in Collateral roa Secured Party: and ©, One of the following conditions must be me §, Debtor has authenicete a Security Agreement that provides description of Collateral 4i, Collateral in posession of Secured Paty pur- suant to upreement (ules certificated security, {which ether provisions apply) ii.Collateral consists of deposit accounts, clec- ‘tronic chael paper, investment propery. or Teter of credit rights the Secured Party has control of under the UCC and pursuant to the Security Agreement Composite theory of documents: To create a Security Interest that ataches, Financing statements, prom Issory notes, and Security Agreements may becom sidered in composite to evidence the requisite intent toencumber the Collateral and are legally suliient, to adequately describe the property + AFTER-ACQUIRED PROPERTY [9-204] I, Security Interest exeted in Collateral that Debtor ‘doesnot own atime of fling but sequires in future 2, Allows Debtor fo encumber property that helshe does not yet own at time of Secured Transaction 3.4 Security Agreement may provide that any or all obligations under the agreement may include afieracquired property WW dearly evidences he intent to encumber such property Afiracquired property clauses are interpreted ‘Xeictye however. with inventory and aocounts, presumption is that partes intended to encumber tse forms of Collateral with alteracqied clauses without explicit language needed, a these types of CCollatral are expected to turn over during the Tie of the loan “FUTURE ADVANCE CLAUSES [9.323] ILA Security Agreement may provide for a Security Interest in future loans advanced from the Creditor after the dste ofthe Security Agreement 2, Security Interest relates back to ist filing date on already-sccured Collateral i advance made before ‘of while Security Interest is perfected 3, Anaconda/Draget Clause: Provision that Collateral will be security for repayment of loan and for any ‘other present o future debts of Creditor 4, Lintited to transaction relating to Collateral or onginal Security Interest (contract interpretation ‘of erginal transaction) ’b, May be limited by some consumer laws © Serves to secure all future loans with Collateral already encumbered without having to eveate & row Security Interest fs PURPOSE To give noise to other potential Creditors that Secured Party has interes in Collateral ad to preserve rights agaist other Creitors who may aso have a Scvared Interest AA Security Interest perfected when it has attached and when all applicable Steps required for perfztion have heen taken EFFECT OF PERFECTION Generally. ater perfection, the Secured Party is protected ugains subsequent (Creditors and transeres of the Debior Used to establish priority among Creditors: an unperfected or later perfected Security Interest may be enforeable but becomes subordinate to othe claims TOOLS FOR PERFECTION “FINANCING STATEMENT [9-502] |. Document that gives notie of Creditors interest in Debtor's property calle “UCC. 2 Typically used to accomplish “perfection” under the Code 5 Required contents 9-504) a Name of Debtor ', Name of Seoured Part or representative of Secured Paty © Description of Collateral covered by financing statement (2-804) 4. Efecto errors of omissions AA statement that substantially satisfies the requirements is effective, even with ‘nor errors or omissions unless errors or omisions make he financing state- ‘meat seriously misleading [9-064 ‘A financing statement ot seriously misleading i' search of the records of the ling fice under the Debtors correct name, and using the fing office’ Standard search logic, would disclose financing statement. even if name fs not correct in accordance with UCC, the incorrect name Joes not make the statement seriously misleading [-S06(0) requires searchers 10 adhere to objective stndard of fling office, as purpose of Financing Statement i 9 provide notice of filed statement « The 2010 amendments to Artic 9 are beginning to be adopted by stateseffetne 2013 1 Amadments provide farther glance for names: {For registered organizations: The name willbe what is found on the public ‘organs recordte). i, Forindidmals: The state will acd to choose between Alternate A, the name of ‘an individual Deblor ait pearson the most recent unexpired driver’ eens, Sand Altematie B which provides 3 ways forthe name of nidual Debor: (a) As under cueent law using the individual name ofthe Debtor {() Debtor lastname and Rest name (6) Unexpired drivers license ‘5. Maybe filed before u Security Agreement is made ora Sceurity Inerestother- ‘vise attaches (980240) 4 Common practice of “prefing” to establish ealest date for notice fing system MEANS OF PERFECTION One or more ofthe following, according tothe Code Filing spproprate paperwork (Financing statement) at appropriate location (nay be done before Security Agreement signed) Secured Party taking posession of Collateral 9-313], Secured Party taking contol of property STS} ‘Aatomaie perfection (a seps heyond aachment) [2-309] PERFECTION BY FILING [9-310] “+ ARTICLE 9 USES 4 SYSTEM OF “NOTICE FILING” 1, Filing pus other Creditors on notice ofa Secured Inicrest 2. Filing isthe preferred method of perfection and is effective even i another method of perfection i available, unless expresly Stated not valid in Code: i Secured Party is unsure about method of perfection, should fle ules excluded Certain filings may instead be covered by statue. and a UCC+1 may not be ‘ifetive to perfects EX: goods covered by a certicateof tile 3, Financing statements may be amended und continued ‘4 Location of fil: Central ing in oie of Secretary ofthe State of location of Debtor “DEBTOR'S LOCATION 1. A regisiered organization is located in state under which the organization ‘was restored ~ 2, Am individual Debtor is locate at hier principal residence 3. A partnership is located at place of busines rat chief executive office if Debtor tas more than one place of business “+ CHANGES IN LOCATION AFTER FILING Registered organizations Location folic ielevant unless organization unreg- {strs and reenter in new location Nonregistred ents: Security Interest perfected remains perfected until eles, time that a Perfection ceases '. Nomutter where filed, € months alter change of Debtor's location EFFECTIVENESS OF FILING Except as otherwise discussed [9-816 ling consists of communicating a record tora Bling office and paying filing fee or acceptance of record by filing office Filing does not oocur if filing office reluses to accept record because tis fncorret oF i unauthorizod medium, filing fe isnot properly paid. or the filing office is unable 1o index record for reasons including, but not limited to tno Debtor's name provided, lapsed oF inelTective papers, or other missing oF incorrect iormation TIME & DURATION OF FILING A filed financing statement is effetve for S years afer date of filing 1-815] Continuation sstement must be filed within 6 months before expiration of Scyear period a continuation statement filed 1 day too carly or fate fails to continue the effectiveness of the Md financing statement fa Security Interest Tnecomes unperfected upon hipse tis deemed to have been unpecected Both ‘eleoactively and for Future as fellows: 4 Unperfected retroactively: Anyone ebe who perfected before the Security Interest Lips can take priority over the lapsed Secured Party ony if they are a Purchase for valu (excludes Lien Creditor) ». Unperected for future: Anyone ese who perfects afer Security Interest apse can take priority over the lapsed Secuted Party PLACE OF PERFECTION IN MULTISTATE TRANSACTIONS * NONPOSSESSORY SECURITY INTERESTS 1, Perfection governed by location ofthe Debtor 2 fet of perfection and priory 4 I tangible, law of stat of sts of Collateral governs +. intangible, lw of Debtor's location governs *POSSESSORY SECURITY INTERESTS, 1. Perfection governed by situs of Collateral 2 Effet of perfection or priority governed I tangible, lw of ae of situs of Collateral gover +. If intangible, law of Debtor's location governs SPECIAL RULES REGARDING SOME TYPES OF COLLATERAL 1 I Collateral is deposit apsoun, investment property. agricultural en, goods | ‘covered by crlfeate of till, of letter of credit taht, follow Coliateral- Specific ales 9-302-306) TERMINATION + TERMINATION STATEMENT [9-513], 1. Creditor requited to send Debtor and each filing offer @ Termination ‘Statement to effet that Creditor no longer claims Security Interest 2. Used elther when Toan fas been paid of when a Creditor prefiles but decides not to make the loan, orto correct Frauen lings PERFECTION BY POSSESSION OR CONTROL Secured Party can perfect Security Inverest in some circumstances by raking | possession of Collateral: this may not be practical. depending on the Collateral (such as equipment or inventory) PERFECTION BY POSSESSION Remains as long as posession is retained ‘A Security Interest in money may be perfected only by possession a defined in Code 8-313) Revised Article 9 allows perfection of instruments by possession oe by fling Consider ing to perfet in addition to possession, for added safety Secured Party must use reasonable cae inthe custody and preservation of Collateral Even without continuous perfection, goods, certtiated securities or inst rents, or negotiable dacuments retured to Debtor for sil, exchange, or ‘alletion in accordance with Code 932] {Creditor his temporary automatic perfection For 20 days without fling i312} b, Alter 20-day period, perfection depends upon compliance with reminder oF 8312 PERFECTION BY CONTROL A Security Interest in a deposit account may be perfected only by control, 3s etined by Code (9.314) ‘Contr involves or raquires« Debtors consent by, Contr exists only if the Secured Creditor is the depositary bank where ‘scout fr maintained: the Debtor, Secured Creditor ad depostary have ‘greed that the bank will follow Creditor’ instructions without Debtor's Turther consent; othe Creditor becomes the depositary bank's customer regarding te account 2. A Security Interest in letter of credit right may be perfvted only by con- trol as defined by Code [2-314] {A Security Interest in eleteoni chattel paper may be perfected by contra (onare with tangible chattel paper, which has a required writing) AUTOMATIC PERFECTION [9-309] In some eases, no additional steps beyond ataclonent are necessary to perfect a ‘Seewriry Inerest this ivan exception to the general requirement dhat a finance Ing statement must be filed to perfeet Security Interest “TYPES OF SITUATIONS |. PMSI in consumer goods, excep as otherwise provided in UCC or state stat A Filing under certificate of ide laws i required for automobiles by Fling required for fixtures ling Tor priority against rel estate lenders ©. Not good against subsequent bons. fie purchaser for value who buys From original sonsumer unless inacing statement ed covering goods Assignment of accounts or payment intangibles that doesnot by sel. or in Conjunction with other assignments to same assignee, ransfer a siniicant panty of outstanding accounts or payment intangibles Sle of payment intangible or promissory note Security Interest created by assignment ofa helth-

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