The Nebraska Unicameral has enacted the revisions to Article 9 of the Nebraska Uniform Commercial Code (“UCC”) effective July 1, 2013 (the “Revisions”). Article 9 of the UCC governs the rights of creditors in personal property collateral securing various transactions. While the Revisions are not nearly as expansive as the 2001 amendments, there are several changes that impact lenders and other secured creditors. The following summarizes the more important changes and transition rules that should be followed to obtain or maintain a perfected secured position under the Revisions.
New Debtor Name Rules
Under the Revisions, a financing statement sufficiently provides the name of the debtor:
|a)||If the debtor is a registered organization, the financing statement must state the name listed on the registered organization’s most recently filed or issued public organic record. For corporations, this is the articles of incorporation; for limited liability companies, it is the articles of organization.|
|b)||If the debtor organization is not a registered organization, such as a general partnership, use the name of the organization. For a general partnership, the name may be found in the partnership agreement or partnership statement, if recorded. If the organization does not have a name, use the names of the partners, members, associates or other persons comprising the debtor in a manner that each name provided would be sufficient if the person named were a debtor (i.e. follow the same rules you would if such person or entity was the debtor). We recommend listing any names used by the entity as “additional debtor” names as well.|
|c)||If the debtor is an individual to whom Nebraska has issued a driver’s license that is not expired, the name of the individual, which is indicated on the driver’s license, should be listed on the financing statement. If more than one driver’s license has been issued to the person, the most recent must be used. We recommend photocopying and retaining the individual’s most recent driver’s license at the time of the transaction.|
|d)||If the individual does not have a driver’s license, it must provide the individual name of the debtor or surname and first personal name of the debtor. The name used will be sufficient if a search of the secretary of state’s records using the current search logic would locate it using the correct legal name. Stay away from nicknames, etc., instead use the best available correct legal name, for example that found on a birth certificate, social security card or filed tax return.|
|e)||If the name on the financing statement later becomes insufficient, the financing statement perfects a security interest in the collateral acquired by the debtor before or within four months after the name becomes insufficient. Examples include the debtor’s name change on a driver’s license or an organization amends its name in its recorded organic record. In such circumstances, the filing will not be effective as to collateral acquired after the four month grace period. This puts a duty of inquiry on the lender. We recommend you include provisions in your loan documents requiring immediate or advance notice of any name change, and a periodic review of the individual’s driver’s license or public record searches for name changes. Representations and warranties in the loan documents requiring advance disclosure of changes similar to those used for location verification should also be added to provide enforcement leverage and additional protection.|
|f)||There are special rules for security interests in the property of decedent’s estates and trusts. Please contact any member of McGrath North’s Financial Services Practice Group for information in this specialized area.|
The Revisions take effect July 1, 2013. The following rules govern the transition to the Revisions:
|a)||A security interest properly perfected prior to July 1, 2013 stays perfected if the Revisions’ requirements are met without further action.|
|b)||A security interest properly perfected prior to July 1, 2013 by a method other than filing (such as control or possession) that does not meet the requirements of the Revisions, will be perfected only if the Revisions’ requirements are satisfied within one year of July 1, 2013.|
|c)||If the security interest was not perfected prior to July 1, 2013, it stays unperfected until the requirements of the Revisions are met.|
|d)||There are special rules regarding the continuing effectiveness of certain actions taken before July 1, 2013. They include:|
The Revisions determine the priority of conflicting claims to collateral; however, if those claims were established before July 1, 2013, then the UCC provisions (as they existed before July 1, 2013) determine such priority.
McGrath North has the experts needed to address any questions you have regarding the Revisions. Please contact any member of the Financial Service Practice Group for assistance.