Delaware UCC Search Options
To welcome new readers to the FCS blog, we will be running a “Best of” series over the next several weeks. Check back each week between now and the end of May to read another of our most popular blog posts!
Delaware UCC Search Options
It is important to have a good working knowledge of a state’s search logic prior to ordering or performing UCC searches in that jurisdiction. With so many businesses organizing in the State of Delaware, it has also become a hotbed of UCC searching activity and in this blog post, we offer some information on performing UCC searches there.
Delaware Certified Searches
The Delaware Secretary of State provides certified searches only; there is no plain or uncertified option available from the state. With the exception of a few noise words, Delaware adheres to exact name search logic, meaning no name variations will be included on the search report. Due to the restrictive search logic used to generate a certified listing in Delaware, a searcher has to order a separate certified search for each name variation they can think of and those fees can add up rather quickly.
Delaware Online Searches
UCC searchers looking for a more inclusive and cost-effective search solution in Delaware often look to an online search system that will reveal name variations. The problem with online searching for Delaware is that the state does not make their UCC data available for purchase in bulk. Therefore, in order to offer Delaware searching on their private search system, a service company must purchase Delaware UCC data from a third party source rather than from the state filing office directly.
Third party databases can pose some real problems for UCC searchers because they are built through data collection efforts; essentially, the third party buys copies of filed UCC records and transcribes the data to recreate the state’s index. This transcription process opens the door for errors to be introduced into the data including misspelled party names, erroneous file dates, and sometimes we even see documents left off the recreated index entirely. Ultimately, these data entry errors compromise the integrity of the search result and translate into increased risk for any lender who relies on them to make a funding decision.
The FCS Solution
First Corporate Solutions has developed an innovative solution to help overcome some of the common problems associated with UCC searching in Delaware. Our Delaware UCC search solutions follow a two-step process. First, customers search our online data using flexible, broad-based search logic to generate a preliminary report that uncovers name variations. Then they select from three follow up search options that supplement the online data to ensure the accuracy and completeness of reported liens.
Our follow up search options complement the preliminary online listing to generate the most complete and most accurate DE UCC search available anywhere. Visit our website at http://www.ficoso.com/delaware-ucc-solutions.aspx or call a customer service representative at 800.406.1577 for more information on flexible Delaware search options from First Corporate Solutions.
To welcome new readers to the FCS blog, we will be running a “Best of” series over the next several weeks. Check back each week between now and the end of May to read another of our most popular blog posts!
Refer to Organizing Paperwork for Legal Name of a Business Debtor
According to the Uniform Commercial Code, a UCC Financing Statement is only effective if it gets the debtor name right. A UCC Financing Statement that fails to properly identify the debtor by their legal name will not offer the secured party priority status to collect should the debtor default or file for bankruptcy.
The Code goes on to say that for registered business debtors, the name that should appear on a UCC Financing Statement is the name that appears in the public record in the state where the business is organized. The prevailing opinion among UCC scholars is that, in this context, “public record” means a business’s formal organizing paperwork such as articles of incorporation/organization or partnership agreement.
These days, states filing offices and many private service companies, are making business entity data available online. As a result, a trend has emerged where we find UCC filers looking to an online business entity database to determine an entity’s legal name. Here on the First Corporate Solutions Blog, we want to take a quick moment to emphasize that it really is best practice to view the actual, organic formation documents (including any related amendments or mergers), rather than relying on an online database to determine the legal name of a business debtor.
On the surface, an online business entity database may seem like a low cost alternative to obtaining copies of formation documents, but in fact, trusting online business data can pose a real threat to a secured party’s perfection. In an online database, words may have been abbreviated or typographical errors committed that would cause a secured party to put the wrong name on their UCC Financing Statement, setting them up for a potential future loss should the secured party ever have to fend off a challenge from a competing creditor.
In many cases, you can get a copy of a company’s organizing paperwork from your applicant, but for those times when they need to order copies of a company’s formation documents, First Corporate Solutions offers affordable, nationwide retrieval of business documents. Contact us today to place your order at 800.406.1577 or info@ficoso.com.
Omit “dba” notation from UCC Filings
To welcome new readers to the FCS blog, we will be running a “Best of” series over the next several weeks. Check back each week between now and the end of May to read another of our most popular blog posts!
Omit “dba” notation from UCC Filings
A UCC Financing Statement must properly identify the debtor in order for the UCC to perfect a security interest and provide priority protection for the secured party. To satisfy this requirement, a secured party must complete their Financing Statement using the debtor’s legal name.
In general, secured parties understand the importance of properly naming the debtor on their UCC Financing Statements and try hard to comply. Sometimes though, they try a little too hard and include additional information, such as “dba” names (ex. ABC Trucking, Inc. dba Truck World) in an attempt to identify their debtor more clearly.
By structuring their debtor names to include a trade name, secured parties are actually failing to file under the entities legal name. Every entity has a single legal name, which is the name listed on their organizing paperwork (articles of Incorporation/Organization etc.) A trade name is merely another name under which the entity may do business, sort of like a business alias.
Under the Uniform Commercial Code, filing under a trade name alone is not sufficient to perfect a security interest; a UCC Financing Statement must list the legal name. A secured party is free to file under the legal name and the trade name, if they wish. A better way to file in these cases is to list the entity’s legal name as the primary debtor and list the trade name as an additional debtor, omitting the “dba” notation from the beginning of the name (ex. Debtor 1: ABC Trucking, Inc., Debtor 2: Truck World)
Every UCC filing submitted through the First Corporate Solutions online UCC filing and portfolio management system, File n’ Track, undergoes a rigorous quality review to check for potential filing mistakes including the inclusion of the dba notation. Contact us today for a free system demo! 800.406.1577 | info@ficoso.com
Why Name Variations Matter in UCC Searching
To welcome new readers to the FCS blog, we will be running a “Best of” series over the next several weeks. Check back each week between now and the end of May to read another of our most popular blog posts!
Why Name Variations Matter in UCC Searching
In previous blog posts we have talked about the importance of a secured party listing the correct debtor name on their UCC1 Financing Statement. Remember, a UCC filing is only effective if it gets the debtor name right. A UCC filing that fails to properly identify the debtor by their legal name will not offer the secured party priority status to collect should the debtor default or file for bankruptcy. It is dangerous, however to apply the same “exact name” philosophy to UCC searching. When performing UCC searches, it’s a good idea to include name variations (aka similar names) in your search effort.
Here’s why:
Locating Tax Liens
Many state filing offices maintain tax lien records in addition to UCCs. In some cases, the tax liens are housed on the same index as UCC filings. The problem with that is that while UCC filers must endure strict scrutiny of their debtor names, the IRS is not held to the same standard when filing a Notice of Federal Tax Lien. In several key cases, the courts have favored the IRS over a secured creditor even though the IRS has not used the exact legal name of the taxpayer on the Notice. A search that includes name variations would help locate Federal Tax Liens that have imprecisely named the debtor.
Indexing Errors
A search to include name variations can also uncover UCC filings that have been mis-indexed at the filing office. Once a document is accepted for filing, the pertinent filing information is abstracted from the document and input into the state’s searchable index. The indexing of filings is a largely manual process and mistakes happen. Consider a UCC record that gets the debtor name right, but is misspelled on the state’s UCC index – this document will not be located using an exact name search even though it may be an active, perfected financing statement.
The FCS online search system offers broad-based name searching featured including a wildcard character and stem/truncated search logic. We designed these featured specifically to help searchers locate critical filings that might be missed using an exact name search methodology. Contact us today at 800.406.1577 or info@ficoso.com to schedule a free online system demonstration!
To welcome new readers to the FCS blog, we will be running a “Best of” series over the next several weeks. Check back each week between now and the end of May to read another of our most popular blog posts!
Best of the FCS Blog: Importance of County-Level Lien Monitoring
Once a creditor has filed a UCC Financing Statement they will want to do all they can to maintain their priority position throughout the life of the loan. Lien monitoring programs run interval searches on debtor names to check for any new filing activity, and then provide timely updates to alert a creditor to potential threats. Monitoring offers an easy and affordable way for a secured party to keep an eye on other lien-holder activity against their debtor that may jeopardize their ability to collect.
Some of the most common monitoring programs on the market offer state-level lien searches only. Service providers can offer state-level only monitoring programs for a very small fee, which makes them attractive to many cost-conscious lenders. In many cases though, state-level only monitoring does little to protect creditors from priority challenges – especially when dealing with individual, rather than business debtors.
Many creditors consider Federal Tax Liens the most urgent of all liens because, in certain situations, they can prime a perfected UCC. When evaluating lien monitoring programs, it is important to recognize that only 22 states maintain Federal Tax Lien records at the state level filing office, of those, only 7 include Federal Tax Lien records for individual debtors. In these jurisdictions, only a search of the county index will uncover Federal Tax Liens against an individual debtor.
First Corporate Solutions’ Account Monitoring program includes expert searches of both the state and county filing office records for your complete coverage and peace of mind. Contact us today at 800.406.1577 or visit our website here for more information.
Under Revised Article 9 of the Uniform Commercial Code, secured parties are permitted to pre-file UCC Financing Statements, meaning they may file their UCC document before official execution of the security agreement provided the secured party receives proper authorization from the borrower. This week, we welcome Steve Capper of Flexible Funding as a guest author on the FCS blog. In this piece, Steve offers some words of caution for borrowers about pre-filed UCC’s.
A Factor’s Perspective on Pre-Filed UCC Financial Statements
Beware of Uniform Commercial Code UCC Filings that may be filed on your business by a funding organization that you are just “talking to” or “considering” and not actually doing business with. This could be done by a large bank as well as by a privately owned straight factoring company that purchases accounts receivables.
In some cases, a pre-filed UCC filing on your business is a tactic to get a jump on other funding organizations you may be talking to. It is counting chickens before they hatch. In other cases, when you fill out funding application to be reviewed by a funding company there may be very tiny fine print in the application that allows them to file a UCC …while just looking at you. Because the fine print is so small, and because it is just an application rather than a loan contract/document, many people miss it. Most businesses do not regularly track UCC filings and are usually surprised, and even angry to find about these UCC filings on their business. Sales and business development people for funding organizations rarely call attention to a miniscule UCC authorizing clause, as it may be an obstacle to bringing in an application.
If you need short-fused funding very quickly and are not going with the company that filed a UCC-1 document against you by an authorizing clause in an application, you have to get it terminated very quickly. Sometimes that is easier said than done because they may delay to try to save the deal, or want to take time to resell you on their program. The best way to get the document terminated quickly is to make an authenticated demand for the secured party to terminate their pre-filed UCC. A secured party’s failure to terminate such a UCC filing after having received such can result in serious legal consequences for the funding company.
About the Author
Contributed by Steve Capper, Principal/CEO of Flexible Funding, LLC, San Francisco, CA. Flexible Funding specializes in payroll funding for staffing agencies across the nation. You can visit their website for more information http://www.flexiblefund.com/ or reach them by phone at 800-487-8327.
Could you use a refresher on UCC filing rules? You’re in luck! This week, we welcome guest author, attorney, Bennett L. Cohen to the blog! Read on for the second installment in his two-part blog series detailing the basic filing rules under Revised Article 9 of the Uniform Commercial Code.
It’s vitally important that UCC filers understand and observe the basic UCC filing rules under the Uniform Commercial Code (the “Code”) described herein. Obviously, these rules do not constitute all of the Code’s filing rules, but they are essential rules to know regarding UCC Change Statements:
Priority of Security Interest in Collateral Added by Amendment
When a secured party amends an existing UCC filing to add collateral, the secured party’s priority in the added collateral dates from the date of the filing of the UCC amendment, and does not relate back to the date of the original UCC filing.
Unauthorized UCC Termination Is Ineffective.
A filed UCC Termination that was not authorized by the secured party of record is not an effective UCC Termination and the UCC Filing remains effective despite the filing of such unauthorized UCC Termination.
Termination by all Secured Parties
If the initial UCC filing named more than one secured party, or one or more subsequent amendments to such UCC filing added one or more secured parties, all secured parties of record must terminate the UCC filing. A termination by only one of multiple secured parties will not terminate the UCC filing as to the remaining secured parties.
Priority in Accounts
The first secured party to file against either “all accounts” or “all inventory” will have a first priority security interest in accounts. The reason for this is that a UCC filing against “all inventory” automatically picks up accounts as proceeds of the inventory.
UCC Continuations
In most states, UCC filings are effective for five years, and a continuation statement must be filed within six months prior to the end of the five-year period. Subsequent continuations must be filed every five years within six months prior to the end of the applicable five-year period. Each five-year period runs from the original UCC filing date and not from the date of the continuation statement filing. For example, a UCC filing that was filed March 28, 2005 and is properly continued within six months prior to March 28, 2010, is effective until March 28, 2015 (and if subsequently timely continued, would be effective until March 28, 2020, and so on).
About the Author
Bennett L. Cohen is a partner in the law firm of Cohen, Salk & Huvard, P.C. in Northbrook, Illinois, a Chicago suburb. Bennett regularly represents banks, commercial finance companies, insurance companies and other institutional lenders in the structuring, documentation and closing of commercial financing transactions, including asset-based loans, commercial loans, commercial real estate mortgage and construction loans, mezzanine loans, leveraged acquisitions, equipment lease loans and factoring transactions. Bennett is a member of the American Bar Association and serves on the ABA Committee on Commercial Financial Services and the ABA Subcommittees on Secured Lending, Loan Documentation and the Uniform Commercial Code. Bennett can be contacted at bcohen@cshlegal.com.
Could you use a refresher on UCC filing rules? You’re in luck! This week, we welcome guest author, attorney, Bennett L. Cohen to the blog! Read on for the second installment in his three-part blog series detailing the basic filing rules under Revised Article 9 of the Uniform Commercial Code.
It’s vitally important that UCC filers understand and observe the basic UCC filing rules under the Uniform Commercial Code (the “Code”) described herein. Obviously, these rules do not constitute all of the Code’s filing rules, but they are essential rules to know regarding UCC Change Statements:
Priority of Security Interest in Collateral Added by Amendment
When a secured party amends an existing UCC filing to add collateral, the secured party’s priority in the added collateral dates from the date of the filing of the UCC amendment, and does not relate back to the date of the original UCC filing.
Unauthorized UCC Termination Is Ineffective.
A filed UCC Termination that was not authorized by the secured party of record is not an effective UCC Termination and the UCC Filing remains effective despite the filing of such unauthorized UCC Termination.
Termination by all Secured Parties
If the initial UCC filing named more than one secured party, or one or more subsequent amendments to such UCC filing added one or more secured parties, all secured parties of record must terminate the UCC filing. A termination by only one of multiple secured parties will not terminate the UCC filing as to the remaining secured parties.
Priority in Accounts
The first secured party to file against either “all accounts” or “all inventory” will have a first priority security interest in accounts. The reason for this is that a UCC filing against “all inventory” automatically picks up accounts as proceeds of the inventory.
UCC Continuations
In most states, UCC filings are effective for five years, and a continuation statement must be filed within six months prior to the end of the five-year period. Subsequent continuations must be filed every five years within six months prior to the end of the applicable five-year period. Each five-year period runs from the original UCC filing date and not from the date of the continuation statement filing. For example, a UCC filing that was filed March 28, 2005 and is properly continued within six months prior to March 28, 2010, is effective until March 28, 2015 (and if subsequently timely continued, would be effective until March 28, 2020, and so on).
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About the Author
Bennett L. Cohen is a partner in the law firm of Cohen, Salk & Huvard, P.C. in Northbrook, Illinois, a Chicago suburb. Bennett regularly represents banks, commercial finance companies, insurance companies and other institutional lenders in the structuring, documentation and closing of commercial financing transactions, including asset-based loans, commercial loans, commercial real estate mortgage and construction loans, mezzanine loans, leveraged acquisitions, equipment lease loans and factoring transactions. Bennett is a member of the American Bar Association and serves on the ABA Committee on Commercial Financial Services and the ABA Subcommittees on Secured Lending, Loan Documentation and the Uniform Commercial Code. Bennett can be contacted at bcohen@cshlegal.com.
Could you use a refresher on UCC filing rules? You’re in luck! This week, we welcome guest author, attorney, Bennett L. Cohen to the blog! Read on for the first installment in his three-part blog series detailing the basic filing rules under Revised Article 9 of the Uniform Commercial Code.
A Review of the Basic Filing Rules: UCC Financing Statements
It is vitally important that UCC filers understand and observe the basic UCC filing rules under the Uniform Commercial Code (the “Code”) described herein. Obviously, these rules do not constitute all of the Code’s filing rules, but they are essential rules to know regarding the filing of UCC Financing Statements:
Filing UCC Prior to Closing
A secured party may pre-file its UCC filing against a debtor prior to the closing of the financing transaction if the debtor authorizes such pre-filing in writing. Otherwise, the debtor’s signing of a security agreement is deemed by the Code to be the debtor’s automatic authorization to the secured party to file a UCC filing covering the collateral described in the security agreement.
Place to file UCC Financing Statements
Excluding UCC fixture filings (which must be filed in the county where the fixtures are located, and more specifically in the office where real estate mortgages are recorded), the following basic rules apply depending on the type of debtor:
- Registered organizations (such as corporations, limited liability companies and limited partnerships) – file in the state where the registered organization was formed (most states have designated the secretary of state or another central filing office as the office to file against a registered organization).
- Individual debtors – file in the state where the individual debtor maintains his or her principal residence (caution where an individual debtor has a second home in another state). In most states, filings against individuals are filed in the central filing office of the state of primary residence.
- Foreign debtors that are located in a foreign country without a public filing system in such country are deemed under the Code to be located in Washington, D.C. and filing for such foreign debtors would be in Washington, D.C.
Trade Names
Under the Code, filing against a trade name (assumed name) of the debtor is ineffective. Moreover, the debtor’s legal name in the UCC filing should never include the trade name (e.g., ABC Corp. d/b/a Sully’s Plumbing) as that could render the UCC filing ineffective depending on whether the filing office’s search logic would pick up that UCC filing when searching the exact legal name (ABC Corp.). If a lender insists on filing against a trade name despite its ineffectiveness, it should file against only the exact legal name in the first debtor box in the UCC Form, and against only the trade name in the second debtor box.
About the Author
Bennett L. Cohen is a partner in the law firm of Cohen, Salk & Huvard, P.C. in Northbrook, Illinois, a Chicago suburb. Bennett regularly represents banks, commercial finance companies, insurance companies and other institutional lenders in the structuring, documentation and closing of commercial financing transactions, including asset-based loans, commercial loans, commercial real estate mortgage and construction loans, mezzanine loans, leveraged acquisitions, equipment lease loans and factoring transactions. Bennett is a member of the American Bar Association and serves on the ABA Committee on Commercial Financial Services and the ABA Subcommittees on Secured Lending, Loan Documentation and the Uniform Commercial Code. Bennett can be contacted at bcohen@cshlegal.com.
Regular readers of the First Corporate Solutions blog may recall that we posted a special alert a few weeks ago regarding California Senate Bill 12 (SB 12). As a refresher, SB 12 seeks to amend significant sections of the state Business and Professions Code, the Civil Procedure Code, the Revenue and Taxation Code and Article 6 of the Uniform Commercial Code.
If passed, SB 12 will repeal the California Bulk Sales Law in its entirety.
In an effort to keep our customers and friends in the California Escrow community advised of the latest news regarding this important piece of legislature, we offer the following link to help you track the progress of SB 12: http://leginfo.legislature.ca.gov/faces/billHistoryClient.xhtml. From there, you can register to receive email updates as new developments occur.
