First Corporate Solutions Blog | UCC, Corporate, Lien, Litigation, Title | Search, Filing, Monitoring » Due Diligence

Three Phases of Due Diligence Series – Phase Two: UCC Filing

First Corporate Solutions Team — Fri, 25 Mar 2011 22:01:50 +0000

In phase two of the due diligence cycle, a lender has decided to advance funds. The lender will file a UCC Financing Statement to perfect their interest in the collateral and secure a priority position to collect should the debtor default. It is critical that UCCs get filed correctly since inaccurate or incomplete filings can open the door for secondary parties to claim a priority position.

When preparing and filing UCC Financing Statements remember to:

File under the correct name

For a business, this means the name as it appears on their organizing paperwork such as articles of incorporation/organization or partnership agreement. Avoid using states’ online corporate look-up features to determine the legal name of an entity as these databases can include abbreviations or typographical errors that could cause you to file under the wrong name.

When filing on a business name, there is no need to include any trade names on the financing statement. If you choose to include them on your filing, omit the “dba” notation. The “dba” is not a part of the entity’s legal name and including it can make your document difficult to find in the public record.

Determining the legal name for an individual can be difficult. In most cases, it will be the name on a person’s driver license or state-issued identification card, but it is a good idea to check the specific state UCC filing rules before filing on individual names to guarantee compliance.

File in the right filing office

Here is an overview of where to file UCC documents according the Uniform Commercial Code:

Registered Businesses: file in their home/domicile state

Unregistered Businesses: file in the state where they have their chief executive office

Individuals: file in their primary state of residence

Fixture Filings: file in the county where the collateral is located

Carefully review attachment pages

If you need to include attachment pages with your Financing Statement to list out specific collateral, be sure to carefully review all pages of the attachment before submitting the document to the filing office. Missing attachment pages can cause a UCC to inadequately describe the collateral, and that could be dangerous in the event of a competing claim.

Include the appropriate filing fee

A document that is presented for filing with the incorrect filing fee will be rejected. For information on filing fees, you can refer to the filing office’s website. Be mindful that some jurisdictions will charge additional fees for things such as additional debtors, attachment pages and non-standard forms.

Check back next week for another installment of The Three Phases of Due Diligence!

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Top 2011 Due Diligence Trends

First Corporate Solutions Team — Sat, 08 Jan 2011 00:43:46 +0000

Happy 2011! It is a new year and there is a lot going on in the world of due diligence and risk management. What follows is a brief overview of a few stories we will be watching and blogging about this upcoming year.

Increased Processing Times
Faced with dramatic budget cuts, State filing offices are struggling to meet the public’s demand for quick and efficient access to public records. In 2011, we are likely to see even more delays in the fulfillment of service requests including business filings, certified searches and document retrieval requests.

Proposed Changes to Uniform Commercial Code Revised Article 9
In 2010 the National Conference of Commissioners for Uniform State Laws (NCCUSL) voted to adopt the proposed changes to Article 9 of the Uniform Commercial Code. To date, three states (NV, ND and NE) have begun the legislative process to formally adopt NCCUSL’s proposed changes. More discussion, debate and legislative action is sure to follow throughout the year.

Pre-Lien IRS Monitoring for Tax Liabilities
Through the filing of IRS form 8821, a designated agent can receive pre-lien notification of a taxpayer’s federal tax delinquencies. Factors and Asset-based Lenders look to IRS form 8821 to learn of any developing tax issues involving their clients prior to the filing of a Notice of Federal Tax Lien. With more and more high-risk lending taking place, look for 8821 monitoring practices to increase this year.

Be sure to check the First Corporate Solutions blog regularly for information and updates on these and other developing stories in 2011!

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Ordering a Civil Litigation Search: 5 Pieces of Information Your Searcher will Need from You

First Corporate Solutions Team — Fri, 18 Jun 2010 22:41:04 +0000

Conscientious searchers know that an exhaustive pre-funding due diligence investigation will include a search of court records for civil litigation involving their prospect. Not being attorneys however, many are unsure of what to order or what information they will need to provide to get the ball rolling.

In addition to the search name, there are five basic pieces of information you will need to supply in order to secure a relevant and fruitful result. Here is a brief discussion of what information you should be prepared to provide.

1. What Court?

The U.S. Court system contains hundreds of courts, each fulfilling a specific purpose and a serving a defined region of the country. You will need to indicate to your searcher in what court you would like them to search for cases involving your party. What court you elect to search will depend upon where your party resides and the type of cases you are interested in turning up.

For information on what types of cases are heard at which court, please visit the U.S. Courts website at http://www.uscourts.gov/Home.aspx

2. Plaintiff or Defendant?

Are you looking only for cases where your party is listed as defendant in order to learn if they have had suit filed against them or are you also interested to in cases brought about by your party as plaintiff? Or maybe both? Your searcher will be looking to you to advise in what role they should search for your party name.

3. Open and Closed Cases?

Cases remain on a court’s searchable index even after they have been closed. Let your searcher know if you are looking for open cases only (sometime referred to as pending) or if you’d like closed cases reported as well. It is a good idea to work with your searcher up front to clearly define these terms; case status can sometimes be confusing.

4. How many years?

It is also useful to communicate to your searcher how far back you want them to query. The given court’s index may reach back 50 years or more! If very old cases are not pertinent to your transaction, let your searcher know that by asking them to report cases with a more recent file date; a 10 year search is particularly common.

5. Copies of?

Lastly, if any cases are found that match your search parameters, what documents would you like to see from the case? Keep in mind that case files are often large and copies are typically billed at a per page rate. Many people choose to order a certain set of documents from cases that will provide them an overview of what transpired. One frequent copy package includes the docket, complaint and judgment for any cases that were located.

And remember, effective litigation research is a painstaking process that requires a great deal of concentration and expertise. Communicating clear search parameters to your searcher enables them to swiftly and accurately identify cases that are of interest to you.

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Mitigate Risk with Comprehensive Due Diligence

First Corporate Solutions Team — Thu, 03 Dec 2009 17:33:05 +0000

Given the uncertainty of today’s economy, businesses across the nation are looking for meaningful ways to reduce spending. Lenders however, should be cautious where they make cuts and think twice before cutting too deeply from their due diligence budgets. Now more than ever, lenders need to have a clear picture of a prospect’s financial solvency before making their funding decision.

It is advisable to let your legal and risk management departments determine what searches to perform to best mitigate your risk for loss. That being said, the following due diligence search package provides for comprehensive reporting of existing financial obligations and encumbrances in the public record:

UCCs (and available Tax Liens or Judgments) at the State Level
UCCs/Fixture Filings, Tax Liens and Judgments at the County Level
Civil Litigation at the State Court of General Jurisdiction
Civil Litigation at the U.S. District Court
Bankruptcy at the U.S. Bankruptcy Court

Thorough due diligence searching can help lenders make funding decisions with confidence. For more information on search options, contact a public records professional. Many service companies can customize a search package to meet your specific pre and post-funding due diligence needs.

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Wondering What Parties to Search as Part of Your Prefunding Due Diligence?

First Corporate Solutions Team — Wed, 13 May 2009 21:41:24 +0000

Searching for the right party is imperative when coordinating due diligence search efforts. This may seem simple, but keep in mind that liens could be filed under business names, individual names, aliases or nicknames, even fictitious business names. So, how can you be sure you are searching for the right name?

Here are a few pointers to get you on the right track:
1. Check corporate charters to determine the exact legal name before performing liens searches on a business.
2. Utilize online UCC search systems that allow for broad-based name searching to reveal name variations.
3. Be mindful of jurisdictions where exact name or Revised Article 9 search logic is employed. Searches performed in these jurisdictions will not include any similar names on your search result.

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