In phase three of the due diligence cycle, a lender seeks to maintain their priority by managing post-closing events that can jeopardize their ability to collect. Herein we offer several strategies for maintaining priority after filing a UCC Financing Statement.

Perform a Search to Reflect

A search to reflect is a UCC records search of the office where you filed, after your document has posted to the index.  A search to reflect will confirm how the state indexed your document and reveal any typographical or clerical errors made when indexing your filing. These data entry errors can cause a filing to be difficult to locate in the public record and put secured parties at risk.

A search to reflect will also verify your position relative to any other creditors. A search to reflect will alert you if any other claims managed to sneak in ahead of your Financing Statement or if a lien was somehow missed on your initial search effort. A search to reflect offers assurance of a filer’s priority position to collect on debts by revealing their position relative to any other claimholders.

File Timely Continuations

As a secured lender, it is critical for a secured party to file timely continuations, as a lapsed filing ceases to be effective and opens the door for a subsequent filer to move into a priority position.

A UCC1 financing statement is effective for a period of five years from its date of filing. Every Financing Statement has a filing date and a corresponding lapse date. In order to extend the term, you must file a continuation statement prior to the UCC1’s lapse date. A Continuation Statement is acceptable for filing only within six months of a UCC’s lapse date; continuations submitted prior to the six-month window will be rejected by the filing office.

A Continuation Statement extends the term of the Financing Statement for an additional five years from the date of the original UCC1 filing, regardless of the filing date for the Continuation Statement. A filing’s lapse date is always calculated from the filing date of the original financing statement. Think of it as if the UCC1 is always allowed to finish out its initial term, and the continuation is tacked on at the end.

Monitoring Other Lien-Holder Activity

To preserve your priority position, it is also a good idea to monitor other lien holder activity. One way to accomplish this is to utilize a lien monitoring service to check for newly filed liens. These services will run interval searches on your debtor names to check for any new filing activity and alert you to potential credit risks. The idea behind monitoring programs is that the sooner you know, the sooner you can act to protect your interests.

If you decide to take advantage of a lien-monitoring service, consider monitoring your debtor names for federal tax liens, state tax liens, judgments, new UCC Financing Statements and Change Statements. For a more complete monitoring package, some services also offer litigation, bankruptcy and corporate status monitoring options.

Remember, you worked hard to obtain your priority position, do what you can to protect it!

ALL corporations incorporated in the State of Delaware are required to file an annual report, and all but exempt domestic corporations are required to pay taxes. The annual report filing has been raised to $50.00 this year, with minimum tax at $75.00 and maximum tax at $180,000.00.

Any corporations who do not file their annual report on or before March 1st will be required to pay an additional penalty of $100.00, as well as interest on any unpaid tax balance which accrues at 1.5% per month.

It’s also important to note that any corporations that owe $5,000.00 or more pay estimated taxes in quarterly installments.

All annual reports and tax payments must be completed online via the DE SOS website: http://corp.delaware.gov/paytaxes.shtml

The site is very easy to use, but the folks at the State office are always ready to answer any questions that might arise.

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