UCC Secured Transactions: Avoiding Pitfalls in Perfecting Security Interests

Transcription

1 presents UCC Secured Transactions: Avoiding Pitfalls in Perfecting Security Interests Protecting Collateral in Bankruptcy and Enforcement Actions A Live 90-Minute Audio Conference with Interactive Q&A Today's panel features: Steven O. Weise, Partner, Proskauer Rose, Los Angeles Tuesday, June 30, 2009 The conference begins at: 1 pm Eastern 12 pm Central 11 am Mountain 10 am Pacific The audio portion of this conference will be accessible by telephone only. Please refer to the dial in instructions ed to registrants to access the audio portion of the conference. CLICK ON EACH FILE IN THE LEFT HAND COLUMN TO SEE INDIVIDUAL PRESENTATIONS. If no column is present: click Bookmarks or Pages on the left side of the window. If no icons are present: Click View, select Navigational Panels, and chose either Bookmarks or Pages. If you need assistance or to register for the audio portion, please call Strafford customer service at ext. 10

2 UCC Article 9 UCC Secured Transactions: Avoiding Pitfalls in Perfecting Security Interests Steve Weise sweise@proskauer.com 1

3 Does Article 9 apply to the transaction? Meaning of security interest 1 201(b)(35) Hidden secured transactions Dirty leases Sales transactions Consider taking protective measures, e.g. filing of financing statement 2

4 Sales of payment rights 9 109(a)(3) Accounts Chattel paper Payment intangibles Promissory notes 3

5 Consignments 9 109(a)(4) Consignment creates a security interest Consignor is secured party Consignee is debtor 4

6 Agricultural liens 9 102(a)(5) Not a security interest Lien created under non Article 9 law Other law governs enforceability between the parties Perfection necessary under Article 9 to defeat rights of third parties 5

7 Exclusions 9 109(c) Government debtors in some states Sales of small amounts of payment rights 6

8 Attachment Security agreement Rights in the collateral Give value 7

9 Security agreement 9 102(a)(73) Agreement that creates or provides for a security interest In transactions covered by Article 9, includes: Consignment agreement Sales agreement 8

10 Oral security agreement Pursuant to debtor s security agreement Possession of certificated security Registration of ownership of registered certificated security Control Deposit accounts Electronic chattel paper Investment property 9 Letter of credit rights

11 Authenticated security agreement Grant of security interest Consignment or sales language creates or provides for security interest in consignment and sales transactions Authentication 9 102(a)(7) Allows electronic authentication Not subject to: UETA, or E SIGN 10

12 Description of collateral Must reasonably identify the collateral May not use all assets description in security agreement OK to describe collateral by type or category Description by type not sufficient: Commercial tort claims Consumer transaction involving consumer goods, securities entitlement, or securities account 11

13 Rights in the collateral or power to transfer Power to transfer Buyer with voidable title Consignee Seller of accounts, chattel paper or instruments where buyer is not perfected Non transferable property 12

14 Anti assignment provisions regarding collateral LLCs and partnerships Is the collateral investment property, general intangible, or a payment intangible? Who is the account debtor? IP licenses Government permits Application of rules during foreclosure 13

15 Give value Meaning of value Any consideration sufficient to support a simple contract Commitment to make a loan To whom? OK if value goes to third party, e.g. when security interest granted by guarantor and loan made to borrower 14

16 Supporting obligations and underlying collateral Security interest automatically created when security interest is created in: supported obligation or secured obligation 15

17 Proceeds Security interest in proceeds automatically attaches if security interest has attached to original collateral Security interest may detach after 20 days if certain requirements are not met 16

18 After acquired collateral Generally allowed Not permitted: Commercial tort claims Consumer goods, unless acquired within ten days of secured party giving value In security agreement should refer to after acquired collateral or the like 17

19 Future advances Security interest may secure future advances 18

20 Security agreement default clause No definition in Article 9 Typical provisions Non payment of secured debt Non ordinary course transfers of collateral Loss of perfection or priority 19

21 Why perfect the security interest? Beat other secured parties Beat lien creditors Beat trustee in bankruptcy Beat non ordinary course buyers, lessees, transferees, and licensees 20

22 Perfection: automatic Sales: Promissory notes Do not need possession Payment intangibles Not automatic for sales of accounts or chattel paper 21

23 Perfection: financing statement Available for all types of collateral, except: Money Deposit accounts Letter of credit rights Required federal or other state filings Sometimes subject to non temporal priority rules 22

24 Completing the financing statement Debtor name 9 502(a)(1) Individuals Nick names Registered organizations Which document to look at Organizations Trusts 23

25 Completing the financing statement Indication of collateral 9 502(a)(3) All asset descriptions 24

26 Where to file the financing statement Location of the debtor rule Registered organizations Organizations Individuals Trusts 25

27 Authorization to file the financing statement Express authorization Automatic authorization Authentication of security agreement Ratification of earlier filing Retroactive effect 26

28 Perfection: maintaining the financing statement 5 year rule for most financing statements month window Fixture filings Manufactured homes Amendments Change in name Change in collateral Terminations 27

29 Possession Applies only to tangible collateral Through agent Bailee Not effective unless bailee authenticates record that it has possession for benefit of secured party Bailee may not be too closely connected to debtor 28

30 Control 9 314(a) Deposit accounts Investment property Electronic chattel paper Letter of credit rights

31 Compliance with other laws Certificate of title Cars File financing statement for dealers with Airplanes respect to inventory (seller or lessor of cars) File financing statement if car dealer not in the business of selling cars (as well as leasing, if leasing is what it does) FAA filing UCC still applies to non perfection issues Capetown Convention Ships 30

32 Federal law filing? 9 109(c)(1) Copyright File in Copyright Office for registered copyright and under UCC for unregistered copyrights Patents File under UCC Trademarks File under UCC 31

33 Supporting obligations and underlying collateral Security interest automatically perfected when security interest is perfected in supported obligation or secured obligation 32

34 Proceeds Perfected if security interest in original collateral was perfected May lose perfection after 20 days if certain requirements are not met 33

35 Agricultural liens Regular method of perfection rules apply 34

36 Application of perfection rules to specific types of collateral Equipment, inventory, promissory notes, chattel paper Financing statement or possession Possible superpriority for promissory notes and chattel paper Accounts receivable Financing statement only 35

37 Application of perfection rules to specific types of collateral Deposit accounts (as original collateral) Control only Securities accounts Financing statement or control Control superpriority Partnerships and LLC interests Financing statement only If opt in to Article 8, then also possession or control Possible superpriority 36

38 Due diligence Which names to search Where to search Which systems to search in On site inspections Review contracts for assignment issues 37

39 Post closing changes Change of debtor s name 9 507(c) Change of debtor s location 9 316(a)(2) New debtor 9 325, Transfer of collateral to different debtor 9 507(a) Ordinary course transferees Conversion statutes 38 Article 9 revisions

40 UCC Article 9 UCC Secured Transactions: Avoiding Pitfalls in Perfecting Security Interests Steve Weise sweise@proskauer.com 39