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 emailed 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 800-926-7926 ext. 10
UCC Article 9 UCC Secured Transactions: Avoiding Pitfalls in Perfecting Security Interests Steve Weise sweise@proskauer.com 1
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
Sales of payment rights 9 109(a)(3) Accounts Chattel paper Payment intangibles Promissory notes 3
Consignments 9 109(a)(4) Consignment creates a security interest Consignor is secured party Consignee is debtor 4
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
Exclusions 9 109(c) Government debtors in some states Sales of small amounts of payment rights 6
Attachment 9 203 Security agreement Rights in the collateral Give value 7
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
Oral security agreement 9 203 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
Authenticated security agreement Grant of security interest 9 203 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
Description of collateral 9 108 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
Rights in the collateral or power to transfer 9 203 Power to transfer Buyer with voidable title Consignee Seller of accounts, chattel paper or instruments where buyer is not perfected Non transferable property 12
Anti assignment provisions regarding collateral 9 406 + 9 408 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
Give value Meaning of value 1 204 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
Supporting obligations and underlying collateral 9 203 Security interest automatically created when security interest is created in: supported obligation or secured obligation 15
Proceeds 9 203 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
After acquired collateral 9 204 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
Future advances 9 204 Security interest may secure future advances 18
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
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
Perfection: automatic 9 309 Sales: Promissory notes Do not need possession Payment intangibles Not automatic for sales of accounts or chattel paper 21
Perfection: financing statement 9 310 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
Completing the financing statement Debtor name 9 502(a)(1) + 9 503 Individuals Nick names Registered organizations Which document to look at Organizations Trusts 23
Completing the financing statement Indication of collateral 9 502(a)(3) + 9 504 All asset descriptions 24
Where to file the financing statement 9 301 9 307 Location of the debtor rule Registered organizations Organizations Individuals Trusts 25
Authorization to file the financing statement 9 509 Express authorization Automatic authorization Authentication of security agreement Ratification of earlier filing Retroactive effect 26
Perfection: maintaining the financing statement 5 year rule for most financing statements 9 515 6 month window Fixture filings Manufactured homes Amendments 9 512 Change in name Change in collateral Terminations 27
Possession 9 313 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
Control 9 314(a) Deposit accounts 9 104 Investment property 8 106 + 9 106 Electronic chattel paper 9 105 Letter of credit rights 9 107 29
Compliance with other laws 9 311 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
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
Supporting obligations and underlying collateral 9 308 Security interest automatically perfected when security interest is perfected in supported obligation or secured obligation 32
Proceeds 9 315 Perfected if security interest in original collateral was perfected May lose perfection after 20 days if certain requirements are not met 33
Agricultural liens Regular method of perfection rules apply 34
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
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
Due diligence Which names to search Where to search Which systems to search in On site inspections Review contracts for assignment issues 37
Post closing changes Change of debtor s name 9 507(c) Change of debtor s location 9 316(a)(2) New debtor 9 325, 9 326 + 9 508 Transfer of collateral to different debtor 9 507(a) Ordinary course transferees 9 320 + 9 321 Conversion statutes 38 Article 9 revisions
UCC Article 9 UCC Secured Transactions: Avoiding Pitfalls in Perfecting Security Interests Steve Weise sweise@proskauer.com 39