Article Detail

New York Modernizes Article 9 of the UCC
Date: December 22nd, 2014    Written by David E. Paseltiner and Suneet Bawa


On December 17, 2014, Governor Andrew Cuomo signed Assembly Bill 9933 amending certain provisions of Articles 1, 7, 8 and 9 of the Uniform Commercial Code. This article focuses on the amendments to Article 9, Secured Transactions. The following is a brief summary of the more significant provisions of AB9933; we recommend that interested persons review the law in its entirety.

Revisions to Article 9


•    Name of individual debtors on UCC-1s. With respect to individual debtors, AB 9933 provides that to be sufficient, the name of an individual debtor on a UCC-1 must be the name indicated on the debtor’s unexpired driver’s license or other photo ID card, in either case issued by the state were the UCC-1 will be filed. If the debtor does not have a current driver’s license or state-issued ID card, then the financing statement must provide the individual name of the debtor or the surname and first personal name of the debtor. If the state has issued to an individual more than one driver’s license or state-issued ID card, the name on the license or ID card that was issued most recently is the one that must be used on the UCC-1. Note that these requirements do not apply to a record of a mortgage that is filed as a financing statement filed as a fixture filing. In such case, the mortgage need only provide that individual name of the debtor or the surname and first personal name of the debtor.

•    "Registered Organization” definition and name. AB 9933 modifies the definition of "registered organization” to provide that an organization is a registered organization if it is formed or organized solely under the law of a single state by the filing of a public record with the state (rather than, as under the previous law, by the state merely being required to maintain a public record showing that the organization had been organized). The amendment broadens the definition of "registered organization” to include a common law trust that is formed for a business or commercial purpose and is required by a state's business trust statute to file with the state an organic record, such as the trust agreement for a common law trust.

Under the new law, to be sufficient, the name of the registered organization debtor on the financing statement must be the name reflected on the "public organic record” of the organization. Accordingly, when preparing UCC-1s, secured parties must examine the organizational document of the debtor and not rely solely on a good standing certificate or the Department of State web site for conducting entity searches.

•    When debtor is a trust that is not a registered organization. If the debtor is a trust that is not a registered organization, the UCC-1 must provide the name of the trust as set forth in its organic documents, or if no name for the trust is specified in the trust agreement, the name of the settlor or testator. In addition, if the trust has a name, the UCC-1 must indicate in a separate part that the collateral is held in a trust. If the trust does not have a name, the UCC-1 must provide in a separate part additional information sufficient to distinguish the trust from other trusts having one or more of the same settlors or the same testator and indicate that the collateral is held in a trust, unless the additional information so indicates.

•    When debtor is a personal representative. If the debtor is a decedent’s estate, the UCC-1 must provide as the name of the debtor the name of the decedent and must indicate that the collateral is being administered by a personal representative.

•    Control of Deposit Accounts. The new law adds two methods of obtaining control over a Deposit Account. First, the name on the Deposit Account is the name of the secured party or indicates that the secured party has a security interest in the Deposit Account. Second, another person has control of the Deposit Account on behalf of the secured party or, having previously acquired control of the Deposit Account, acknowledges that it has control on behalf of the secured party. In addition, the new law clarifies that a  secured  party  has control under a control agreement even if any duty of the bank to comply with instructions originated by the secured party directing disposition of the funds in the deposit account is subject to any conditions (other than further consent by the debtor).

•    Debtor's Change of Location. Previously, if a debtor changed its location to a new jurisdiction, a secured party that perfected by filing in the original jurisdiction had up to four months to continue such perfection by filing a financing statement in, or otherwise perfecting the security interest under the law of, the new jurisdiction. The four-month grace period applied, however, only to collateral in which the secured party’s security interest was perfected at the time of the change of location. A security interest in property acquired by the debtor after the change of location was not perfected at the time of the change because the security interest in the after-acquired property was not attached until the property was acquired by the debtor and the debtor then had rights in the collateral. No grace period was provided for perfection of a security interest that may attach to property that was acquired after a change in the debtor's location.

The new law adds a grace period for such after-acquired property by providing that the UCC-1 filed in the original jurisdiction is effective with respect to collateral acquired within the four months after the debtor’s location changes. The secured party can continue perfection beyond the four-month period by filing a financing statement or otherwise perfecting under the law of the new jurisdiction.

•    Priority of new debtor. The new law provides similar protection for a security interest in after-acquired property if a new debtor becomes bound by the original debtor's security agreement and the new debtor is located in a different jurisdiction from the jurisdiction in which the original debtor was located.  Previously, there was no grace period for perfection of any security interest that may have attached to post-merger after-acquired property (such as would occur, for example, if a debtor located in State A merged into a new debtor located in State B).  Using an approach similar to that taken with respect to property acquired by a debtor after it relocates, the new law provides for a grace period of up to four months in the case of such an interstate merger. However, as under current law, a security interest in post-merger after-acquired property that is perfected only by a UCC-1 filed against the original debtor in its original jurisdiction will be subordinate to any security interest perfected by filing a UCC-1 against the new debtor in the new jurisdiction.

•    National Banks. The new law clarifies that a registered organization organized under Federal law, such as a national bank, that, by authorization under Federal law, designates its main office, home office or other comparable office as its location, is located in the state of that office for purposes of Article 9.

Please Also Note

•    UCC Forms.  The new law retained the non-standard requirement that a UCC-1 provide the type and jurisdiction for an organization debtor name.  UCC records must continue to provide this information when they provide an organization debtor name or the filing office must reject the record. The new law also retained the non-uniform version of 9-521, which provides that a filing office must accept a written form approved by the New York Department of State.  The DOS, however, has not approved the new uniform UCC-1 that is accepted in the other states that have adopted the 2010 Amendments to Article 1 because it lacks fields for the organization information.  Accordingly, these forms will not be accepted for filing in New York. We await word from the New York Department of State ("DOS”) as to whether they will approve use of any forms other than the 2002 forms currently in use.

The currently-approved forms do not contain check boxes for the new indications required by § 9-503(a)(2) and (3) for estate and trust related records, nor does the DOS electronic UCC filing system. Filers should continue to use the old forms and electronic filing system for most UCC filing transactions in New York.  However, secured parties may want to file trust and estate related financing statements as written records and provide the new indications in the collateral field, the addendum miscellaneous field or on an attached exhibit.

•    Transition Provisions. In what is presumably a legislative oversight, the new law does not contain any transition rules, which has raised questions regarding filed financing statements that do not comply with the new debtor name rules. By its terms, AB 9933 only applies to transactions entered into on or after December 17, 2014.  Consequently, a pre-effective-date financing statement should remain effective under the former law, at least until it must be continued or otherwise amended.  Nevertheless, there has been some discussion to the effect that secured parties must amend non-compliant records April 17, 2015 to remain perfected in after-acquired collateral because the new law caused a change in the debtor name for purposes of § 9-507(c).   Without the transition provisions, pre-effective date filings that do not conform to the new naming conventions may be deemed seriously misleading due to what is effectively a change of name of the debtor. Hopefully the legislature will correct this oversight prior to April 17.

Please contact us if you have any questions regarding AB 9933. We will be happy to be of assistance to you.   

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