A Primer on the Primary UCC Forms
1, 3, 11… Confused counting? Of course not, silly, these numbers identify the various types of UCC filings under Article 9 of the Uniform Commercial Code (UCC). As you may already know, UCCs provide an opportunity for trade creditors to collateralize or “secure” their goods and/or accounts receivable, by leveraging the personal property assets of their customer.
Here’s a quick overview of the three primary UCC forms.
UCC-1: the Original
This is the initial UCC filing, which represents the granting of the security interest.
- It must* include:
- Your company (aka the secured party) name & address
- Your customer’s (aka the debtor) name & address
- The collateral description
- It’s good for 5 years (10 years in Wyoming and up to infinity in Canada)
*It’s important to note, if you neglect to include one of these required bits of information, the filing will be rejected.
UCC-3: the Change
This UCC form is used to continue an existing filing, change information on an existing file or to terminate an existing filing. To change information on a UCC filing and to terminate a filing are pretty straightforward, but let’s dig a little deeper into the continuation.
What is a UCC Continuation?
If you perfect a security interest through UCC filings, you probably know that a UCC filing is good for five years (except in Wyoming, where it’s ten years and in Canada, where the PPSA can actually be infinite). So, what happens if the five years is up and you are still extending credit to your customer? You should continue your filing. Timely continuance of a UCC filing maintains your security & priority.
Here are a few other things you should know about continuations:
- The five year anniversary of your filing is the “lapse” date aka expiration date. i.e. If the original filing was recorded 07/07/2014, then the continuation needs to be filed by 07/07/2019.
- To maintain your secured position, you should continue your filing before the lapse date. If you haven’t filed the continuation by the time the lapse date arrives/passes, you have to file a brand new UCC which means you forfeit your priority position.
- Don’t file your continuation too soon! A continuation can only be filed within six months of the lapse date – if you file it too soon or too late*, the recording office will reject the filing. i.e. If the lapse date is 07/07/2019, the earliest you can file the continuation is 01/07/2019.
*There is no wiggle room, so make sure you file timely.
“If my original UCC was filed July 1st and I record the continuation on February 1st, is my new renewal date February 1st?”
No. Your renewal will always be the date of the initial filing – for this example, it will always be July 1st.
UCC-11: the Search
This UCC filing is an “epic-information-dig”. Here are a few reasons why creditors, or other interested parties, may run a UCC search:
- To determine if there are other secured parties on a particular debtor.
- This can be helpful when a creditor needs to send notification letters to these other parties.
- To determine if specific collateral is already secured by a UCC filing.
- To determine a creditor’s priority (i.e. are they 1st, 2nd… 13th…).
Some creditors find the Search to be quite useful when they are requiring a customer to sign a security agreement, and the customer says “None of my other vendors make me sign these!”
When running searches as a part of a credit approval process, it arms the creditor with information on whether or not other parties are filing UCCs against their customer – with the search information, the creditor could say “Actually, XYZ Inc. asked you to sign a security agreement and subsequently filed a UCC, in order to protect their rights. We are simply following a streamlined credit approval process, which will have no negative impact on you, unless you were to default.”