Article 9 is Changing Effective July 1, 2013

Creditors taking personal property as collateral should be aware that Washington has made changes to Article 9 of the Uniform Commercial Code, which go into effect July 1, 2013.  Article 9 governs how to take a security interest in personal property.  Key revisions to Article 9 are:

Proper Name of a Debtor

When a business entity is the debtor, Article 9 required UCC filings to use the name shown on the “public record” of the debtor’s jurisdiction.  The amendments clarify that the debtor’s name is the name found on “public organic records,” which are records available for public inspection, such as filed articles of incorporation or certificates of formation.

When an individual is the debtor, variations in a person’s name have made it difficult for a secured party to determine the proper name to use on a financing statement.  The amendment clarifies that a financing statement sufficiently names an individual debtor by (a) providing the debtor’s individual name, (b) the debtor’s surname and first personal name, or (c) the name on an unexpired driver’s license or identification card.

Grace Period When Debtor Relocates

A new subsection (h) was added to Section 9-316 to ensure that, when a debtor relocates to another state, a creditor’s original financing statement in Washington covers property the debtor acquires within four months after the move, as long as the secured party has taken steps that would have perfected the security interest in the debtor’s original state. The perfection extends until the end of this four-month period.

Effectiveness of Filings

Section 9-516 was revised to make financing statements effective even if they omit:  1) the debtor’s type of organization, 2) the debtor’s jurisdiction of organization, or 3) the debtor’s organizational identification number. Previously, all three pieces of information were required for an effective financing statement.

These and other technical changes can be found at 9-102(a)(68), 105, 307(f)(2), 316(h), 316 (i), 503, 516 and 518.

For more information or advice on how this may affect your business, please contact a member of our Real Estate Group or our Bankruptcy and Creditors’ Rights Practice Group.

PDF of News Alert.