Hot topic #3 - Continued perfection of security interest following change in governing law

We love getting questions and comments from our readers, so keep them coming! Today’s post is in response to a question we received regarding UCC provision 9-316, or the continued perfection of a security interest following a change in the governing law.

As a little review for those of you who are not well-versed in the UCC RA9 and its new amendments to take effect by 2013, this section of the code primarily addresses the effect on a security interest in after-acquired property in the event of a change of the debtor’s location, or a new debtor becoming bound by the security agreement. As part of the new amendment package, new subsections (h) and (j) are created, which address two narrow situations. First, it addresses situations in which collateral is acquired by a debtor after the debtor’s location to a new jurisdiction. Second, it addresses collateral acquired by a new debtor, when the new debtor is located in a different jurisdiction than the original debtor.

The question from our reader is as follows:

• Assuming we properly file a financing statement in the New State on the New Debtor/Survivor within the four-month or one-year period, what do we do with the filing on the Old Debtor in the Old State? Let it lapse? Does its continued existence provide any retrospective priority? Do we continue it in the Old State or In-lieu it to the New State?

Our UCC business consultant Tim Hall provides the following response:

• Generally, when the situation involves only 9-316, the new filing (in the new location) generally “moves” the interests from the original jurisdiction to the new jurisdiction. It is common practice for the new filing to specifically reference the original filing information (and some secured parties will attach a copy of the original filing) when filing in the new jurisdiction. This is similar to how a “financing statement in lieu of continuation” was filed during the transition period. There is no need to take any action upon the original filing when the transaction involves only 9-316.

Have a burning question you want answered? Submit it to CT Lien Solutions and you may see an answer in an upcoming blog post!

Comments

[Pat Huegerich]

I am not familiar with a standard RA9 compliant filing.
I have been using the UCC for State & County.
Please advise.
Thanks