CT Lien Solutions recently hosted a webinar on the July 2013 amendments to the UCC Article 9. With more than 1,500 attendees, our expert Tim Hall fielded a wealth of questions from the audience. Over the span of several weeks, we have addressed some of those questions here on our blog. This post marks the conclusion of this particular series, but we'll do more Q&A at some time in the future.
Q: Should you file a UCC-3 referencing a subordination of security interest and is this necessary?
A: No. The UCC-3 used to have a field for subordinations. It was very common to file subordinations. Back in 2001, the drafters decided that filing public notice referencing a subordination provides no value because it doesn’t affect any other parties. It only affects the interest of the parties that are involved in the subordination. If you have 10 secured parties and number 10 obtains a subordination from number 1, it doesn’t affect the rights of 2 through 9—so why provide notice? So, there’s no reason to ever put a subordination on record, and it was actually taken out on purpose so that people wouldn’t do it.
Tim Hall, Director of Government Relations, has been with CT Corporation for 15 years. He spent his first three years as a Team Leader for a UCC Service team, and has been with the Government Relations team for the remainder of his tenure. He is a graduate of The Ohio State University and the Northern Illinois University College of Law, and is a frequent speaker on Article 9 of the UCC.