On February 7, 2012, Rep. Bob Gardner and Sen. Ellen Roberts introduced HB 12-1262 – Concerning Enactment of Amendments to the Secured Transactions Provisions of the “Uniform Commercial Code.” This summary is published here courtesy of the Colorado Bar Association’s e-Legislative Report.
The CBA LPC has voted to support this bill.
Colorado Commission on Uniform State Laws
The bill enacts amendments to article 9, regarding secured transactions, of the “Uniform Commercial Code,” that were adopted in 2010 by the national conference of commissioners on uniform state laws. Article 9 provides the rules governing any transaction that couples a debt with a creditor’s interest in a debtor’s personal property. If the debtor defaults, the creditor may repossess and sell the property to satisfy the debt.
The creditor’s interest is called a “security interest.” The 2010 amendments to article 9 modify the existing statutes to respond to filing issues and other matters.
The bill provides greater guidance as to the name of a debtor to be provided on a financing statement. For business entities and other registered organizations, the amendments clarify that the proper name for perfection purposes is the name filed with the state and provided on the organization’s charter or other constitutive documents, to the extent there is a conflict with the name on an entity database. In particular, the bill adopts a “safe harbor” rule by leaving intact the requirement that the financing statement use the debtor’s “individual name”, but specifying that the name on the driver’s license will also be sufficient as well as the debtor’s surname and first personal name.
A number of related changes were also made. For example, the 2010 amendments clarify that a change in the name used on a debtor’s driver’s license or the expiration of the driver’s license may qualify as a name change. With respect to trusts, if collateral is held by a statutory trust or in a Massachusetts-type business trust, the trust is a registered organization and the trust’s name is the debtor name. For common law trusts that are not Massachusetts-type business trusts, the financing statement must provide the name of the trust as identified in the trust’s organic records if it has name indicated there, or otherwise the name of the settlor or testator and sufficient additional information to distinguish a particular trust from others held by that same settlor or testator.
The amendments also deal with perfection issues arising on after-acquired property when a debtor moves to a new jurisdiction. Article 9 currently provides that perfection by filing continues for 4 months after the jurisdiction in which the debtor is located changes. However, this temporary period of perfection applies only with respect to collateral owned by the debtor at the time of the change. Even if the security interest attaches to after-acquired collateral, there is currently no perfection with respect to such new collateral unless and until the secured party perfects pursuant to the law of the new jurisdiction. The amendments change this by giving the filer perfection for 4 months in collateral acquired post-move. A similar change is made with respect to a new debtor that is a successor by merger. The new rule provides for temporary perfection in collateral owned by the successor before the merger or collateral acquired by the successor within 4 months after the merger.
Existing law authorizes the debtor to file a correction statement: A claim that a financing statement filed against it was in fact unauthorized. While this filing has no legal effect on the underlying claim, it does put in the public record the debtor’s claim that the financing statement was wrongfully filed. The amendments change this in 2 ways. First, the filing is no longer called a “correction statement,” but is instead referred to as an “information statement”. Second, the amendments authorize the secured party of record to also file an information statement if the secured party believes that an amendment to its financing statement was not authorized. The change addresses concerns of secured parties that an amendment to a different financing statement may be inadvertently filed on the secured party’s financing statement because the amendment contains an error when referring to the file number of the financing statement to be amended.
A number of additional technical amendments are also included in the bill. For example, some extraneous information currently provided on financing statements will no longer be required. A safe harbor for the transfer of chattel paper in conformance with the “Uniform Electronic Transactions Act” is included, and the bill clarifies that the broader override of contractual restrictions found in existing law applies with respect to enforcement of a security interest through the sale or strict foreclosure of payment intangibles and promissory notes. Certificates of title for goods are clarified where the certificates of title are, in whole or in part, in electronic form, and greater guidance is given with respect to the notice requirements applicable to electronic dispositions of collateral (specifically, time and “electronic location” of online auctions) when a security interest is enforced by sale or other disposition of the collateral.
The bill has a uniform effective date of July 1, 2013, so as to allow states to adopt the amendments uniformly and have them become operative simultaneously, thereby avoiding unnecessary conflicts and confusion with respect to interstate transactions. The House adopted the bill on March 5; the Senate Judiciary Committee will hear the bill on Tuesday, March 20 Upon Adjournment.
Since this summary, the bill was referred unamended from the Senate Judiciary Committee to the Senate Committee of the Whole.
Summaries of other featured bills can be found here.