5 Questions About Avoiding Fatal Debtor Name Mistakes on UCC Financing Statements

Overview: Even minor debtor name mistakes can create meaningful UCC filing risk. Case sensitivity in the debtor name is generally not the main issue, but debtor name accuracy matters. In addition, untimely debtor name amendments after a name change can affect priority.

1. Is a debtor’s name case sensitive, and can differences in case cause a UCC filing to be deemed seriously misleading?  

Answer: No. However, it is strongly recommended that the debtor’s name on the UCC financing statement precisely match the debtor name as presented on the organic documents (formation documents and any amendments).

For entities: Use the name as it appears on the formation documents and any amendments.

For individuals: Use the name as shown on the individual’s unexpired state-issued driver’s license or state-issued identification card from their primary state of residence, including the surname, first personal name, and middle name (if any).

At Cogency Global, we are not aware of any case law where differences in letter casing alone (i.e., uppercase vs. lowercase) have caused a UCC financing statement to be held seriously misleading, and thus ineffective.

2. What if there was a debtor name error in the UCC1 filing, but the UCC3 continuation was filed reflecting the correct debtor name…Does that resolve the incorrect debtor name?

Answer: Unfortunately, it does not. The only way to amend the debtor’s name is to file a UCC3 debtor name amendment. A UCC3 continuation extends the life of the UCC by another 5 years unless the UCC was filed in Wyoming, which has a 10-year statutory period. To correct or change a debtor name, a UCC3 debtor name change amendment should be filed.

3. How do you know when debtors change their names if they don’t tell you? 

Answer: The Security agreement or other contract that was signed by the debtor and secured party that authorizes the filing of the UCC initial financing statement should contain language that requires the debtor to notify the secured party of a name change. If such a provision exists and the debtor fails to provide timely notice, this may constitute a breach of the agreement and could trigger a default, depending on the terms of the contract.  Some secured parties, even with this requirement in the security agreement, will periodically check the public record to see if a debtor has changed its name. Secured parties do not rely solely on the debtor for notification. A periodic check of the public record for name changes is sometimes necessary for the secured party involved with a deal that might be viewed as high risk or where there are other indicators that a periodic name check would be helpful.

4. What happens to your UCC filing position if the entity changes its name after the UCC1 is filed?  

Answer: It is common for debtors to change their names months or years after an initial UCC financing statement is filed. Position may be affected if the secured party fails to file a UCC3 debtor name amendment within a specified period, usually 4 months of the name change. If an amendment is filed within the required period, then priority is preserved, even if another secured party files during that 4-month window. If no debtor name amendment is filed, then the UCC filing could be deemed seriously misleading since third-party searchers are conducting searches on the current (new) true and correct name. Further, depending on the collateral being secured, the prior secured party may not have interest in any after-acquired collateral. Searchers are not required to search for UCCs on former debtor names or conduct “reasonable” searches on prior names or name variations since UCC filers are required to maintain UCCs, which includes amending the debtor name after a debtor name change.  

For specific statutory language covering this issue, please refer to UCC §9-507(c).

5. What is a good method to check and see if my UCC filings might be seriously misleading? 

Answer: A post-filing search is an effective way to determine whether a UCC filing may be deemed seriously misleading. It is a best practice to conduct this type of search shortly after a UCC filing has been filed. If the search does not return the expected UCC filing, this is a strong indication that an error in the debtor name may exist. Conducting a timely post-filing search allows the filer to identify and correct any issues promptly. If a post-filing search is not conducted shortly after a UCC1 or UCC3 debtor name change or addition, there is a risk that any error may go undetected until it is too late for the UCC to be effective.

Conduct the post-filing search on the exact name of the debtor by consulting the formation documents and any amendments for entities and unexpired state-issued driver’s license or ID for individuals. Include spaces, punctuation, and corporate indicators when conducting the search. In addition, be sure to conduct this search in the state of formation of the debtor (for entities and primary state of residence for individuals) using the state-approved search logic/system, and not a wild card search or using a third-party website. If the returned results include your filing, then it is likely that the UCC would be considered an effective UCC financing statement. If the post-filing search results do not return the expected search results, it is likely that the UCC filing in question could be considered seriously misleading—unless steps are taken to resolve the issue.

Third-party searchers are only required to search in the correct state, on the correct name, using the state-approved search logic. If a UCC filer follows this same process and uncovers their lien, then the filing is likely an effective financing statement. In addition, it helps to show the filer that third parties conducting UCC searches will find the UCC, too.

If you have any other questions, feel free to contact our specialists or contact us in the comments.

_{This article is provided for informational purposes only and should not be considered, or relied upon, as legal advice.}