Are you a frequent UCC Article 9 filer that checks state corporate databases to verify entity names when preparing a UCC filing? If this is your process, keep reading for important information concerning the correct debtor name and Amended Article 9 (AA9).
Revised Article 9’s Strict Entity Name Standards
Since Revised Article 9 (RA9) became effective in almost all states on July 1, 2001, the strict standards for determining whether a business entity’s name is “seriously misleading” resulted in filers becoming more conscientious about verifying the true and exact entity debtor name when preparing UCC financing statements. Some filers have made it a common practice to verify entity names by consulting state corporate databases. Section 9-503(a)(1) of RA9 states that a financing statement sufficiently provides the name of the debtor “if the debtor is a registered organization, only if the financing statement provides the name of the debtor indicated on the public record of the debtor’s jurisdiction of organization which shows the debtor to have been organized.” While state corporate databases do provide information on the public record, the drafters of RA9 intended for the corporate formation documents to be consulted as the public record, not corporate databases, which can sometimes be slightly different.
While most states have aligned the entity names in formation documents with their corporate databases, in some states, the entity names in corporate databases may not be 100% accurate for Article 9 purposes. As states developed their corporate databases in years past, some entity names may have been abbreviated or truncated when entered in their corporate databases. For example, entities including the word “National” in their name may have had that name abbreviated to “Nat’l” in the database. While this may be acceptable for many other purposes, this most assuredly would cause a UCC filing to be considered seriously misleading and thus, ineffective.
Article 9 Amendments Clarify Entity Name Standards
AA9 has addressed this potentially serious issue. The amended law states that filers should consult the “public organic record” in the jurisdiction of organization. Per AA9’s Section 9-102(a)(68), the public organic record is the initial (birth) record of the entity – along with any amended or restated articles after the initial filing that contain the exact name of the entity. (When ordering corporate documents, always determine if subsequent amendment filings or restated articles may have changed the entity’s name from the original formation documents.)
Don’t Wait for AA9 to Become Effective!
Although AA9 is not due to take effect until July 2013, examining entity formation documents and any amendments/restatements should be your standard practice now, as that was always the actual intention of the drafters. By verifying entity names from the original formation documents (and subsequent amendments), you can avoid litigation related to name sufficiency and ensure that your important UCC filings are not deemed seriously misleading.
For more information about the Article 9 Amendments, visit the UCC Article 9 Amendments page of our website.
This article is provided for informational purposes only and should not be considered, or relied upon, as legal advice.