CORPORATE TRANSACTIONS & COMPLIANCE BLOG

Puerto Rico Clarifies Effective Period for UCCs is Five Years

By: Clare Oliva, COGENCY GLOBAL INC. on Wed, Mar 12, 2014

Puerto Rico iStock 000008995145XSmallPuerto Rico’s Law No. 17-2014, which became effective on January 16, 2014, amended, among other items, Section 9-515(a) of Article 9 (“Chapter 9, Secured Transactions”) to reduce the life of an initial Uniform Commercial Code (UCC) financing statement from ten years to five years. Due to some drafting errors in Puerto Rico’s prior enactment of Revised Article 9, there had been confusion as to whether the effective period was five years or ten years.

Drafting Errors in Prior Enactment of Revised Article 9

Some drafting errors in Puerto Rico’s enactment of Revised Article 9 and the 2010 Amendments with Law 21-2012, effective January 17, 2013, caused confusion regarding the effective period of financing statements. While Section 9-515(a) clearly indicated that a filed financing statement “is effective for a period of ten years after the date of filing”, the heading for this section is “Five-year effectiveness”. And, Section 9-515(d) refers to the six-month continuation window “before the expiration of the five-year period.” Section 9-515(e) clearly indicates that continuation filings extend the life of the financing statement for five years from the lapse date.

Puerto Rico Department of State Issues Memo to Clarify Effect of Law No. 17-2014

On January 24, 2014, the Puerto Rico Department of State issued a memo to clarify the term of initial financing statements and the effect of continuation filings. The memo makes it clear that the correction to the law effective January 16, 2014 has no retroactive effect. Therefore, UCC1s filed in Puerto Rico on or after January 16, 2014 get a five-year life and those filed on or before January 15, 2014, have a ten-year life. However, continuations filed on or after January 17, 2013 (the date Revised Article 9 and the Article 9 amendments became effective in Puerto Rico) extend the life of the filing for FIVE YEARS from the lapse date. Secured lenders will need to adjust their tickler systems accordingly.

Note that the January 24, 2014 memo from the Puerto Rico Department of State was issued only in Spanish. To view the memo, click here. Note that COGENCY GLOBAL INC. has also provided a unofficial English translation at the end of the memo.

To view Puerto Rico Law 17-2014 (also in Spanish followed by an unofficial English translation), click here.

 

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

Topics: Article 9 Filing, Searching and Due Diligence, UCC