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					The New Amendments to UCC
    Article 9 in Minnesota

                         Presented by:
                         Paul Hodnefield
                Corporation Service Company
                      Presentation Outline


            •       Background
            •       Debtor Names
            •       Forms
            •       Transmitting Utilities
            •       Transition Rules
            •       Legislative Outlook
            •       Q&A



© 2011 by Corporation Service Company®
Debtor Names
                      Registered Organizations

        • Current Law
               – A financing statement is sufficient if it
                 provides the debtor name indicated on the
                 public record that shows the debtor to have
                 been organized. See § 336.9-503(a)(1).
        • Concerns
               – Article 9 does not define the term “public
                 record.”
               – Many other public records include the
                 purported name of an organization.



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                      Registered Organizations

        • Example:
               – Name on Articles:




               – Name in State Business Entity Database:

                       WROBLESKI, JOHN CONSTRUCTION, LLC




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                      Registered Organization Solution

        • Redefine “Registered Organization” in § 336.9-102(a)(71).
               – An organization formed or organized solely under the law of a
                 single state or the United States by the filing of a public
                 organic record or the enactment of legislation. The term
                 includes a business trust if a statute requires the organic
                 record of the trust to be filed with the state. § 9-102(a)(68).
        • Define “Public Organic Record” in § 336.9-102(a)(68).
               – Record initially filed with or issued by a state or U.S.
               – Legislation which forms or organizes an organization.
               – Record of a business trust required to be filed by law.
        • Amended § 336.9-503(a)(1):
               – If the debtor is a registered organization, the financing
                 statement is sufficient only if it provides the name stated to be
                 the registered organization’s name on the public organic
                 record most recently filed with or issued or enacted by the
                 registered organization’s jurisdiction that purports to state,
                 amend or restate the registered organization’s name.


© 2011 by Corporation Service Company®
                      New Registered Organization Effect

        • Source of Name
               – Clarifies that only the public organic record,
                 including any amendments to that record,
                 provides the only sufficient source of a
                 registered organization name.
        • Changes to Best Practices
               – Registered organizations under current law:
                       • No change.
               – New registered organizations:




© 2011 by Corporation Service Company®
                      New Registered Organizations

        • Entities Created By Legislation
               – Example:
                       • The State Agricultural Society, Minn. Stat. § 37.01 (2010)
               – Best practices:
                       • Obtain copy of the organic legislation that created the entity.
        • Entities Created By Government Charter
               – Example:
                       • Farm credit banks, 12 USCS § 2011.
               – Best practices:
                       • Obtain copy of the record issued to create the entity.
        • Business Trusts
               – Examples:
                       • Minnesota Business Trust under Minn. Stat. § 318.01 (2010).
                       • Delaware and Massachusetts business trusts.
               – Best practices:
                       • Obtain copy of the organic filed with the state.



© 2011 by Corporation Service Company®
                      Business Trusts




© 2011 by Corporation Service Company®
                      Individual Debtors

        • Current Law
               – Financing statement is sufficient only if it
                 provides the… individual name of the debtor
                 See § 336. 9-503(4).
        • Concerns
               – Article 9 offers no guidance to help a filer
                 determine the correct name of an individual
                 debtor.
               – Case law provides little guidance.
               – Secured parties left with uncertainty.



© 2011 by Corporation Service Company®
                      Individual Debtors

        • Proposed Solutions
               – Single Source (“Only If”)
               – Safe Harbor
        • Stakeholder Positions
               – JRC strongly preferred to do nothing or adopt
                 Safe Harbor.
               – Bankers strongly supported “Only If.”
        • Drafting Committee Compromise
               – Offer “Only If” and Safe Harbor as legislative
                 alternatives.
               – Minnesota selected “Only If” Alternative A.

© 2011 by Corporation Service Company®
                      New § 336.9-503(a)(4)

        • Sufficiency under “Alternative A”
               – Financing statement is sufficient only if it
                 provides the name of the individual which is
                 indicated on the driver’s license or
                 identification card.
               – § 336.9-503(a)(5) Second Tier Safe Harbor if
                 debtor lacks qualifying license or ID:
                       • Surname & First Personal Name
        • Effect of New § 336.9-503(a)(4)
               – Only name on driver’s license or identification
                 card will be sufficient unless debtor lacks
                 current documents.

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                      Driver’s License or ID




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                      § 336.9-503(a)(4) Source & Sufficiency

        • License or ID Must Be Unexpired
               – Expired driver’s license or ID is not sufficient source of
                 name.
        • License or ID Must Be Issued by “This State”
               – State where the law governs perfection and priority.
        • Only Name on License or ID is Sufficient
               – Name on license or ID is the correct debtor name for
                 purposes of the financing statement.
               – Even if not the actual name of the debtor.
        • Multiple Licenses or IDs
               – Most recently issued record controls.
               – See new § 336.9-503(g).



© 2011 by Corporation Service Company®
                      Driver’s License Issues




        SAMPLE                           GAYLE   ELIZABETH


© 2011 by Corporation Service Company®
                      License & ID Name Issues

        • Extraction of Name from License or ID
               – Name component order may not match.
        • Errors in Driver’s License or ID Name
               – Name with errors is the only sufficient name.
        • Debtor’s License or ID Issued by Other State
               – Debtor does not have records required for § 336.9-
                 503(a)(4). Financing statement must provide surname
                 and first personal name. See § 336.9-503(a)(5).
        • Second-Tier Safe Harbor
               – Applies only if the debtor lacks license and ID described
                 in § 336.9-503(a)(4).
        • Effect of License or ID Changes:
               – Expiration or other events may cause a name change for
                 purposes of § 336.9-507(c).


© 2011 by Corporation Service Company®
                      Driver’s License Issues



                                         MARY ELLEN KAYE JOHNSON




        KAYE JOHNSON
        JOHNSON                                MARY ELLEN          KAYE
                                                                   ELLEN KAYE


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                      Driver’s License Errors



                                         BETH JOHNSON




        JOHNSON                                BETH


© 2011 by Corporation Service Company®
                      Driver’s License Errors



                                         KATHERINE ELIZABETH JOHNSO




        JOHNSO                                 KATHERINE         ELIZABETH


© 2011 by Corporation Service Company®
                      Driver’s License Errors



                                         MQRY KAY JOHNSON




        JOHNSON                                MQRY         KAY


© 2011 by Corporation Service Company®
                      Driver’s License Errors



                                         MARY K JOHNSON, MD




        JOHNSON,
        JOHNSON MD                             MARY           K


© 2011 by Corporation Service Company®
                      Individual Debtor Best Practices

        • Provide Name Indicated on License or ID
               – Exactly as listed on the license or ID.
               – Start today!
        • If No Qualifying License or ID
               – Provide surname (last name) and first personal name
                 (first name).
        • Map Name Components to Correct Form Fields
               – Order does not necessarily correspond to form.
        • If in Doubt
               – Provide multiple forms of name as separate debtors.
        • Effect on Search Best Practices:
               – None. Continue to search for name variations.


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                      Decedent’s Estate

        • Current Law: § 336.9-503(a)(2)
               – A financing statement is sufficient only if it
                 provides the name of the decedent and
                 indicates the debtor is an estate.
        • Drafting Committee Concerns
               – Filing errors under current law.
               – Decedent has no drivers license in states that
                 enact Alternative A “Only If” approach.
               – “Decedent’s Estate” doesn’t really exist.




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                      Decedent’s Estate

    • Drafting Approach
            – New § 336.9-503(a)(2) changes focus from identity of the
              debtor to whether collateral is being administered by a
              decedent’s personal representative.
                   • Name of decedent and indication are still required.
            – Provides guidance for how to provide required indication.
            – Creates special safe harbor for name of the decedent. See
              new § 336.9-503(f).
    • Effect
            – Name and content requirements do not change.
            – Additional due diligence may be necessary to ensure name
              falls within § 336.9-503(f).
            – Form check box label will change.



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                      Trust or Trustee

    • Current Law: § 336.9-503(a)(3)
            – A financing statement is sufficient only if it provides the
              name of the trust specified in its organic documents or, if no
              name is specified, the name of the settlor.
            – Financing statement must provide additional information to
              distinguish from other trusts with same settlors.
            – In the debtor’s name or otherwise indicate the debtor is a
              trust or trustee acting with respect to property held in trust.
    • Drafting Committee Concerns
            – Confusion & filing errors under current law.
            – This section should not apply to a registered organization.
            – Common law trust cannot be a debtor.




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                      Collateral Held in a Trust

    • Drafting Approach – New § 336.9-503(a)(3)
            – Changes shift focus from identity of debtor to
              status of collateral.
            – Clarifies that this section applies to a
              testamentary trust.
            – Clarifies that indications and additional
              information must be provided somewhere other
              than the name field.
    • Effect
            – Name and content requirements generally do not
              change for a common law trust.
            – Form check boxes will be combined with a new
              text label.

© 2011 by Corporation Service Company®
     Forms
Statutory Safe Harbor
Correction Statement
                      Approved Changes to Official Forms

    • Eliminate SSN/FEIN Field
            – Prevents filers from submitting records with debtor’s SSN
              when not required by law.

    • Eliminate Debtor Organization Info Fields
            – Delete organization information requirement from § 336.9-
              516(b)(5)(C).

    • Rearrange & Re-label Checkboxes
            – Indication check boxes move from Addendum to Financing
              Statement.
            – Termination checkbox moved away from Continuation on
              Amendment Form.




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                      Approved Forms




© 2011 by Corporation Service Company®
                      Approved Forms




© 2011 by Corporation Service Company®
                      Correction Statement – § 336.9-518

    • Background
            – Revised Article 9 eliminated the debtor signature
              requirements.
            – Correction Statement provided the debtor with a non-
              judicial remedy for the filing of unauthorized financing
              statements.

    • Effect of Amendments to § 336.9-518
            – Changes name of record to “Information Statement”.
            – Authorizes the secured party to file the record
            – Official Comment clarifies that a secured party is under no
              obligation to file an information statement.

    • Corresponding Changes
            – § 336.9-516(b) incorporates the new “information statement”
              label for the record.


© 2011 by Corporation Service Company®
Transmitting Utilities
                      Transmitting Utilities

    • Duration & Effectiveness Under § 336.9-515(f)
            – …and a filed “financing statement” so indicates...
            – § 336.9-102(a)(39) definition of “financing statement”
              includes amendments.
            – Filing offices cannot amend debtor to become transmitting
              utility.

    • Amendment to § 336.9-515(f)
            – Adds “initial” before “financing statement.”
            – Clarifies that the indication can only be made on the initial
              financing statement, not an amendment.




© 2011 by Corporation Service Company®
New Article 9 Part 8
    Transition Rules
                       Source of Part 8 Transition Rules

   • Key Provisions
          – Uniform effective date of July 1, 2013.
          – 5-year transition period ending June 30, 2018.
          – Return of the financing statement in lieu of
            continuation.
   • General Rule for Continued Effectiveness:
          – Filed records remain effective until earlier time of
            lapse or end of transition. See new Section 9-803.




© 2011 by Corporation Service Company®
                       Transition Effect on Filed Records
   • Debtor is Currently a Registered Organization
          – No transition action is necessary.
   • Debtor Becomes a Registered Organization
          – If change in governing law:
                  • File Financing Statement In Lieu of Continuation.
          – May change standard for sufficiency of debtor name.
                  • Amend name with UCC3 or on In Lieu, as appropriate.
   • Individual Names:
          – If filed financing statement debtor name does not match the
            individual debtor’s driver’s license, file amendment to add name
            that complies with new § 336.9-503(a)(4)
   • Debtor is a Decedent’s Estate, Trust or Trustee:
          – No action may be required.
                  • Debtor type Indications under current law remain sufficient under new §
                    336.9-805(e).
          – Consider filing amendment to add safe harbor name if applicable.
                  • See new § 336.9-503(f) & (h).


© 2011 by Corporation Service Company®
Legislation
                      Enactments Through 9/12/2011

    State                                Individual Name § 9-503(a)(4)   Forms § 9-521
    Connecticut                                  Alternative B             Omitted
    Indiana                                      Alternative A               Text
    Minnesota                                    Alternative A             Omitted
    Nebraska                                     Alternative A               Text
    Nevada                                       Alternative A             Omitted
    North Dakota                                 Alternative A             Omitted
    Rhode Island                                 Alternative A               Text
    Texas                                        Alternative A             Omitted
    Washington                                   Alternative B               Text

© 2011 by Corporation Service Company®
                      Resources

        • Official Text from the ULC
               – Visit: www.nccusl.org
        • Handout – Summary of Changes
        • Legislative & Jurisdiction Updates
               – CSC Global (www.cscglobal.com)
               – CSC Financial (www.cscfinancialonline.com)
               – Update email distribution list.




© 2011 by Corporation Service Company®
                      Q&A




                                         Paul Hodnefield
                                          Associate General Counsel
                                         Corporation Service Company
                                         380 Jackson Street, Suite 700
                                              St. Paul, MN 55101
                                            800-927-9801, ext 2375
                                            phodnefi@cscinfo.com




   This presentation is not intended to be legal advice. You should not act or rely on any information
               contained in this presentation without seeking the advice of an attorney.


© 2011 by Corporation Service Company®

				
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