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Report 1 (2006)

handle is hein.ali/rpmntpf0001 and id is 1 raw text is: PERMANENT EDITORIAL BOARD FOR THE UNIFORM COMMERCIAL CODE REPORT MAINTAINING PERFECTION BEYOND JUNE 30, 2006 OF SECURITY INTERESTS CREATED AND PERFECTED BY FILING UNDER FORMER ARTICLE 9 A. Introduction Revised Article 9 of the Uniform Commercial Code has been in effect since July 1, 20011 (the effective date), yet aspects of former Article 9 still have legal effect. In particular, revised UCC Section 9-705(c) provides that a financing statement that was effective under former Article 9 remains effective under revised Article 9 (even if the financing statement was filed in a jurisdiction that is not the jurisdiction whose law governs perfection under the conflict of laws rules in revised Article 9). The period of effectiveness of such a financing statement under revised Article 9 is limited, though. UCC Section 9-705(c) goes on to provide that the pre- effective-date financing statement ceases being effective under revised Article 9 at the earlier of (i) the time the financing statement would have ceased to be effective under the law of the jurisdiction in which it was filed and (ii) June 30, 2006 (the cutoff date). As the cutoff date approaches, secured parties must plan carefully to assure that the perfected status of their security interests that remained effective under UCC Section 9-705(c) continues after that date. This Report generally describes the effect of the cutoff date and the actions that secured parties may take to maintain the perfection of their security interests and analyzes in particular detail the effect of the cutoff date on certain financing statements that were continued during the first half of 2001. As discussed in detail below, there is an interpretive issue concerning the further continuation of certain financing statements that were continued during the first half of 2001. In particular, application of UCC Section 9-705(c) to such continued financing statements that are filed in the same office in the same state as required by revised Article 9 is particularly problematic and may not have been intended by the drafters.2 Consequently, resolution of the interpretive issue must be accomplished either by interpretation of UCC Section 9-705 in light of both its text and the absence of clear evidence of statutory intent or by concluding that Section 9-705 does not address such continued financing statements and, thus, the cutoff date is inapplicable to them. This Report takes no position as to the correct interpretation. As this Report indicates, though, under any interpretation a secured party wishing to continue such a financing statement can 1 See UCC § 9-701. All references in this report are to the Uniform Commercial Code are to the 2004 Official Text, unless otherwise indicated. The analysis in this report assumes the enactment of the Official Text. It should be noted, though, that four states enacted non-uniform versions of § 9-701, resulting in effective dates of October 1, 2001 (Connecticut) and January 1, 2002 (Alabama, Mississippi, and Florida). 2 While this situation brings about uncertainty with respect to further continuation of those financing statements, it should be noted that this uncertainty will affect only a small number of financing statements inasmuch as the affected class of financing statements is not large and only a small number of financing statements are continued twice. 1

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