California :: Business Entity Filings Relief Measure

PHOTO: The California State Capitol, Garee Hill, 2013

On May 1, 2013, California Governor Jerry Brown approved Assembly Bill 113 (Chapter 3), which amended the Budget Act of 2012, effectively increasing the appropriation to the Secretary of State’s office for purposes of filings and registrations by $1,600,000—effectively increasing the 2012-13 fiscal year filings and registrations budget from $53,526,000 to $55,126,000. This increase in funds is being used to pay for overtime and temporary employees to help process business entity filings and reduce turnaround times. Back in mid-March, the wait time for formations/qualifications was hovering around six weeks, whereas today the turnaround time is around two or three weeks, depending on whether your filing is submitted via mail or hand delivered over the counter.

In addition to increasing the appropriation, the bill also requires that the Secretary of State report on a monthly basis to the Joint Legislative Budget Committee, communicating the progress in achieving those reductions.

For more on AB 113, go here.

Washington, D.C. :: Benefit Corporation Act

In late 2011, the Benefit Corporation Act (Bill Number B19-0584) was introduced in the Council of the District of Columbia, proposing the authorization of a new type of entity that would make it possible for companies to create structures that are both profitable and socially responsible. On May 1, 2013, that legislation became effective, adding Washington, D.C. to the list of more than a dozen jurisdictions and states, including California and New York, that have enacted similar legislation. The Benefits Corporation Act provides a voluntary corporate model, and does not impact corporations that choose not to opt into the form.

For a complete list of states where benefit corporation legislation has passed, go here.

Kentucky :: Annual Report Deadline Approaches

All corporations (profit, non-profit & professional service), limited liability companies (profit, non-profit & professional service), limited partnerships, limited liability limited partnerships, and business trusts that are registered with the state are required to file an annual report with the Kentucky Secretary of State by June 30, 2013 in order to remain in “good standing” with the state. Failure to file an annual report may lead to administrative dissolution or revocation (for foreign business entities). In order to have a business entity reinstated or requalified, you will have to complete and file additional forms as well as pay fees, including delinquent filing fees. If you need assistance filing your annual reports, we’re here to help. Just give us a call at 800.533.7272.

Nationwide :: UCC Article 9 Amendments Effective Date…or Dates?

July 1, 2013 is coming, but what does that really mean to UCC filers? Those familiar with UCCs are probably aware of the sweeping amendments to the UCC Revised Article 9 that are expected to be enacted in most, if not all, states. To date, 37 states have have enacted legislation that will impact previously filed UCCs that are effective, as well as those that continue to be filed after the date the amendments take affect. On the other hand, 13 states as well as Washington, D.C. and the US Virgin Islands have yet to take any legislative action.

Of those states that have enacted legislation, we have learned that several will miss the July 1, 2013 mark. Arizona’s effective date is delayed until September 1, 2013, while California and Oklahoma have both announced a July 1, 2014 effective date—an entire year after the effective date of many other states. Furthermore, Missouri has yet to declare an effective date, although speculation is that it might be delayed until August 28, 2013. That means, come July 1, UCC filers could be operating under three rules for debtor names—the “Only If” option, the “Safe Harbor” option, and existing state protocol—depending on the state in which they are filing. No doubt, those working with UCCs are in for a bumpy road.

Working with a professional service provider can certainly help mitigate risk during this transition. Give our UCC department a call at 800.533.7272 if you’d like to enlist our help.

Pennsylvania :: Corporate Scam

The Pennsylvania Department of State recently issued a consumer alert regarding misleading solicitations targeting businesses operating within the state. Two companies by the names of Pennsylvania Corporate Compliance Company and Corporate Records Service are behind the solicitations, which include seemingly official documents that are titled “Annual Meeting Disclosure Statement” and “2013 – Annual Minutes Form.” The deceptive mailings urge businesses to file information and pay a $125 fee by a certain date in order to maintain proper records; however, none of the information requested is required to be filed with the Department of State or the Secretary of the Commonwealth. The alert strongly recommends that these documents be disregarded by all companies that receive them.

To read the consumer alert in its entirety, go here.

Washington :: HB 1115 Amends Previously Passed RA9 Amendment

Back in late 2011, Washington state passed House Bill 1491, which, among other things, selected alternative B (the “Safe Harbor” option) as the means to determine the “correct” debtor name for individuals in regard to UCCs. Then, in early 2013, new legislation was introduced proposing the previously passed RA9 amendment be changed from alternative B to alternative A (also known as the “Only If” option). On May 3, Governor Jay Inslee signed into law House Bill 1115, successfully amending the previously passed revised RA9 amendment and making the change from option B to A. The effective date for section 34 of the bill, which is the section related to debtor names, is July 1, 2013.

For more on the two options for selecting the individual debtor name, read “The Importance of Selecting the Correct Name in UCC” by Edward Noyer.

National :: The Importance of the Correct Name in UCC

As you are probably already aware, this year is an especially important year if you file UCCs. Beginning on July 1, 2013, a majority of states across the nation will begin enforcing the UCC Revised Article 9 (RA9) amendments. These amendments clarify longstanding questions brought about by RA9, including one of the most important questions relating to individual debtor names. In fact, perhaps none of the impending changes will have quite the same impact as those surrounding individual debtor names—since obtaining the correct debtor name is paramount to having an effective lien.

What is a “Correct” Debtor Name for Business Entities?
The amendments have created a definition replacing “public record” with the term “public organic record” §9-102 68 A et. Seq. The definition for public organic record is:

A record that is available to the public for inspections and is…

• A record consisting of the record initially filed with or issued by a state or the United States to form or organize an organization and any record which amends or restates the initial record;

• An organic record of a business trust consisting of the record initially filed with a State and any record which amends or restates the initial record, if a statute of the State governing business trusts requires the record be filed with the State; or

• A record consisting of legislation enacted by the legislature of a State or the congress of the United States which forms or organizes an organization, and any record amending the legislation and any
record which amends or restates the name of the organization.

When this is reduced to the essential statements, an organizational debtor name is determined by the name listed on a record when a state or federal law creates an organization, and any record that amends or restates the initial record. This will generally be the Articles of Incorporation, Articles of Organization, documents creating partnerships, limited partnerships, etc. and all amendments to any of the aforementioned records.

If the organization does not have a name, the debtor is the individual names of the partners, members, associates or other persons comprising the debtor in a manner that each name provided would be sufficient if the person named were the debtor. However, even determining the individual name is not a simple task.

What is a “Correct” Debtor Name for Individuals?
Determining an individual’s name will be more complex under the impending amendments, as the Uniform Law Commission included two options as to how to go about determining an individual’s name—allowing the states to choose which option they prefer.

Depending on which option was enacted when the state passed their amendment (if at all) will determine how the name should be determined. The two options are:

Alternative A – The “Only If” Option
Individual debtor name is determined:
• If this state has issued a driver’s license that has not expired, only if the financing statement provides the name of the individual, which is indicated on the driver’s license.
• If the above does not apply, only if the financing statement provides the individual name of the debtor or the surname and first personal name of the debtor.

Alternative B – The “Safe Harbor” Option
Individual debtor name is valid if:
• It provides the individual name of the debtor; or
• Provides the surname and first personal name of the debtor; or
• Provides the name of the individual, which is indicated on a driver’s license this state has issued and which has not expired.

At this point in time, 31 states have chosen alternative A, 6 have chose alternative B, and 14 states (including Washington, D.C.) have yet to enact a bill selecting an option.

Trusts Debtors When Not a Registered Organization
If collateral is held in trust and the trust is not a registered organization then the correct debtor name is very difficult to determine and the secured party should take extreme care. The debtor name to a trust is determined as follows:

• If the organic record specifies a name for the trust, the name specified in the trust or any record which amends the name is the debtor name.

• If the trust does not specify a name for the trust, the name of the settlor or testator is the debtor name.

• There are additional requirements for the UCC form for trust debtors that require additional boxes or information to be provided to distinguish a trust from other trusts having similar names. See §9-503 (3) (A) et Seq.

The states continue to enact and pass amendments to the current version of the code, so the Uniform Commercial Code and requirements continue to evolve at a rapid pace. Working with a service provider that can help mitigate risk is an important consideration during this transition, enabling you to be better prepared for all of the impending changes and challenges.

The code changes referenced in this blog post are based on the model act (‘act’), as a result the specific code sections adopted within each state may deviate from the ‘act.’ Although almost all states have introduced or enacted the amendments, not all states have and differences in laws may exist after July 1, 2013. This document is not intended as legal advice and only provides general information. Always seek an attorney well versed in the Uniform Commercial Code for specific advice.

 

About the author: A prolific writer and presenter, Edward Noyer has penned numerous articles for trade association magazines and paralegal associations across the nation. His background in banking and certification from an American Bar Association-approved paralegal program only add to his credentials, which include a degree in business administration and marketing. Edward is currently the Director of Product Marketing at Parasec.