This year a number of states are making changes to their Uniform Commercial Code (UCC) laws, most of which will be implemented on July 1, 2013. Georgia is one of those states but they have some unique aspects to their version of the amendments and we’d like to provide some further information about the specifics of what they are implementing.
How to identify the correct name of a Registered Organization has been unclear prior to this amendment. The new legislation clarifies this by stating that the correct name of a Registered Organization to be used on a financing statement is the name listed on the debtor’s “public organic record.” The public organic record is defined as a document that is available to the public for inspection and must be one of the following:
- Articles of Incorporation for Georgia corporations
- Articles of Organization for Georgia LLCs
- Certificates of LP for Georgia Limited Partnerships
Certificates of Existence and listings from the Georgia Secretary of State website do not meet the criteria of public organic records and are cannot be used to identify the “correct” name for a Registered Organization.
This new legislation now clarifies that there is a distinction between statutory trusts, which are formed pursuant to state statute, and common law trusts, which are not. The two types of trusts draw their “correct” name from difference sources. Statutory trusts are considered to be similar to other business entities in that the “correct” name is drawn from the public organic record associated with them. In contrast, Common Law Trusts and Testamentary Trusts draw their “correct” name from the name of the trust or the name of the trust settlor if the trust has no name. In the past, common law trusts could use the name of the trustee but this will no longer be the case.
The “correct” name to be used for an individual on a financing statement has had no clarification until this legislation. Now, the “correct” name for an individual is the name found on their valid Georgia driver’s license. If they do not have a driver’s license, the name should be the debtor’s “individual name” or the debtor’s surname and first name.
A problem area other than correct name has been continuing perfection for collateral when a Registered Organizational debtor changes jurisdictions. The current law provides for a four-month grace period for collateral owned at the time of the jurisdiction change. During this time period, the secured party must identify the change has occurred and file a new financing statement in order to remain perfected. Additional collateral acquired during that time period has not been covered. The new law will extend the grace period to cover both existing collateral as well as new collateral acquired after the change in jurisdiction.
A similar issue has been encountered when a new debtor becomes bound by an existing financing statement. This might occur when the debtor merges with another company based in a different jurisdiction. Under the new law, the secured party will have a four-month grace period to file a new financing statement or amend the existing statement to include the new debtor. During that grace period, collateral in existence at the time the new debtor became encumbered by the financing statement as well as any collateral acquired after will remain perfected. If the new debtor grants a new security interest in collateral prior to the secured party filing the new financing statement, any collateral acquired after the debtor was bound by the financing statement but before the secured party filed, will be subordinate to the claim of the other secured party.
For debtors who are deceased, the existing financing statement will remain valid because the legislature has determined that the name of the decedent on the financing statement is acceptable if it is shown on the order appointing a personal representative to the estate by a court with jurisdiction over that collateral. This eliminates the need to file a new financing statement upon the death of the debtor.
Under the new legislation, “correction statements” will be called “information statements” from here on. This more accurately identifies the purpose of the statement, which is to provide additional information about the original filing that remains in full force.
Currently, mortgages or deeds are not acceptable as a UCC filing. The new legislation allows them to be utilized as a UCC filing to secure debt for collateral such as fixture filings. This prevents the secured party from having to file two separate filings to secure the mortgage and then also to secure the fixture filing.
Finally, the type of debtor organization and the jurisdiction of the organization will no longer be required as information of the financing statement.
This has by no means been an exhaustive description of the changes to Georgia’s UCC laws. For more information on the impending changes, read Senate Bill 185 in it’s entirety here.