Missing Collateral Description not Cause for UCC Rejection in Many States of Incorporation
UCC, Corporate, TipsThere are not many errors you can make that will cause a filing officer to reject a UCC1 Financing Statement. For the filing officer to accept a UCC for filing, the document must meet a set of minimum requirements. If a UCC document meets the minimum requirements and the correct filing fee accompanies the document, the Uniform Commercial Code directs the filing officer to accept the document into the public record.
While these requirements vary a little from state to state, general understanding in the UCC world has been that a Financing Statement must contain, at a minimum, a debtor name and address, a secured party name and address and a collateral statement .
Earlier this week, an informal survey of state filing offices was conducted through the International Association of Commercial Administrators (IACA) listserv questioning how many states are rejecting UCC documents that leave the collateral description box (Box 4) blank. Responses are still trickling in and the results have been surprising. Of the fifteen state administrators have responded so far, only two have stated that they would always reject a document that was submitted with no collateral description, claiming that there are no official grounds with the Uniform Commercial Code for rejection. Several others noted that, while they would accept a paper filing that contained no collateral description, their electronic filing systems are programmed to reject such a document.
Please keep this development in mind as you prepare you UCC Financing Statements. The collateral description is a critical piece of a UCC Financing Statement and it seems that in many cases, a filing office will not catch your mistake and reject your UCC document should you fail to include the collateral description. Always be sure to double check your prepared document prior to submitting to the filing office to avoid potentially costly or troublesome filing mistakes.
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