UCC Termination Statements, a Trap for the Unwary: Part One
UCC
For the next several weeks, we welcome back guest author, attorney, Bennett L. Cohen to the FCS blog! Read on for the first installment in his multi-part blog series addressing the intricacies of UCC Termination Statements
Reviewing UCC terminations in a UCC search is often viewed by some secured parties as a mundane administrative task. Quite to the contrary, UCC terminations are an essential and important component of a financing transaction, and careful review and evaluation of filed UCC terminations of record in a UCC search are essential for a secured party’s protection.
Let’s first examine the basics of a UCC termination, and then delve deeper into the subject.
Upon enactment of Revised Article 9 of the Uniform Commercial Code (the “Code”) in 2001, a UCC termination was no longer required to be signed by the secured party of record terminating its filing. The UCC termination, as well as amendments, assignments, partial releases, and continuations of a UCC financing statement, are all accomplished by filing a UCC amendment form and checking and/or completing the appropriate sections of the amendment form (i.e., filling out the appropriate sections for a termination, amendment, assignment, partial release or continuation).
The following basic information is required to be inserted in the UCC amendment in order to file an effective UCC termination:
- The initial UCC financing statement number being terminated needs to be inserted in Box 1a. The date such initial UCC was filed should also be entered in Box 1a (although it is technically only required in those states where the filing number for the initial UCC filing is also the same filing number used by such states for subsequent amendments to the same filing).
- Note that when you terminate a UCC filing, you only list its initial UCC filing number in Box 1a. You do not list in the UCC termination, the separate filing numbers for all subsequent amendments to the UCC filing being terminated (such as the filing numbers for continuations or amendments for name, address or collateral changes, etc.).
- Box 2 needs to be checked to reflect that the amendment is being used to terminate the initial UCC described in Box 1a.
- In Box 9a, the name and address of the secured party authorizing the termination of the UCC is inserted*. On rare occasions, Box 9a is used to reflect that the termination has been authorized by the debtor (see discussion below).
*technically, Box 9a does not need to be completed for an effective termination, however, it’s always a good idea to complete Box 9a
About the Author
Bennett L. Cohen is a partner in the law firm of Cohen, Salk & Huvard, P.C. in Northbrook, Illinois, a Chicago suburb. Bennett regularly represents banks, commercial finance companies, insurance companies and other institutional lenders in the structuring, documentation and closing of commercial financing transactions, including asset-based loans, commercial loans, commercial real estate mortgage and construction loans, mezzanine loans, leveraged acquisitions, equipment lease loans and factoring transactions. Bennett is a member of the American Bar Association and serves on the ABA Committee on Commercial Financial Services and the ABA Subcommittees on Secured Lending, Loan Documentation and the Uniform Commercial Code. Bennett can be contacted at bcohen@cshlegal.com.