How does due diligence vary between the Corporate and UCC perspective? This presentation outlines the similarities and differences between the two. Explore legal due diligence from both the audit and deal perspectives, with a focus on entity structure, contacts, KYC/AML, and timing.
Topics covered:
- Entity Structure
- Contracts
- Entity Records
- Know Your Customer/Anti-Money Laundering (KYC/AML)
- Timing
- Potential Impact Issues
Meet our expert:
Lori Ann Fox, Esq., Transactional Business Consultant
Lori Ann Fox has been with CT Corporation for over ten years as a government liaison and legal expert. In her role, she focuses primarily on the legal and regulatory issues facing CT’s customers in formation, compliance, and M&A. She sits on drafting committees and works closely with state bar associations, government offices and legislatures to implement changes in business entity and related laws. Additionally, she regularly lectures across the U.S. on topics related to business entity operations and filings, including:
Delaware Entity Laws
Mergers
Business Entity Formation and Maintenance
Compliance and Governance
Limited Liability Companies
Specialty/Alternative Entity Types
Ethical Considerations Surrounding Entity and Compliance Issues
Prior to joining CT, Ms. Fox maintained a private practice focusing on corporate law, which was preceded by her serving as General Counsel for an insurance company. Ms. Fox received her law degree from Emory University School of Law and is a member of the State Bars of Texas, Oklahoma, and Georgia.
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Entity Due Diligence From Corporate & UCC Perspectives
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CT CorporationWolters Kluwer
Entity Due Diligence:
From Corporate and
UCC Perspectives
Presented by:
Lori Ann Fox, Esq.
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STRUCTURE – Entities
• Identification – all parent, subsidiary & affiliated
• Determine domesticity
• Determine foreign registration
• Partnership with other departments or groups?
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STRUCTURE – Status
• Entities
– Compliant
– Noncompliant
Determine grounds
Gather facts
– Non-US?
• UCC
– Proper record filed
Types of UCC’s on record
STR
– Identify changes
Amendments
Continuations
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STRUCTURE – Status (cont.)
• UCC (cont.)
– Three Types of UCC Rev. Art. 9 documents
UCC 1—The foundation — notice document
UCC 3—The Swiss-Army knife — amend, continue, terminate, assign
UCC 5 — Information statement — no legal enforceability
– Stay vigilant
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STRUCTURE – Clean Up
• Entity clean up
– Requirements by entity type
Return to good standing
Resolve outstanding issues
– Responsible party(ies) by type
– Timing
• US vs. non-US
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STRUCTURE – Regulated Industries (cont.)
• Rev. Art. 9 UCC’s
– Security agreement
– UCC 1 – financing statement
• Financial Institutions – biggest changes
– Burden has increased on secured party to maintain and manage its portfolio of
UCCs
– Secured Party has fiduciary duty to maintain accurate information for
investors/shareholders/owners
– Changes in privacy laws require secured parties to maintain higher barriers to
their portfolios/UCCs
– Maintain privacy other than info required to be public
• Regulated Industries and regulations
– Ag liens, ERISA, EPA, etc.
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CONTRACTS (cont.)
• UCC – understanding impact
– Security agreement is a contract
UCC Financing Statements have not needed signatures since 2001
Revised Article 9 of the UCC permits the use of electronic records and signatures to
create a security interest in personal property, and by recognizing electronic
collateral
– Revised Article 9 permits electronic creation of a security interest via an
“authenticated” security agreement
– Amendments to security agreement?
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ENTITY RECORDS – Corporate Records
• Who, what, when, where, how
• Format – pc, online/cloud, paper?
• Blockchain
• Compliance impact?
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ENTITY RECORDS – UCC Records
• State records
– State index where all UCCs are stored and viewed
– E-filing UCC’s
– E-filing system differences – timing issues possible
• Internal records
– Identify policies
– Accessibility
– Monitoring
Responsible party
Record updates
– Most secured parties have created their own portfolios to manage their filings
per each state’s rules
• Blockchain. . .
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UCC & BLOCKCHAIN
• Interface issues with other systems
• Security concerns
– Public
– Private
• Slow adoption
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AML/KYC
Corporate
– Entities/Parties
– Contracts (incl reseller/dist agreements)
– SEC OFAC searches – SDN/PEP
– WY HB 101 – corp SH by key only and no one else has access but dies
– DAO
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AML/KYC (cont.)
UCC
– Process driven
– UCC/DUE DILIGENCE – BSA, US Patriot Act, OFAC, FinCEN
Deal Process
Often includes such elements as:
- Scanning ID’s and legal documents for verification
- Negative news/reputation analysis of individuals/entities
- ‘New’ databases (750 plus) to search to collect such data
- Regulatory agency review—has the entity/person been sanctioned
somehow