1. JULY 1, 2013 AMENDMENTS TO UCC
ARTICLE 9: EFFECT ON INSOLVENCY &
RESTRUCTURING ADVISORS
Webinar, June 19, 2013
Hon. William Houston Brown
Lawrence R. Ahern, III

2. Panelists:
William Houston Brown
Bankruptcy Judge, W.D. Tenn., 1987-2006
Lawrence R. Ahern, III
Adjunct Professor of Law, Vanderbilt University
Partners, Brown & Ahern
ADR & Legal Consulting to Professionals
WBrown@BrownAhern.com
(970) 319-2103
LAhern@BrownAhern.com
(615) 579-2542

3. INTRODUCTION
Why do you care?
 Interplay of Article 9 of the UCC
 Perfection defeats lien creditor
 Trustee/DIP is hypothetical judgment creditor with lien
on personal property
 May "avoid" unperfected security interest
 Importance to restructuring, workouts,
bankruptcy
 Determines secured status
 Secured status determines leverage in Chapter 11

4. INTRODUCTION (Cont'd)
Article 9 & Bankruptcy (Cont'd)
 Perfection constitutes "transfer" for preference
purposes
 Trustee/DIP may avoid perfection within
preference period
 90 days
 1 year to or for benefit of insider

5. INTRODUCTION (Cont'd)
Name of debtor
 Filing provides notice of security interest
 Indexed by name
 Trustee/DIP may show wrong name is "seriously
misleading"
 Unperfected
 Article 9 strict
 Search in correct name
 "Search logic" strict
 Must reveal filing

6. INDIVIDUAL DEBTOR'S NAME
Guidance lacking in 2001 statute
 Naming individuals more problematic than
entities
Court decisions
 Harsh outcomes
 Inconsistent
 States had started to enact "safe harbor"
legislation

7. INTRODUCTION (Cont'd)
New rules
 Most states have adopted
 Uniform effective date July 1, 2013
 Will change the way restructuring advisors and
other professionals will evaluate secured claims
 Upcoming AIRA Journal Articles

8. INDIVIDUAL DEBTOR (Cont'd)
Legislative status
 http://csctransactionwatch.com
 Majority have chosen Alternative A
Two alternatives
 §503(a)(4)
 Alternative A = "Only if"
 Alternative B = "Safe harbor"

9. ALTERNATIVE A – "ONLY IF"
If debtor has current driver's license
 Or ID issued by licensing authority
 Name on license sufficient to name debtor
Only if license/ID does not exist
 Two more alternatives
 Individual name
 First personal name and surname

10. ALT. B – "SAFE HARBOR"
Three equally sufficient safe harbors
 Individual name
 First personal name and surname
 Name on unexpired driver's license
So, if license/ID exists
 Works under either alternative
Problem for searchers
 Must search all possibilities

11. OBSERVATIONS
If license/ID exists
 Works under either alternative
Alternative B
 Additional searching
Alternative A
 License names not always fit with UCC-1
 Fields; order of names

12. HYPOTHETICAL # 1
Name: Brooks L. Dickerson
 Individual owner of construction company
 Known in community: "Louie" Dickerson
 Equipment filing: "Louie" Dickerson
 Peoples Bank v. Bryan Bros. Cattle Co., 504
F.3d 549 (5th Cir. 2007); § 9-506 Cmt. 2; see
also UCC § 9-503 Cmt. 2.d.

13. HYPOTHETICAL # 2
Name: Jane Doe Smith, nee Jane Patricia
Doe
 Individual owner of retail business
 Driver's license issued after marriage
 Inventory filing used name on old license
Effect of name change on filing
 Distinguish between existing and after-acquired
collateral
 4-month window to file correctly

14. HYPOTHETICAL # 3
Name: James McGinty, now Roger
McGuinn
 Alternative A state
 Driver's license: James McGinty
 Court order changed James McGinty's name to
Roger McGuinn
 No new license
 But filing in name of Roger McGuinn
 § 9-507 Cmt. 4.

15. HYPOTHETICAL # 3A
Name: James McGinty / Roger McGuinn
(Cont'd)
 Individual owner of retail business
 What if driver's license expires?
Name change rules (again):
 Collateral acquired by debtor more than four
months after change
 Not covered by after-acquired property clause

16. HYPOTHETICAL # 3B
Name: McGinty/McGuinn (Cont'd)
 Individual owner of a construction business
 What if McGinty/McGuinn moves to a new state?
 Only license is issued by former state
Location change rules:
 Must re-perfect within four months after change
 Unperfected if not re-filed
 Not limited to after-acquired property clause

17. REGISTERED ORGANIZATION
Institutional "birth certificate”
 Document filed as public record
 Corp., LLC, etc.
Two problems
 Database/website inconsistent with public
record?
 Public document have internal inconsistencies?

18. REGISTERED ORG. (Cont'd)
Database/document inconsistency
 New definition: "public organic record"
 = source of name
Inconsistency within public organic
record
 Look to text provision stating name
 Not caption, signature block, etc.

19. HYPOTHETICAL # 4
Spearing Tool
 Charter: "Spearing Tool Manufacturing
Company"
 Secretary of State website: "Spearing Tool Mfg.
Co."
 Sec'y of State issues Good Standing Certificate
("Spearing Tool Mfg. Co.")
 Filing: "Spearing Tool Mfg. Co.”
 In re Spearing Tool and Mfg. Co., Inc., 412 F.3d
653 (6th Cir. 2005), cert. denied, 127 S. Ct. 41
(2006).

20. HYPOTHETICAL # 5
C. W. Mining Company
 Title of "public organic record": "Articles of
Incorporation of CW Mining Company"
 Paragraph 1 of "public organic record": "The
name of this corporation shall be C. W. Mining
Company.” (periods; spaces)
 Filing: "CW Mining Company”
 Rushton v. Standard Industries, Inc. (In re C.W.
Mining Co.), 2009 WL 2601246, 69 UCC Rep.
Serv. 2d 830 (Bankr. D. Utah Aug. 24, 2009).

21. Transition Rules
General effectiveness rule
 New rules apply to existing transactions
 But 5 years to get filings right
 Ties to general 5-year effectiveness of UCC-1s
Filings that lapse during transition
 Must be re-filed in the correct name

22. JULY 1, 2013 AMENDMENTS TO UCC
ARTICLE 9: EFFECT ON INSOLVENCY &
RESTRUCTURING ADVISORS
QUESTIONS?

23. Panelists:
William Houston Brown
Bankruptcy Judge, W.D. Tenn., 1987-2006
Lawrence R. Ahern, III
Adjunct Professor of Law, Vanderbilt University
Partners, Brown & Ahern
ADR & Legal Consulting to Professionals
WBrown@BrownAhern.com
(970) 319-2103
LAhern@BrownAhern.com
(615) 579-2542