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.

1. CT CorporationWolters Kluwer
CT CorporationWolters Kluwer
Entity Due Diligence:
From Corporate and
UCC Perspectives
Presented by:
Lori Ann Fox, Esq.

2. CT CorporationWolters Kluwer
SEMINAR OVERVIEW
• Timing
• Structure
• Contracts
• Entity Records
• AML/KYC
• Potential Impacts
1

3. CT CorporationWolters Kluwer
TIMING

4. CT CorporationWolters Kluwer
TIMING – Audit vs. Deal
• Audit (Corp and UCC)
– Frequency
– Procedure
– Planning
• Deal (Corp and UCC)
– Pre vs. Post
– Priorities
 Corporations
 Private equity
3

5. CT CorporationWolters Kluwer
STRUCTURE
4

6. CT CorporationWolters Kluwer
STRUCTURE
• Entities
• Status
• Clean up
• Regulated Industries
5

7. CT CorporationWolters Kluwer
STRUCTURE – Entities
• Identification – all parent, subsidiary & affiliated
• Determine domesticity
• Determine foreign registration
• Partnership with other departments or groups?
6

8. CT CorporationWolters Kluwer
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
7

9. CT CorporationWolters Kluwer
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
8

10. CT CorporationWolters Kluwer
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
9

11. CT CorporationWolters Kluwer
STRUCTURE – Clean Up (cont.)
• UCC
– Identify issues
– Refile new UCC 1
– File UCC 3
10

12. CT CorporationWolters Kluwer
STRUCTURE – Regulated Industries
• Entities
– Identify agencies
– Filing requirements
– Compliance requirements
• Impact on UCC’s. . .
11

13. CT CorporationWolters Kluwer
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.
12

14. CT CorporationWolters Kluwer
CONTRACTS

15. CT CorporationWolters Kluwer
CONTRACTS
• Organizational skills
• Policy compliance
• Smart contracts
– Impact?
– Dispute resolution?
14

16. CT CorporationWolters Kluwer
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?
15

17. CT CorporationWolters Kluwer
ENTITY RECORDS

18. CT CorporationWolters Kluwer
ENTITY RECORDS – Corporate Records
• Who, what, when, where, how
• Format – pc, online/cloud, paper?
• Blockchain
• Compliance impact?
17

19. CT CorporationWolters Kluwer
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. . .
18

20. CT CorporationWolters Kluwer
UCC & BLOCKCHAIN
• Interface issues with other systems
• Security concerns
– Public
– Private
• Slow adoption

21. CT CorporationWolters Kluwer
AML/KYC

22. CT CorporationWolters Kluwer
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

23. CT CorporationWolters Kluwer
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

24. CT CorporationWolters Kluwer
POTENTIAL
IMPACT ISSUES

25. CT CorporationWolters Kluwer
POTENTIAL IMPACT ISSUES – Blockchain
Smart
contracts
DAO
Business
Entity
Amendments
Texas
UETA
Cost/benefit
Non-US Delaware
Unclaimed
property laws
Wyoming
Nevada
Federal
24

26. CT CorporationWolters Kluwer
RECAP
• Timing
• Structure
• Contracts
• Entity Records
• AML/KYC
• Potential Impact Issues
25

27. CT CorporationWolters Kluwer
CT CorporationWolters Kluwer
THANK YOU FOR ATTENDING
Entity Due Diligence:
From Corporate and
UCC Perspectives