aira 6 19-13 webinar rra9 ppt
TRANSCRIPT
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
Panelists:
William Houston BrownBankruptcy Judge, W.D. Tenn., 1987-2006 Lawrence R. Ahern, IIIAdjunct Professor of Law, Vanderbilt University
Partners, Brown & AhernADR & Legal Consulting to Professionals
[email protected](970) [email protected](615) 579-2542
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
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
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
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
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
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"
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
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
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
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.
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
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.
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
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
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?
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.
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).
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).
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
JULY 1, 2013 AMENDMENTS TO UCC ARTICLE 9: EFFECT ON INSOLVENCY
& RESTRUCTURING ADVISORS
QUESTIONS?
Panelists:
William Houston BrownBankruptcy Judge, W.D. Tenn., 1987-2006 Lawrence R. Ahern, IIIAdjunct Professor of Law, Vanderbilt University
Partners, Brown & AhernADR & Legal Consulting to Professionals
[email protected](970) [email protected](615) 579-2542