According to an American Bar Association advisor to the Article 9
Drafting Committee, old financing statements are effective until the earlier of five years
from the filing date or July 1, 2001. They are effective to
perfect post-June 30, 2001, collateral, even if the collateral
category changes, and that priority dates from the filing date for
both old and "new" collateral. It will be necessary
for searches to be conducted n the "old" filing locations as
well as the "new" locations under Revised Article 9 for the
entire five-year transition period.
Continuation statements come in two categories. A
"real" continuation, which is used when continuing an old
Article 9 filing in the same state where it would be filed under
Revised Article 9. This filing will be done on a UCC-3
(Amendment) form and is to be filed within the normal six-month
window. The continuation statement must "update"
the old financing statement to comply with Revised Article 9 by
reflecting the "correct" debtor name (this would be the name
as it appears on the Articles of Incorporation for a registered
entity) and amending the collateral description to comply with Revised
Article 9. This filing will relate back in priority. The
second category is the "in-lieu" continuation, which is used
when the filing under old Article 9 is not in the correct state for
Revised Article 9. This filing will be done on a UCC-1 (Initial
Financing Statement) and must state it is an "in-lieu"
filing plus refer to the filing(s) in old Article 9 state(s)/office(s)
by date, file number and jurisdiction. These may be filed any
time after July 1, 2001, but before lapse or June 30, 2006, whichever
comes first. This filing will have a new lapse date, which will
be five years from its filing, but the priority will relate back to
the original filing date. It is suggested that you keeping
certified copies of the filings in the "old" Article 9 state
to document position in each jurisdiction.
Generally, most filings will fall under the five-year rule but
there are some exceptions that will require "in-lieu" filing
during the first year of Revised Article 9. The one-year rule
will apply if new kinds of collateral or transactions are added or if
collateral is attached and perfected under old Article 9, or outside
old Article 9. Sometimes pre-filing is the answer. Some
examples of this would be deposit accounts collateral, commercial tort
claims, credit card sale or promissory note - notice to the
bailee. For pre-filing to comply with Revised Article 9, it must
be in the right state, have the correct collateral description and if
filed prior to July 1, 2001, have a debtor signature. Some
examples of pre-filing would be: generic description of the
collateral; license fee collateral with a full description; promissory
notes (notice to the bailee and bailee acknowledges the notice or
borrower "forgets" to give note to the bailee in 2000 and
borrower opens warehouse in additional state, but "forgets"
to mention it to the secured party.)
Priorities established under old Article 9 stay in place and the
old financing statements date from the filing. Pre-filing dates
from July 1, 2001, unless both secured parties pre-filed. In
other words, in order to retain a priority position, you must file
your continuation; either "real" or "in-lieu"
whichever is applicable. Pre-filing a UCC-1 in the location
required by Revised Article 9 will not be effective until July 1,
2001, so the priority will not relate back to the date of the
pre-filing.
In summary, it is suggested that perfecting correctly now under old
Article 9 and continue the old financing statement with an initial
financing statement, "in-lieu", at the appropriate time
instead of placing a separate filing in the state of
incorporation. Re-perfect by July 1, 2002, for security
interests perfected other than by filing, if perfection does not
suffice under Revised Article 9. Pre-file for collateral and
transactions now outside of Article 9.