DOCSLIB.ORG

Secured Transactions – Creation, Perfection and Priority Under Ucc Article 9

Total Page：16

File Type：pdf, Size：1020Kb

Download full-text PDF Read full-text

Load more

1 SECURED TRANSACTIONS – CREATION, PERFECTION AND PRIORITY UNDER UCC ARTICLE 9 Note: Portions of the outline that are particularly relevant to security interests in non- intermediated securities (i.e., “certificated securities”) appear in bold type. 1) SCOPE OF UCC ARTICLE 9 a) Article 9 Transactions UCC 9-109 i) Security Interest (1) Transaction, regardless of form, that creates a security interest in personal property or fixtures by contract (2) Security interest is an interest in personal property or fixtures to secure payment or to secure performance of an obligation UCC 9-102(37) (a) Secured Party—person in whose favor a security interests is created UCC 9-102(72) (b) Debtor—person with the interest in the collateral UCC 9-102(28) (c) Obligor—person who owes payment or performance, usually the debtor UCC 9-102(59) ii) Agricultural Liens (ALWAYS STATUTORY) (1) Interest in farm products (not a security interest) (2) Secures payment for goods, services, or real estate lease in connection with debtor’s farming operation (3) Created by statute (4) Creditor furnished goods/services or leased real property in the ordinary course of debtor’s business AND (5) Statute does not require possession to effectuate the lien iii) Sale of Intangibles (Debtor sells his rights to payment) (1) Accounts (2) Chattel paper (3) Payment intangibles (4) Promissory notes iv) Consignments (1) A consignment is a bailment for the purpose of sale. Article 9 applies if (a) Merchant receiving goods (i) Is not an auctioneer (ii) Does not do business under name of the consignor (iii) Is not generally know by creditors to be a consignee (b) Each delivery is $1000 or more at the time of delivery (c) Goods are not consumer goods immediately before delivery AND (d) The transaction is not a security interest v) Conditional Sales UCC 9-109(a)(5); 2-401 (1) Any attempt by a seller to retain title in goods shipped or delivered is limited to a security interest vi) Leases Intended as Security UCC 1-201(37): Article 9 applies if: (1) Lease is not subject to termination by the lessee AND one of the following: (a) Term of the lease and economic life are equal (b) Lessee is bound to buy (c) Renewal or buyout at end of term for nominal consideration (i) Nominal consideration is determined by comparing the buyout/renewal price to the "reasonably predictable fair market value" (ii) Reasonably predictable fair market value is what the parties expected the goods would be worth at the time the parties entered into the lease agreement (iii) If the only reasonable thing to do is pay the buyout price, the price is nominal (2) Security interests are not created in the following situations UCC 1-201(37) (a) Clause requiring the lessee to pay insurance, taxes, etc. (b) Lessor files a financing statement (c) Present value of the property is substantially greater than or equal to the fair market value at the time the lease was entered into (d) Full payout leases where lessee pays the full price at the end of the term 2 (e) Renewals for consideration (not nominal) b) Collateral: Determined by the debtor’s use of the property i) Classification UCC 9-102 (1) Tangibles: Goods (movables at the time the interest attaches) including Fixtures UCC 9-102(a)(44). (a) Goods Generally (i) Classification of goods is mutually exclusive: goods must be one of the four classifications (ii) The classification of goods is determined by their principal use (iii) If you can't determine the principal use, the good is equipment (b) Consumer goods UCC 9-102(a)(23) (i) Primarily for personal, family, or household use (ii) Businesses cannot have consumer goods, only individuals (c) Equipment UCC 9-102(a)(33) (i) Goods other than inventory, consumer goods, or farm products (ii) Rule out all other goods before picking equipment (iii) Animals can be equipment (if not on the farm as farm product) (iv) Principal Use Doctrine: = equipment (d) Inventory UCC 9-102(a)(58) (i) Goods other than farm products where debtor 1. holds the goods for sale or lease OR 2. uses up or consumes the goods in business (e) Farm Products UCC 9-102(a)(34) (i) Goods held by debtor (farmer) engaged in farming operation 1. Farming operation is raising, cultivating, fattening, etc. on the farm AND (ii) Goods are either 1. crops 2. livestock—animals raised on the farm 3. supplies—seed, fertilizer, feed, NOT fixed assets 4. products of crops or livestock in unmanufactured state (f) Fixtures: UCC 9-102(a)41) (i) Personal property that is so related to real property that an interest arises under real property law (ii) Fixtures will either be 1. Equipment, if the debtor is a business OR 2. Consumer goods, if the debtor is an individual (2) Intangibles (a) Money: medium of exchange adopted by a government (1-201(24)) (b) Investment Property (i) Security (directly or indirectly held, certificated security or uncertificated security), commodity contract, or commodity account (9-102(a)(13)) (c) Commercial Tort Claim (i) Individual’s tort claim arising out of business and not involving personal injury, or (ii) An organization’s tort claim (9-102(a)(13)) (d) Chattel Paper (i) The records constituting a secured transaction in, or a lease of, specific goods, but not the charter of a vessel (9-102(a)(11)) (ii) Record that evidences both a debt and a security interest in specific goods (e) Instrument (i) Right to payment of a monetary obligation represented by a negotiable instrument or by a writing commonly transferred by delivery and any necessary endorsement or assignment, unless it is a lease or security agreement, investment property, letter of credit, or writings evidencing a credit card receivable (9-102(a)(47)) (ii) Types 1. promissory notes 2. checks 3. negotiable certificates of deposit; drafts (f) Deposit Account (i) demand, time, savings, or passbook account maintained with a bank, but not investment property or an instrument (9-102(a)(29)) (g) Account 3 (i) right to payment of a monetary obligation that arises from (1) the disposition of property by sale, lease, license, or otherwise (2) the rendering of services, (3) the issuing of insurance, (4) the incurring of a secondary obligation, (5) the providing of energy, (6) the chartering of a vessel, (7) the use of a credit card, or (8) legal lottery winnings; unless the right to payment results from money advanced or comes within one of the other categories of intangible property (h) Document (i) warehouse receipts, bills of lading, and similar documents embodying rights to goods possessed by a bailee (9-102(a)(30)) (ii) documents means documents of title (i) General Intangibles (i) any personal property not fitting into one of the other categories (ii) (i.e. software, copyrights, patents, payment intangibles) c) Exclusions—UCC 9-109(d) excludes the following from Article 9: i) Transactions Excluded (1) Statutory liens other than agricultural liens (2) Assignments of deposit accounts (bank accounts) in consumer transactions (3) Insurance policies EXCEPT Health Care Insurance Receivables (4) Transfer of accounts, chattel paper, payment intangibles, or promissory notes where (a) Sale is part of a going out of business sale (b) Assignment is for collection purposes only (5) Assignment of a single account, payment intangible, or promissory note (NOT CHATTEL PAPER) to satisfy a preexisting debt (6) Assignment of a right to payment under contract to assignee who is also obligated to perform under the contract ii) Collateral Excluded (1) Non-commercial tort claims (2) Real estate other than fixtures 2) CREATION OF SECURITY INTERESTS: ATTACHMENT UCC 9-203 a) General Rule: A security interest attaches to collateral when it becomes enforceable against the debtor with respect to the collateral i) Attachment is all that is necessary when the dispute is between the creditor and the debtor ONLY ii) Where there is a dispute involving a third party, the security interest is enforceable against third parties BUT perfection will be necessary to determine priority b) Requirements: (1) Agreement; (2) Debtor has Rights in the Collateral; (3) Creditor gives Value (Statute of Frauds) i) Agreement and Authenticated Record: Debtor authenticates a security agreement that describes the collateral (1) UCC 9-102: Security agreement is an agreement that creates or provides for a security interest (a) This is the intent requirement (b) The parties, particularly the debtor, must have intended to create a security interest and intent to do so must be evidenced in some kind of record (c) No magic words are required in the agreement (2) UCC 9-102: Authenticated Record (a) The debtor signed the agreement or (b) The debtor executed or adopted a symbol with the present intent to adopt or accept a record (c) Record is information inscribed on a tangible medium or stored in electronic medium and is retrievable in perceivable form (d) Emails can be records (e) Bundle of Documents Theory: ALL the correspondences by the parties can be used to meet the authenticated record requirement (3) UCC 9-108: Description of the Collateral (a) General rule (i) Reasonably identifies what is described. 1. Exact description of the collateral 2. Category of collateral 3. An Article 9 description (e.g., accounts, chattel paper, inventory, etc.) 4. Quantity 5. Computational or allocational formula or procedure OR 4 6. Any other method, if the identity of the collateral is objectively determinable (b) Exceptions (i) Supergeneric descriptions such as "all debtor’s assets" or "all debtor’s property" are not sufficient for the security agreement (ii) An Article 9 description is insufficient if the collateral is 1.
Recommended publications
  • The Anti-Lien: Another Security Interest in Land*

    The Anti-Lien: Another Security Interest in Land*

    The Anti-Lien: Another Security Interest in Land* Uriel Reichmant The law recognizes various security interests in land, which are de- signed to provide two distinct advantages over unsecured interests: the right to priority over general creditors in bankruptcy proceedings, and the right to satisfy the debt from a specified parcel of property. This article proposes recognition of an intermediate concept between secured and unsecured debt: an interest in land that secures to some extent the repayment of a debt, but does not possess the twin characteristics of full security interests. This interest in land, the "anti-lien,"1 is a preventive measure; the debtor's power of alienation and power to grant another security interest are suspended while the debt remains outstanding. The anti-lien creditor has no powers or rights other than this passive rem- edy; for all other purposes, he is treated as a simple debt creditor. The few cases that have dealt with contracts containing anti-lien re- strictions have limited the analysis to a narrow question: did the con- tract create an equitable lien (that possesses the characteristics of a traditional security interest) or merely a personal obligation? Framing the question in this way eliminated consideration of the anti-lien alter- native-an alternative that is potentially useful when a regular security interest is unavailable or economically impractical. This paper attempts to explain deficiencies in the application of the equitable lien analysis to the anti-lien situation and argues the case for the anti-lien concept. Just a decade ago, documents evidencing an anti-lien approach were widely used in California.
  • Credit Applications and Beyond

    Credit Applications and Beyond

    Credit Enhancements: Beyond the Personal Guaranty Thomas R. Fawkes and Brian J. Jackiw Goldstein & McClintock LLLP Warning Signs of Impending Default • Deviations in the manner or timing of counterparty payment may suggest liquidity issues or a potential bankruptcy filing • Counterparty requests lengthening of payment terms or additional trade credit • Counterparty becomes less cooperative and avoids communications concerning outstanding amounts due • Public reports (such as those published by Dun & Bradstreet) suggest that the counterparty is not paying its trade debts in a manner consistent with past practices • Rumors of the counterparty’s imminent demise are being conveyed by competitors or industry sources 2 What do you do if you do not have credit enhancements in place? TAKE THE MONEY!!!! • Comply strictly with any contracts in place • Do not extend additional credit • Evaluate past history • Make every effort to maintain ordinary course of business terms 3 Credit Enhancements and Protections Credit enhancements offer greater protection in the event a counterparty experiences financial distress and/or becomes a debtor in bankruptcy, and include: • Irrevocable Letters of Credit • Pre-payment of goods and services • Guaranty Agreements and Puts • Cross/Intercompany Guarantees • Deposits • Trust Agreements • Credit Insurance • Security Interests in Collateral (including purchase-money security interests) 4 Standby Letters of Credit • A letter of credit (LOC) is, simply put, a commitment to make a payment, typically issued by a counterparty’s
  • Distinguishing Between Securities Account and Deposit Accounts Under the UCC

    Distinguishing Between Securities Account and Deposit Accounts Under the UCC

    As Appeared in the Illinois Bar Journal December, 2000, Volume 88 #12 Distinguishing Between Securities Account and Deposit Accounts Under the UCC By René Ghadimi, Katten Muchin Zavis Rosenman ©Reprinted with permission of the Illinois Bar Journal. Copyright by the Illinois State Bar Association, on the Web at <www.isba.org> Lenders frequently take security interests in the deposit accounts and securities accounts of their borrowers to secure the repayment of borrowers loan obligations. This article explores the basis for perfecting security interests in securities and deposit accounts and discusses the often important and sometimes elusive distinction between the two. The first step [in] determining how to perfect a lien is to decide whether a given account is a deposit or a securities account, as such terms are defined in the UCC in the relevant jurisdiction. Cash collateral accounts of one form or another are an important part of many finance transactions. These accounts may constitute significant assets of a borrower and can assume many forms, including operating accounts, capital subscription accounts, various types of reserve accounts and cash management accounts. These accounts may contain funds that are maintained overnight or for extended periods. More often than not, business realities dictate that the borrower be allowed to maintain some degree of control over the funds and invest them in financial assets rather than letting them languish as cash balances. The question for lenders who typically take a pledge of these accounts to secure the loan obligations of their borrower is how to perfect their security interest. These lenders must confront the issue of whether these various accounts are deposit accounts or securities accounts under the Uniform Commercial Code, or maybe a little of both.
  • 2011 Commercial Law Developments

    2011 Commercial Law Developments

    2011 COMMERCIAL LAW DEVELOPMENTS Steven O. Weise PROSKAUER ROSE LLP Los Angeles, California Teresa Wilton Harmon SIDLEY AUSTIN LLP Chicago, Illinois Lynn A. Soukup PILLSBURY WINTHROP SHAW PITTMAN LLP Washington, DC February 23, 2012 1080/99999-590 current/25279187v4 TABLE OF CONTENTS Page I. PERSONAL PROPERTY SECURED TRANSACTIONS ............................................ 1 A. Scope of Article 9 and Existence of a Secured Transaction .......................................................................................... 1 1. General ....................................................................................... 1 2. Insurance ................................................................................... 1 3. Licensing .................................................................................... 2 4. Consignments ........................................................................... 3 5. Real Property ............................................................................ 3 6. Leasing ....................................................................................... 5 7. Sales ............................................................................................ 8 8. Intellectual Property .............................................................. 10 9. Tort Claims .............................................................................. 10 B. Security Agreement and Attachment of Security Interest ...............................................................................................
  • Perfecting a Security Interest in an LLC Membership Interest in Virginia

    Perfecting a Security Interest in an LLC Membership Interest in Virginia

    Perfecting a Security Interest in an LLC Membership Interest in Virginia Rebecca C. Bowen Thompson McMullan, P.C. (804) 698-6223 / [email protected] With limited liability companies being the entity of choice for many businesses in Virginia and the lending opportunities that they create, it is important to understand how to perfect a security interest in an LLC membership interest. Under Virginia’s UCC, a membership interest may be classified as either a “security” (Va. Code § 8.8A-103(c)) or a “general intangible” (Va. Code § 8.9A-102(42)). Establishing and determining the correct classification is important because different rules are invoked for the perfection and priority of a security interest in a security versus a general intangible. Va. Code § 8.8A-103(c) provides that a membership interest is not a “security” unless it is “dealt in or traded on securities exchanges or in securities markets, its terms expressly provide that it is a security governed by [Article 8.8A of the Virginia Code], or it is an investment company security. However, an interest in a partnership or limited liability company is a financial asset if it is held in a securities account.” Accordingly, a membership interest is not a “security” unless: the LLC’s articles of organization or operating agreement “opt-in” to Article 8.8A by specifying that the membership interests are securities governed by Article 8.8A; (ii) the membership interests are actually dealt in or traded on securities exchanges or securities markets; (iii) the LLC is an investment company; or, (iv) the membership interest is a financial asset held in a securities account.
  • United States

    United States

    Finance Handbook 2011 Country Q&A United States George E Zobitz, Paul H Zumbro and Christopher J Kelly www.practicallaw.com/9-501-2871 Cravath, Swaine & Moore LLP OVERVIEW OF THE LENDING MARKET In a minority of states, however, a mortgage transfers title to the lender until the secured obligations are met. 1. Please give a brief overview of the main trends and important Deeds of trust. A deed of trust is a variant of the mortgage and developments in the lending market in your jurisdiction in is used in many states in its place. It usually involves a convey- the last 12 months. ance of the real property by the borrower to a third party, who holds it in trust for the lender as security for the debt. The US loan market has experienced some volatility over the past Leasehold mortgages/leasehold deeds of trust. A leasehold 12 months, being marked by rapid swings in market demand for mortgage or deed of trust enables a lender to take a security in- new loans. At the beginning of 2010, much of the loan market ac- terest in the borrower’s interest as a tenant under a lease. Upon tivity focused on extending the maturity of existing loan facilities an event of default, the lender can foreclose on its leasehold through amend and extend transactions, as few investors were mortgage and become the tenant under the lease, or transfer the willing to make new money loans. As the year has progressed, tenancy to another entity. Leases often prohibit such mortgages new syndicated loan financings have become more prevalent, in- or deeds of trust, or require the landlord’s consent.
  • Foreclosure of Security Interests in Personal Property Phillip L

    Foreclosure of Security Interests in Personal Property Phillip L

    Agricultural Business Management FARM LEGAL SERIES June 2015 Foreclosure of Security Interests in Personal Property Phillip L. Kunkel, Jeffrey A. Peterson, Jason Thibodeaux Attorneys, Gray Plant Mooty virtually every security agreement contains a INTRODUCTION broad definition of events that constitute a default. Such events include the failure to Lenders typically require borrowers to pledge make an installment payment when due, the property (or collateral) to secure the loan. sale of collateral without the creditor's prior Collateral is real or personal property owned written consent, the failure to keep the by the borrower that is pledged to the lender collateral adequately insured or the as security for the repayment of the debt occurrence of any other event that causes the obligation. For further discussion, see creditor to deem itself insecure. Financing the Farm Operation; Contracts, Notes and Guaranties; Mortgages and Acceleration Clause Contracts for Deed; and Security Interest in Both the promissory note and the security Personal Property. In the event of default, the agreement will generally contain an lender may look to the collateral to satisfy acceleration clause. This clause allows the the debt. creditor to demand payment of the loan in The process of foreclosing a mortgage in real full upon the occurrence of any event of property and foreclosing a security interest default. in personal property are very different. In this fact sheet, we will discuss the options SECURED PARTY OPTIONS AFTER DEFAULT available to creditors with a security interest Once a default has occurred, there are a in personal property and review the number of options available to the secured procedures under Minnesota law that are party.
  • Security Interests in Patents and Patent Applications?

    Security Interests in Patents and Patent Applications?

    Volume VI - Article 3 Security Interests in Patents and Patent Applications? Pauline Stevens1 Fall 2005 Copyright © University of Pittsburgh School of Law Journal of Technology Law and Policy There is a question mark in the title of this article because more questions than answers have been encountered in researching the topic. The relative certainty with which owners of furniture, equipment, accounts and most other personal property can obtain credit by granting a security in their property rapidly dissipates when the property in question is intellectual property. Owners of patents and other intellectual property find barriers to obtaining secured credit that are not faced by other property owners because there is a historical gap between the federal law protecting rights of intellectual property owners and state laws addressing secured transactions. The increasing importance of intellectual property to the economy of the United States (patent filings having increased by seventy percent since 19962 raises the visibility of this gap and urges consideration of changes in law. This would permit owners of intellectual property access to the same 1 Copyright Reserved. Parts of this article are adapted from “The Intersection of Film Finance and Revised Article 9: A Mystery” appearing in the spring edition of the U.C.L.A. Entertainment Law Review (2002). While this article focuses on patents and patent applications, other forms of intellectual property are subject to the same issues. For general discussions of some of these issues, see materials cited in notes 33 and 46 infra. 2 Intellectual property constitutes the largest sector of the American economy, contributing five percent to the gross domestic product, and it continues to grow in importance generally.
  • The Unfortunate Life and Merciful Death of the Avoidance Powers Under Section 103 of the Durbin-Delahunt Bill: What Were They Thinking?

    The Unfortunate Life and Merciful Death of the Avoidance Powers Under Section 103 of the Durbin-Delahunt Bill: What Were They Thinking?

    University of Pennsylvania Carey Law School Penn Law: Legal Scholarship Repository Faculty Scholarship at Penn Law 2004 The Unfortunate Life and Merciful Death of the Avoidance Powers Under Section 103 of the Durbin-Delahunt Bill: What Were They Thinking? Steven L. Harris Chicago-Kent Law School Charles W. Mooney Jr. University of Pennsylvania Carey Law School Follow this and additional works at: https://scholarship.law.upenn.edu/faculty_scholarship Part of the Bankruptcy Law Commons, Labor and Employment Law Commons, Retirement Security Law Commons, and the Secured Transactions Commons Repository Citation Harris, Steven L. and Mooney, Charles W. Jr., "The Unfortunate Life and Merciful Death of the Avoidance Powers Under Section 103 of the Durbin-Delahunt Bill: What Were They Thinking?" (2004). Faculty Scholarship at Penn Law. 513. https://scholarship.law.upenn.edu/faculty_scholarship/513 This Article is brought to you for free and open access by Penn Law: Legal Scholarship Repository. It has been accepted for inclusion in Faculty Scholarship at Penn Law by an authorized administrator of Penn Law: Legal Scholarship Repository. For more information, please contact [email protected]. THE UNFORTUNATE LIFE AND MERCIFUL DEATH OF THE A VOIDANCE POWERS UNDER SECTION 103 OF THE DURBIN-DELAHUNT BILL: WHAT WERE THEY THINKING? Steven L. Harris & Charles W. Mo oney, Jr.* lNTRODUCTIO This Article seeks to draw some lessons from the drafting, introduction, claimed justification, and eventual withdrawal of Section 103 of the Employee Abuse Prevention Act of 2002 (the "2002 Bill"). I The Bill was introduced by Senator Richard J. Durbin (D-Ill.) and Rep. vVilliam D.
  • Recent Case: UCC Article 9 - Lease/Option As a Security Agreement - Statute of Frauds [In Re Financial Computer Systems, Inc., 474 F.2D 1258 (9Th Cir

    Recent Case: UCC Article 9 - Lease/Option As a Security Agreement - Statute of Frauds [In Re Financial Computer Systems, Inc., 474 F.2D 1258 (9Th Cir

    Case Western Reserve Law Review Volume 24 Issue 3 Article 7 1973 Recent Case: UCC Article 9 - Lease/Option as a Security Agreement - Statute of Frauds [In re Financial Computer Systems, Inc., 474 F.2d 1258 (9th Cir. 1973)] John T. Mulligan Follow this and additional works at: https://scholarlycommons.law.case.edu/caselrev Part of the Law Commons Recommended Citation John T. Mulligan, Recent Case: UCC Article 9 - Lease/Option as a Security Agreement - Statute of Frauds [In re Financial Computer Systems, Inc., 474 F.2d 1258 (9th Cir. 1973)], 24 Case W. Rsrv. L. Rev. 619 (1973) Available at: https://scholarlycommons.law.case.edu/caselrev/vol24/iss3/7 This Note is brought to you for free and open access by the Student Journals at Case Western Reserve University School of Law Scholarly Commons. It has been accepted for inclusion in Case Western Reserve Law Review by an authorized administrator of Case Western Reserve University School of Law Scholarly Commons. 1973] RECENT CASE UCC ARTICLE 9 - LEASE/OPTION AS A SECURITY AGREEMENT - STATUTE OF FRAUDS In re Financial Computer Systems, Inc., 474 F.2d 1258 (9th Cir. 1973). It has long been held that a debtor may introduce extrinsic evidence to prove that a writing is actually a security agreement even though it appears to be something else.' Such a rule has been considered essential to protect the debtor's equity of redemption. The Ninth Circuit Court of Appeals, nevertheless, recently held in In re Financial Computer"Systems, Inc.' that the statute of frauds barred inquiry into a bankruptcy trustee's claim that a purported lease was in fact a disguised security agreement.
  • Equity Interests As Collateral: Creating and Enforcing Security Interests In

    Equity Interests As Collateral: Creating and Enforcing Security Interests In

    Presenting a live 90-minute webinar with interactive Q&A Equity Interests as Collateral: Creating and Enforcing Security Interests in Stocks, Partnerships and LLCs Navigating Unique Planning and Documentation Issues, Avoiding Potential Pitfalls in Perfecting Security Interests THURSDAY, MARCH 9, 2017 1pm Eastern | 12pm Central | 11am Mountain | 10am Pacific Today’s faculty features: ​ James S. Cochran, Partner, O'Connor Cochran, Los Angeles James D. Prendergast, SVP, Legal Counsel-UCC Division, First American Title Insurance Company, Santa Ana, Calif. Steven O. Weise, Partner, Proskauer Rose, Los Angeles The audio portion of the conference may be accessed via the telephone or by using your computer's speakers. Please refer to the instructions emailed to registrants for additional information. If you have any questions, please contact Customer Service at 1-800-926-7926 ext. 10. UCC ARTICLE 9: CHOICE OF LAW FOR SECURITY INTERESTS IN INTERMEDIATED SECURITIES UNDER THE HAGUE SECURITIES CONVENTION ENFORCING SECURITY INTERESTS IN NON- STANDARD COLLATERAL – UNINCORPO- RATED ENTITIES Steve Weise Proskauer Rose LLP [email protected] March 2017 _ 1080/99987-590 CURRENT/75613231v2 03/07/2017 2:11 PM Enforcing security interests in unincorporated entities 1. Choice of law for security interests in intermediated securities under the Hague Securities Convention 1.1 Effective date in United States 1.2 Scope of the Convention 1.3 Primary rule (a) Account agreement (b) Qualifying Office 1.4 Fall-back rules 1.5 Transition rules 2. Legal and practical framework for the foreclosure of property 2.1 Secured party’s choices: (a) Collection – UCC § 9-607 (“If so agreed, and in any event after de- fault, a secured party: (1) may notify an account debtor or other person obligated on collateral to make payment or otherwise ren- der performance to or for the benefit of the secured party .
  • Purchase Money Security Interest TOPIC Suppliers Beware: Tracing Collateral Proceeds Is No Sure Thing

    Purchase Money Security Interest TOPIC Suppliers Beware: Tracing Collateral Proceeds Is No Sure Thing

    Coming in March: Credit Risk Analysis & Credit Scoring Business Credit ® BusinessNational Association of Credit ManagementCredit THE PUBLICATION FOR February 2006 CREDIT AND FINANCE PROFESSIONALS $7.00 SELECTED Purchase Money Security Interest TOPIC Suppliers Beware: Tracing Collateral Proceeds Is No Sure Thing Bruce S. Nathan, Esq. hen a supplier sells product to a financially The Facts Of The Seventh Circuit Case distressed customer and obtains a purchase The debtor was a dealer in agricultural products, money security interest in the product and all including chemicals, fertilizer and limestone. The W proceeds to secure payment of its claim, the debtor had purchased inventory on credit terms from supplier has no assurance that it can recover from the multiple suppliers, including the purchase money sup- Bruce Nathan, Esq. proceeds of its purchase money collateral. The supplier’s plier involved in the case. is a Partner in the security interest continues in all identifiable proceeds law firm of Lowenstein arising from the customer’s sale or other disposition of In 1983, the purchase money supplier and the debtor Sandler PC in New the supplier’s goods. The problem, dear Watson, is in entered into an agreement under which the supplier was York, NY. He is also a identifying such proceeds. granted a security interest in, among other things, the member of NACM and is a Co-Chair of the following assets to secure payment of the supplier’s American Bankruptcy This is frequently at issue after the customer sells the claims against the debtor: Institute Unsecured purchase money supplier’s inventory collateral, and Trade Creditors commingles the proceeds with the proceeds of other “...all inventory [of the Debtor] including, but not Committee.