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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. Tips for Optimal Quality FOR LIVE EVENT ONLY Sound Quality If you are listening via your computer speakers, please note that the quality of your sound will vary depending on the speed and quality of your internet connection. If the sound quality is not satisfactory, you may listen via the phone: dial 1-866-873-1442 and enter your PIN when prompted. Otherwise, please send us a chat or e-mail [email protected] immediately so we can address the problem. If you dialed in and have any difficulties during the call, press *0 for assistance. Viewing Quality To maximize your screen, press the F11 key on your keyboard. To exit full screen, press the F11 key again. Continuing Education Credits FOR LIVE EVENT ONLY In order for us to process your continuing education credit, you must confirm your participation in this webinar by completing and submitting the Attendance Affirmation/Evaluation after the webinar. A link to the Attendance Affirmation/Evaluation will be in the thank you email that you will receive immediately following the program. For additional information about continuing education, call us at 1-800-926-7926 ext. 35. Program Materials FOR LIVE EVENT ONLY If you have not printed the conference materials for this program, please complete the following steps: • Click on the ^ symbol next to “Conference Materials” in the middle of the left- hand column on your screen. • Click on the tab labeled “Handouts” that appears, and there you will see a PDF of the slides for today's program. • Double click on the PDF and a separate page will open. • Print the slides by clicking on the printer icon. EAGLE 9® UCC Division FIRST AMERICAN TITLE INSURANCE COMPANY EAGLE 9® UCC Division Pacific Ocean Pepperdine Law School 6 EAGLE 9® UCC Division Our Mission Cover foreclosure of Article 9 security interests on equity collateral. 7 EAGLE 9® UCC Division FORECLOSURE 8 ® EAGLE 9 UCC Division A GUIDE TO THINKING ABOUT PERFECTION Step 1: Does Article 9 Apply? Step 2: Attachment Step 3: Categorize the Collateral Step 4: Perfection Step Filing (§9-310) Perfection under non-Article 9 law (§9-311(a)) Possession (§9-313) Control (§§9-314, 9-104, 9-106, 8-106) Step 5: Priority Consequences 9 EAGLE 9® UCC Division US CMBS and CRE CDO: Moody’s Approach to Rating Commercial Real Estate Mezzanine Loans Pledge of 100% of the equity Opt In to Article 8 Certificate the Equity File a Financing Statement Control the ability to Opt Out – hardwire or proxy UCC Insurance 10 EAGLE 9® UCC Division NEED TO CONSIDER NOT ONLY SECURED CREDITOR STATUS UNDER ARTICLE 9 OF THE UCC; BUT ALSO PROTECTED PURCHASER STATUS UNDER ARTICLE 8 OF THE UCC 11 EAGLE 9® UCC Division FORECLOSURE 12 EAGLE 9® UCC Division Methods of Foreclosure • Foreclosure by Public Sale • Foreclosure by Private Sale • Retention of Collateral in Satisfaction of the Debt • Judicial Enforcement • Collection Rights under UCC Section 9-607 13 EAGLE 9® UCC Division Foreclosure 101: 1. Analogies to real property law don’t work – as is generally true: foreclosure cuts off right of redemption (§9-623(c)) rights of good faith transferee (§9-617(b)) 2. Secured creditor rights upon default (including foreclosure) are covered in Part 6 of Article 9. 14 EAGLE 9® UCC Division Sale Procedures Compared Judicial sale Article 9 sale Purpose By whom? Legal standard? When final? Judgment for deficiency? 15 EAGLE 9® UCC Division Sale Procedures Compared Judicial sale Article 9 sale Purpose Enforce mortgage Protect “equity” Maybe fix deficiency By whom? Legal standard? When final? Judgment for deficiency? 16 EAGLE 9® UCC Division Sale Procedures Compared Judicial sale Article 9 sale Purpose Enforce mortgage Enforce SI Protect “equity” Protect “surplus” Maybe fix deficiency Maybe fix deficiency By whom? Legal standard? When final? Judgment for deficiency? 17 EAGLE 9® UCC Division Sale Procedures Compared Judicial sale Article 9 sale Purpose Enforce mortgage Enforce SI Protect “equity” Protect “surplus” Maybe fix deficiency Maybe fix deficiency By whom? Sheriff, clerk Legal standard? When final? Judgment for deficiency? 18 EAGLE 9® UCC Division Sale Procedures Compared Judicial sale Article 9 sale Purpose Enforce mortgage Enforce SI Protect “equity” Protect “surplus” Maybe fix deficiency Maybe fix deficiency By whom? Sheriff, clerk Secured party Legal standard? When final? Judgment for deficiency? 19 EAGLE 9® UCC Division Sale Procedures Compared Judicial sale Article 9 sale Purpose Enforce mortgage Enforce SI Protect “equity” Protect “surplus” Maybe fix deficiency Maybe fix deficiency By whom? Sheriff, clerk Secured party Legal standard? Fixed procedural requirements When final? Judgment for deficiency? 20 EAGLE 9® UCC Division Sale Procedures Compared Judicial sale Article 9 sale Purpose Enforce mortgage Enforce SI Protect “equity” Protect “surplus” Maybe fix deficiency Maybe fix deficiency By whom? Sheriff, clerk Secured party Legal standard? Fixed procedural Commercially requirements reasonable When final? Judgment for deficiency? 21 Sale Procedures EAGLE 9® UCC Division Compared Judicial sale Article 9 sale Purpose Enforce mortgage Enforce SI Protect “equity” Protect “surplus” Maybe fix deficiency Maybe fix deficiency By whom? Sheriff, clerk Secured party Legal standard? Fixed procedural Commercially requirements reasonable When final? On confirmation Judgment for deficiency? 22 EAGLE 9® UCC Division Sale Procedures Compared Judicial sale Article 9 sale Purpose Enforce mortgage Enforce SI Protect “equity” Protect “surplus” Maybe fix deficiency Maybe fix deficiency By whom? Sheriff, clerk Secured party Legal standard? Fixed procedural Commercially requirements reasonable When final? On confirmation Upon sale Judgment for deficiency? 23 EAGLE 9® UCC Division Sale Procedures Compared Judicial sale Article 9 sale Purpose Enforce mortgage Enforce SI Protect “equity” Protect “surplus” Maybe fix deficiency Maybe fix deficiency By whom? Sheriff, clerk Secured party Legal standard? Fixed procedural Commercially requirements reasonable When final? On confirmation Upon sale Judgment for Varied rules deficiency? 24 Sale Procedures EAGLE 9® UCC Division Compared Judicial sale Article 9 sale Purpose Enforce mortgage Enforce SI Protect “equity” Protect “surplus” Maybe fix deficiency Maybe fix deficiency By whom? Sheriff, clerk Secured party Legal standard? Fixed procedural Commercially requirements reasonable When final? On confirmation Upon sale Judgment for Varied rules If procedure OK; and deficiency? special rule if secured is buyer* 25 *§9-615(f) EAGLE 9® UCC Division Sale Procedures Compared Judicial sale Article 9 sale Purpose Enforce mortgage Enforce SI Protect “equity” Protect “surplus” Maybe fix deficiency Maybe fix deficiency By whom? Sheriff, clerk Secured party Legal standard? Fixed procedural Commercially requirements reasonable When final? On confirmation Upon sale Judgment for Varied rules If procedure OK; and deficiency? special rule if secured is buyer* 26 *§9-615(f) Public vs. Private UCC EAGLE 9® UCC Division Foreclosure Sales Public Sale – • Not defined • Meaningful opportunity for competitive bidding • Some form of advertising and notice to maximize public participation • Commercially Reasonable 27 EAGLE 9® UCC Division Public vs. Private UCC Foreclosure Sales Limits on the right of the secured creditor to purchase collateral at a private sale (§9-610(c)). No limits in a public sale. Only collateral sold on a recognized market/subject to widely distributed standard price quotes (publicly traded stock) can be purchased at a private sale by the secured creditor. 28 EAGLE 9® UCC Division Public/Private Sale: Notice: Notification provisions of §§9-611-613. Who receives notice of the sale. (§9-611) The Debtor, any secondary obligor, other secured creditors, and others requesting notice. While not technically required, notice to parties that have expressed an interest in acquiring the collateral may bear on whether the sale was commercially reasonable. 29 EAGLE 9® UCC Division Public/Private Sale: Notice: Contents of notice of sale: “time and place of a public disposition” vs. “time after which” (§9-613). Timeliness of notice:10 day safe harbor (§9-612). UCC Foreclosure Notice Insurance Policy™. 30 EAGLE 9® UCC Division Content of Notice §9-613 provides that notice is sufficient if it: Describes the debtor and the secured party Describes the collateral being sold States the method of intended disposition States that the debtor is entitled to an accounting of the unpaid indebtedness and states the charge, if any, for the accounting States the time and place of public disposition or the time after which any other
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