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Continuation Statements and the new Article 9
by Sam Ott, BOL Guru
BIO AND CONTACT INFO
QUESTION: Can I get a clarification on the filing requirements under the new Article 9 for a continuation. I was under the impression that if a continuation was filed PRIOR to the July 1st effective date that it would be filed in accordance with the current Article 9 rules and that
it would be effective. Basically, do we have to file an "in lieu of" financing statement prior to the effective date or do we file the same way we have in the past?
ANSWER: A continuation statement properly filed prior to July 1, 2001, (the Effective Date), will remain effective until the earlier of either June 30, 2006, or the time the financing statement extended by the filing of any continuation statement would have ceased to be effective. You are not required to file an "in lieu of" financing statement prior to the Effective Date.
Section 9-703(a) provides if a security interest is enforceable and perfected prior to the Effective Date, in a manner that also satisfies the attachment and perfection requirements of Revised Article 9, then the security interest continues to be enforceable and perfected under the revision without any further action. Therefore, a financing statement filed before the Effective Date which complies with the
requirements of Revised Article 9, including being filed in the appropriate filing office, need not be refiled on or before the Effective Date unless it would lapse if a continuation statement was not
filed. Any necessary continuation statement must be filed in the original filing office if the financing statement will lapse prior to the Effective Date.
In addition, Revised Article 9 does not make ineffective a financing statement filed before the Effective Date if it was effective to perfect a security interest in the applicable jurisdiction and collateral but does not meet the perfection requirements of the revision. Under Section 9-705(c), such a financing statement ceases to be effective, as stated above, only at the earlier of June 30, 2006 and the date on which its effectiveness would lapse under the law of the jurisdiction in which it was originally filed. (For example, if the financing statement and any continuation statement were originally filed in the state where the corporate debtor's executive office was located pursuant to current Article 9 and under Revised Article 9 the proper place to file is the debtor's state of incorporation.)
The provision relating to the filing of an "in lieu" initial financing statement, Section 9-706(c), contemplate the filing of a financing statement and continuation statement(s) in another filing office by requiring the "in lieu" initial financing statement to provide the location of the filing office in addition to the dates of filing and file numbers of the original financing statement and the most recent
continuation statement filed with respect to the financing statement. If you file "in lieu" prior to the Effective Date in the new filing office, the filing will not extend the original filing.
NOTE: The above comments assume your state has adopted the Uniform Commercial Code, Article 9, 1999 Official Text. I suggest you consult with your attorney to confirm the above cited sections were not modified or deleted.
First published on BankersOnline.com 2/5/01
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