On July 1, 2013, several changes to the Colorado Uniform Commercial Code become effective. Originally approved by the Uniform Law Commission in 2010 and by the Colorado General Assembly in 2012, the changes will notably impact a secured party’s practices and procedures relating to perfecting a security interest and conducting due diligence on debtors. The amendments adopted by Colorado are largely consistent with the amendments approved by the Uniform Law Commission, which, as proposed by the Uniform Law Commission, become effective nationwide on the same date—July 1, 2013.
The most significant of these changes attempts to clarify the names of debtors for financing statements. For individuals, the name used by a secured party must be the individual name of the debtor, the debtor’s surname and first personal name, or the debtor’s name on an unexpired Colorado driver’s license (C.R.S. 4-9-503). If Colorado has issued an individual more than one unexpired driver’s license, the relevant license is the one issued most recently. The inclusion of the debtor’s driver’s license as a basis for determining an individual debtor’s name provides a safe harbor in instances of ambiguity. For registered organizations, the debtor’s name should match the organization’s name as shown on the public organic record most recently filed with or issued by the debtor’s jurisdiction of organization, which generally refers to the record initially filed with or issued by the debtor’s jurisdiction of organization that purports to state, amend or restate the organization’s name (e.g., articles of incorporation, articles of organization, etc., as amended or restated) (C.R.S. 4-9-503 & 4-9-102(a)(68)). For trusts and estates, changes have also been made to the name requirements.
Other changes to the Colorado UCC include clarification of the rules pertaining to how a secured party controls electronic chattel paper (C.R.S. 4-9-105), perfection of a secured party’s security interest in a debtor’s after-acquired property following a change of governing law (C.R.S. 4-9-316(h)-(i)), the elimination of certain previously required organizational information on financing statements (C.R.S. 4-9-516), and other various amendments that could impact your business.
The amendments have detailed transition provisions. A security interest that was a perfected security interest by filing under the old rules remains a perfected security interest under the transition rules until it would have ceased to be effective had the amendments not taken effect. We note, however, that if a secured party wishes to continue the effectiveness of a financing statement after July 1, 2013, by filing a continuation statement, the financing statement must then satisfy the requirements of the amendments for an initial financing statement in order to be effective. If not, the secured party must amend the financing statement.
If you have any questions regarding how the amendments might impact your business or how you should update your practices or procedures, contact:
Michael R. Miller
What is written here is intended as general information and is not to be construed as legal advice. If legal advice is needed, you should consult a lawyer.