#19 - Exceptions to the Filing Requirement Flashcards
Ways to Perfect
1) File
2) Possession
3) Control
4) Automatic Operation of Law
File
File a financing statement under 9-312
Possession
Possess the collateral under 9-313:
1) physical control of property OR
2) right to physically control property
Negotiable documents, goods, instruments, money, tangible chattel paper, and certificated securities can all be possessed.
Art 9 allows invisible means of possession:
- Agent: one who acts on another’s behalf.
- 9-313(c)(1): “A secured party takes possession of collateral… when the person in possession authenticates a record acknowledging that it holds possession… for the secured party’s benefit
Policy: the idea behind allowing possession to work as perfection is that if someone else is holding onto the debtor’s stuff, then it should be obvious to a new creditor that the debtor isn’t actually fully holding power over that thing, aka the debtor must have given a sec int in that thing to the original creditor
Possession
- Negotiable documents (not including promissory notes)
- Goods
- Instruments (e.g., promissory notes)
- Chattel Paper
- Certificated securities
corporation issues a certificate indicating share count.
- Money (SOLE MEANS OF PERFECTION!!)
NOTE: above categories (not $) can be perfected by filing or possession; possession is preferred.
CANNOT BE PERFECTED VIA POSSESSION:
Accounts + General Intangibles
Control
Control under 9-314: differs for each type of collateral
Used for deposit accounts, electronic chattel paper, investment property, letter of credit rights
Control (level of control depends on category)
- deposit accounts (exclusively perfected via control)
three ways to exert control for deposit account
(1) secured party is the bank where deposit account is held (Holds prio over the other two methods of control).
(2) debtor, secured party, and bank authenticate a record indicating secured party has constructive control.
(3) secured party becomes bank’s customer
electronic chattel paper
investment property (e.g., securities)
letter of credit rights
Automatic Operation of Law
purchase money security interests in consumer goods (like buying a washing machine on credit without paying right away) (PMSI) under 9-309a1: sale of a payment intangible or promissory note 9-309a3, 4
Determining How to Perfect
1) Categorize the collateral
2) Determine what law governs perfection for that type of collateral. This course only covers UCC Art 9
3) Determine how that law requires perfection to be done
- For Art 9, start with titles for different sections in subparts 2 and 3 of part 3
How to perfect investment property?
Investment property: “security, security entitlement, securities account, commodity contract, or commodity account.”
Security (e.g., stocks, bonds, etc.); medium must be:
(1) transferable
(2) divisible
(3) type of medium traded in a securities market/exchange.
Certificated vs Uncertificated
Certificated = corporation issues certificate showing number of shares owned by holder. (Perfected by filing, possession, control all viable but control is preferred). For control of a certificated security, the security must be delivered to the secured party w/ any necessary endorsement or the certificate must be delivered to the secured party and registered in their name.
Uncertificated = corporation records ownership in its own record but does not issue a physical certificate.
(Perfected via filing or taking control (taking delivery) of security (most preferable))
Delivery and Control of an Uncertificated Security occurs when the issuer registers the purchaser or their representative as the owner.
[In]directly Holding Securities
Directly Holding: purchaser of securities who directly registers w/ the organization (most do not do this).
Indirectly Holding: brokerage holds on owner’s behalf and registers ownership in a monthly statement of account. AKA: “securities entitlement” or “securities account.”
