What this is: This article will explore the pros and cons of combining multiple amendment actions on a single UCC3 Financing Statement.
What this means: While combining amendment actions on to one UCC3 filing, like a debtor name change and a continuation, may seem cost effective and efficient, it can carry notable risks.
Choosing Multiple Amendment Types on One UCC3 Financing Statement Can Seem Advantageous
As a frequent Article 9 UCC filer, you may face scenarios where selecting multiple amendment types on a single UCC3 financing statement seems advantageous. For example, consider a situation where a debtor’s name change filing is necessary and the UCC Financing Statement is also within the 6-month continuation window. With the loan obligation still outstanding, both a UCC3 continuation filing and a UCC3 debtor name change amendment filing are necessary. In such instances, consolidating both amendment types on one UCC3 Financing Statement can seem more efficient and cost effective.
Four Reasons UCC Filers Might Choose to File Just One UCC3 Amendment Form
Combining a UCC3 debtor name change and continuation on a single UCC3 filing can appear beneficial at first glance. UCC filers often cite several reasons for opting to file one UCC3 Amendment Form instead of 2 separate UCC3 Amendment filings:
1. Cost Efficiency
Filing a single UCC3 Amendment filing can reduce filing fees and associated costs.
2. Time Savings
Consolidating amendments into one UCC3 Amendment filing streamlines the process, saving some time.
3. Simplified Record Keeping
Managing fewer UCC filings can simplify record keeping and reduce the risk of errors.
4. Administrative Convenience
Handling one UCC3 form instead of multiple filings can ease the administrative burden on filers.
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Filing a UCC3 Multiple Amendment Filing for Multiple Amendment Actions Simultaneously: Potential Risks
In support of preparing a single UCC3 Amendment form for multiple amendment actions, it’s worth noticing that the UCC3 filing form itself does not prohibit the inclusion of multiple amendments by checking more than one amendment type. This approach can seem like a time and cost-saving measure.
However, while it may appear efficient to file a UCC3 Multiple Amendment filing to address various amendment actions simultaneously, there are several reasons why this practice could be risky for UCC filers. Understanding these potential hazards is crucial for making informed decisions about UCC3 Amendment filings:
State Acceptance Variability
Not all states accept Multiple Amendment filings. Before submitting such filing, it is advisable to contact the relevant jurisdiction and/or consult the filing office’s administrative rules to confirm whether Multiple Amendment filings are permissible. There is significant non-uniformity across the country regarding this issue.
Potential for Filing Rejection
Even if state administrative rules indicate UCC3 Multiple Action Amendment filings are acceptable, there is a risk that filing office staff may reject these filings. This can occur due to misunderstandings or lack of clarity about which combinations of multiple amendment types are accepted by their office.
Lack of Published Guidance
Some filing offices do not have published administrative rules to guide filers. In such cases, filers must rely on information provided at the time of inquiry, which may not align with the actions taken once the UCC3 Multiple Amendment filing reaches the filing office and is reviewed and processed by different staff members.
Limitation on Acceptable Combinations
For jurisdictions that do accept UCC3 Multiple Amendment actions, there are limitations on the acceptable combinations. This can lead to a UCC3 Multiple Amendment Action filing being only partially indexed, either intentionally or due to an error, without clear notification to the filer.
Generally Restricted to Paper UCC Filings
In most cases, UCC3 Multiple Amendments are restricted to paper UCC filings only. Typically, electronic UCC filing systems do not allow multiple amendments in a single electronic filing transmission.
Longer Processing Times
Paper UCC filings take significantly longer to process and return a filed acknowledgment image. While preparing a single UCC3 Amendment form may save time initially, the filer will experience a longer wait time for the paper evidence to be returned, compared to having filed electronically.
Electronic UCC Filing is Faster
Filing UCCs electronically is faster and provides quicker access to filed acknowledgement evidence with minimal wait times when filing electronically.
Higher Filing Fees for Paper Submissions
In states that still permit paper UCC filings, many impose higher fees for over-the-counter or mail-in UCC filings compared to electronic filing methods.
Multiple Amendment UCC3s Often Do Not Save Money
Some states that accept a single UCC3 filing with multiple actions selected will charge a separate fee for each action. In these jurisdictions, combining amendment actions on a single UCC3 form does not result in cost savings. For example, in Minnesota, the expected cost savings are negated as the filing office charges for each action as if they were separate paper submissions.
Four Reasons We Don’t Recommend Filing UCC3 Multiple Action Amendments
Here’s what can and has occurred with some UCC3 Multiple Action Amendments and why we strongly recommend against this practice, even when these UCC3 filings are accepted by a filing office.
As a service provider that files many thousands of UCC filings annually on behalf of clients and reviews countless UCC search results, we have identified numerous reasons to avoid filing UCC3 Multiple Action amendments:
1. Incomplete Indexing of the UCC3 Multiple Action Amendment
A filing office may only index one of the 2 amendments. As a filer, you may not be able to confirm if both amendment types were indexed based on the returned acknowledgment. If only one amendment type is indexed, it may not be clear which one was processed, as this information might not be evident on the acknowledgement copy.
2. A Potentially Fatal Error
A critical error that may occur when combining a UCC3 Continuation with another amendment type is when the continuation is not indexed by the filing office. If this occurs, the UCC will lapse and the filer may be unaware that their UCC Financing Statement was not continued.
3. Unfamiliarity by Filing Office Staff
Multiple Action Amendments are less common, which can lead to the following errors during processing:
- Erroneous Rejections: Filing offices may mistakenly reject a multiple amendment UCC3, causing delays in the filing process, even when their own rules indicate that they should accept the UCC3 Multiple Amendment filing.
- Missed Amendment Action: Filing office staff may overlook one of the amendment types, which can be particularly detrimental if timing is critical. For example, this could be the case with UCC3 continuations and UCC3 debtor name changes.
- Invalid Amendment Action Combinations: Submitting invalid combinations of amendments can result in only one amendment being indexed. This requires another UCC3 Amendment filing to be prepared and filed but only if the filer is aware that an additional filing needs to be submitted.
4. Amendment Combinations Are Typically Limited
Those filing offices that accept multiple amendments on a single UCC3 form typically limit the combinations they will accept. Acceptable combinations vary from one jurisdiction to another. For instance, one filing office may permit amending a party name along with adding, changing or restating collateral, but will not allow any other combinations of functions. Conversely, other filing offices may reject this combination but accept other combinations of multiple functions.
Remember the Main Reason for Filing UCCs
It is always important to keep in mind the primary purpose of filing UCCs: To provide notice to third-party searchers of a security interest. UCC3 Multiple Amendment filings, if not accurately completed by the filer and then properly handled by the filing office, can lead to confusion for third parties. At best, this may result in misunderstandings; at worst, it may fail to achieve the filer’s intended objective. As you can see, such issues can cause significant complications for filers and searchers alike.
Conclusion
In summary, while Multiple Function UCC3 Amendments are permissible in many jurisdictions, they are not recommended as a best practice for UCC3 Amendment filings. UCC3 Multiple Amendment Action filings can create confusion for the filer, filing office and third-party searchers reviewing UCC search results. Additionally, UCC filers may experience delays due to filing rejection of a UCC3 Multiple Function filing or errors on the public record. These errors can occur because the UCC3 Multiple Action Amendment is not indexed as the filer had intended or because the filer combined actions that are conflicting or not acceptable by the filing office. The most concerning aspect is that the filer may remain unaware of these issues, even with a UCC3 Multiple Amendment Action acknowledgment in hand. Therefore, we strongly recommend that UCC filers avoid multiple function Amendment filings to ensure clarity and accuracy in the public record.
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What is the purpose of a UCC3 Assignment filing?
A UCC3 Assignment is an Amendment filing that is an “assignment of powers” from one secured party (the assignor) to another secured party (the assignee). It is filed to authorize a new secured party to file any UCC3 amendments to the applicable financing statement. To learn more, refer to our article, UCC Article 9 Assignment Filings: Distinguishing Fact From Fiction.
What is an example of a common error made on UCC Financing Statements?
Incorrect UCC1 File Number Listed on UCC3. Filers need to be extremely careful providing the UCC1 initial file number on an Amendment filing because the state will only reject if there is no such number in their system. If the number listed is an active filing in the filing office’s system but not aligned with the specific filing you intend to amend, they will accept it, connect it with the wrong (unrelated) UCC1 and the filer may never know. This is one of the reasons why a post-filing search is highly recommended. To learn more, read our article, UCC Financing Statements: 11 Mistakes to Avoid.
What is a good method to check if my UCC filings might be seriously misleading?
A Post Filing Search is a good method for learning if a UCC filing could be deemed seriously misleading. The best time to conduct this type of search is soon after a UCC filing has been filed because if the search does not reveal the expected UCC filing, then it is highly probable there is an issue with the UCC filing. A Post Filing Search enables the filer to identify the error and to rectify it promptly. If a Post Filing Search is not conducted shortly after a UCC1 or UCC3 debtor name change or addition was filed, it may be too late for the UCC to be effective. Refer to our article, 5 Questions About Avoiding Fatal Debtor Name Mistakes on UCC Financing Statements, for more information.
This article is provided for informational purposes only and should not be considered, or relied upon, as legal advice.
