Security agreement collateral description - how specific does it need to be for UCC filing?

This is exactly right. I've been doing this for 15 years and generic descriptions work fine as long as they're not so vague that they're meaningless. 'All equipment' by itself might be too broad, but 'all manufacturing equipment' or 'all CNC machines and fabrication equipment' gives enough specificity.

But doesn't this create issues if there's ever a dispute about what's included? I always worry about being too general.

I'm talking about the security agreement itself. I know the UCC-1 can be broad, but I'm trying to figure out the baseline requirement for the agreement.

Good clarification. For the security agreement, you want enough detail to satisfy the 'reasonable identification' test, but you don't need to go overboard. Think of it as a middle ground between the very broad UCC-1 description and an itemized inventory.

How does that work exactly? Do you just upload the PDFs?

Yeah, exactly. I uploaded my security agreement draft and the UCC-1 I was planning to file, and it flagged that my collateral descriptions were inconsistent between the two documents. Saved me from a potential headache down the road.

That's actually pretty smart. I've seen deals where the security agreement says one thing and the UCC filing says something slightly different, and it creates ambiguity.

That's really helpful. Do you ever include the 'now owned or hereafter acquired' language?

Absolutely, especially for businesses that regularly acquire new equipment. That language is crucial for after-acquired property coverage.

I get that it seems vague, but there's actually decades of case law on this. Courts generally look at whether someone reading the description would understand what property is covered. It's not as arbitrary as it sounds.

ok that makes more sense when you put it that way. so it's like, would a reasonable person looking at this know what we're talking about?

What kind of descriptions have you seen get rejected?

Things like 'all assets' or 'all personal property' without any context. Courts want to see that the parties actually thought about what collateral was being secured.

That's a great template. Do you ever worry about including too much with language like that?

Not really. If anything, being too narrow is more dangerous than being too broad, as long as the description still reasonably identifies the collateral.

Agreed. I'd rather have clear coverage than risk leaving something out that should have been included.

They don't need to be identical, but they shouldn't contradict each other. The UCC-1 can be broader than the security agreement, but not narrower.

This is exactly why I mentioned that Certana tool earlier - it catches these kinds of inconsistencies between documents. Super helpful for avoiding problems.

That's a really practical way to think about it. Like a common sense test.

Exactly. Courts aren't looking for perfection, they're looking for clarity and good faith effort to identify the collateral.

Because every deal is different! A checklist approach would be too rigid for the variety of collateral and business situations out there.

I guess that makes sense but it sure would make my job easier lol

That's reassuring. Sounds like my instinct to keep it straightforward but specific to the business type is on the right track.

Definitely. Business-specific language shows you actually understand what the debtor does and what collateral is relevant.

Yeah, it's surprisingly thorough. Definitely worth the peace of mind to make sure everything aligns properly.

Good catch. Consistency between documents is always preferable even when it's not legally required.