UCC 1-106 compliance issues with multi-state equipment financing deals

That's what I was afraid of. We definitely missed that four-month window. So does that mean our security interest became unperfected back in July? This could be a serious problem with our loan covenants.

Not necessarily unperfected entirely, but you may have lost priority against other creditors who filed after your original date but before you refile in Indiana. You should file in Indiana immediately to re-perfect, but there could be a priority gap.

Wait, isn't there an exception for equipment that was originally perfected by filing? I thought mobile goods rules might apply here since it's manufacturing equipment that could theoretically be moved between facilities.

Did you have any issues with other creditors jumping ahead during your gap period? I'm trying to assess the actual risk here versus just theoretical compliance issues.

Fortunately no, but we did a full UCC search in Illinois before refiling and found two other creditors had filed against the same debtor during our gap period. Could have been messy if there had been a default.

That sounds helpful. Did it give you specific guidance on the UCC 1-106 compliance timeline or just flag the jurisdiction mismatch?

It identifies all the inconsistencies between documents automatically - so it caught that the debtor location on the UCC-1 didn't match the current corporate address, plus it highlighted some debtor name variations that could have caused additional problems. Made the whole analysis much faster than doing it manually.

Good point about fixtures. This equipment is bolted down pretty permanently at the new facility. Should I be looking at a fixture filing instead of a regular UCC-1?

Possibly. If it's integrated into the real estate you might need both a UCC fixture filing and potentially a mortgage filing depending on Indiana law. That's getting into some specialized territory though.

Fixture filings have their own complications with UCC 1-106. The real estate location becomes crucial, not just the debtor's location. You might want to get local counsel involved if there's any question about the equipment becoming part of the real estate.

Yeah their website is pretty basic unfortunately. Just the standard forms and fee schedule. Nothing specific about UCC 1-106 transition issues.

Indiana actually has decent phone support for UCC questions if you call their filing office directly. They helped me work through a similar jurisdictional issue last year. Worth a try if you need official guidance.

Already working on the Indiana filing. Should I file a continuation of the Ohio UCC-1 as well to be safe, or focus entirely on the new Indiana filing?

I'd focus on Indiana first since that's where the debtor is actually located now. The Ohio filing doesn't do you much good if the debtor isn't in Ohio anymore. You can always amend or terminate the Ohio filing later if needed.

Same here! I have a checklist I go through annually with all our debtors to confirm addresses and corporate status. Catches most of these issues before they become problems.

That's smart. We obviously need better systems for tracking debtor changes. This one slipped through because the debtor notified us about the move but somehow it didn't trigger our UCC review process.

How detailed does it get with the analysis? Does it actually reference specific UCC sections like 1-106 or just flag general inconsistencies?

It's pretty thorough - flags debtor name mismatches, address discrepancies, filing jurisdiction issues, stuff like that. Definitely would have highlighted that your debtor location didn't match your filing jurisdiction.

Right, so I'm not completely unperfected, just potentially subordinated to anyone who filed during the gap period. Better than I thought but still not great.

Exactly. And depending on your loan documents, you may need to disclose this to your institution. Some loan covenants are pretty strict about maintaining first priority security interests.

Equipment was purchased and installed in Ohio initially. The debtor's relocation was a separate business decision about 18 months later. So it's a true relocation scenario, not an original interstate transaction.

Got it. Then you're definitely dealing with a standard UCC 1-106 relocation issue. The four-month rule applies from when they changed their chief executive office to Indiana.

Make sure you're clear on what constitutes the debtor's "location" under UCC 1-106. For corporations it's usually the state of incorporation, not necessarily where the chief executive office is located.

Good call. I'll order searches in both Ohio and Indiana to see the full picture. Hopefully there aren't any nasty surprises waiting.

When you run the Indiana search, make sure to check variations of the debtor name too. Sometimes other creditors file under slightly different versions of the company name and you want to catch all potential conflicts.

This is another area where document verification tools are helpful. They can run name variations automatically and catch filings you might miss with a manual search.