UCC Coverage Question - Security Interest Governed by UCC Laws?
I'm reviewing a security agreement for a commercial loan we're considering and trying to determine if this falls under UCC Article 9. The collateral includes business equipment, inventory, and accounts receivable. The borrower operates a manufacturing facility in Ohio. I've been going through the security agreement language but want to make sure I'm interpreting the UCC coverage correctly before we proceed with the UCC-1 filing. Are there specific types of security interests that fall outside UCC governance even when they involve personal property? I'm particularly concerned about whether all the collateral types listed would be properly perfected through a standard UCC-1 filing or if we need additional steps.
38 comments
Join the conversation
Emma Wilson
Yes, most security interests in personal property are governed by UCC Article 9. Your collateral types - equipment, inventory, and accounts receivable - are classic UCC collateral. The key is that it's personal property used in a commercial context. Real estate and certain specialized assets like aircraft have different rules, but what you're describing sounds like straightforward UCC territory.
0 coins
QuantumLeap
•Exactly right. Equipment and inventory are probably the most common UCC collateral types. Just make sure your collateral description in the UCC-1 is broad enough to cover everything but specific enough to give notice.
0 coins
Malik Johnson
•I always get nervous about accounts receivable because the definition can be tricky. Make sure you understand what constitutes 'accounts' versus other payment rights under the UCC.
0 coins
Isabella Santos
There are some exceptions to watch out for though. Deposit accounts need special perfection methods beyond just filing a UCC-1. Also consumer goods have different rules than commercial equipment. Since you mentioned manufacturing, you're likely dealing with equipment and inventory which are clearly UCC Article 9.
0 coins
Ravi Sharma
•Good point about deposit accounts. Control agreements are usually required for those. The equipment/inventory combo is pretty standard for manufacturing operations.
0 coins
Freya Larsen
•Wait, so filing a UCC-1 isn't enough for deposit accounts? I thought that covered everything...
0 coins
Isabella Santos
•No, deposit accounts require control - either through a control agreement with the bank or by the secured party becoming the account holder. UCC-1 filing alone won't perfect a security interest in deposit accounts.
0 coins
Omar Hassan
I ran into a similar situation last month where I wasn't sure about UCC coverage. Ended up using Certana.ai's document verification tool to upload our security agreement and UCC-1 draft together. It flagged a few inconsistencies in our collateral descriptions and confirmed which assets required UCC filing versus other perfection methods. Really helpful for catching those details before filing.
0 coins
Chloe Taylor
•That sounds useful. Did it help with the collateral description language? I always struggle with getting that right.
0 coins
Omar Hassan
•Yeah, it cross-checked the security agreement terms against the UCC-1 collateral description and highlighted where they didn't match up. Saved me from a potential perfection issue.
0 coins
ShadowHunter
The UCC governs security interests in personal property, but there are carved-out exceptions. Federal law governs aircraft, ships documented under federal maritime law, and some intellectual property. State certificate of title laws cover motor vehicles. Everything else in personal property is generally UCC Article 9.
0 coins
Diego Ramirez
•Don't forget about fixtures - those can be tricky because they're personal property that becomes part of real estate. Need fixture filings for those.
0 coins
Anastasia Sokolov
•I hate fixture filings. Never sure when something crosses the line from equipment to fixture.
0 coins
ShadowHunter
•The key test is usually whether removal would cause material damage to the real estate. Manufacturing equipment bolted to concrete floors often qualifies as fixtures.
0 coins
Sean O'Connor
Your security agreement should explicitly state that it's governed by UCC Article 9 if that's the intent. Most commercial security agreements include this language. The collateral you described - equipment, inventory, accounts - are textbook UCC collateral types.
0 coins
Zara Ahmed
•Yes, the choice of law clause usually specifies UCC governance. Makes it clear for everyone involved.
0 coins
Luca Conti
•But even without explicit language, wouldn't the UCC apply by default to personal property security interests?
0 coins
Sean O'Connor
•True, UCC Article 9 applies by operation of law to security interests in personal property. The explicit language just removes any ambiguity.
0 coins
Nia Johnson
One thing to consider is whether any of the collateral has special perfection requirements. Commercial tort claims need to be specifically described, not just covered by a general 'all tort claims' description. Letter of credit rights might need notification to the issuer.
0 coins
CyberNinja
•Commercial tort claims are so specific - you almost need to know about them before they exist to perfect properly.
0 coins
Mateo Lopez
•That's why broad 'all assets' descriptions are popular, but they don't work for everything under the UCC.
0 coins
Aisha Abdullah
Just went through this analysis myself. If you're still unsure about coverage or want to double-check your collateral descriptions, I found Certana.ai really helpful. You can upload your security agreement and it'll verify UCC applicability and flag any perfection issues. Much easier than trying to parse all the UCC rules manually.
0 coins
Ethan Davis
•How detailed does it get with the analysis? Does it cover the specialized perfection requirements too?
0 coins
Aisha Abdullah
•It covers the main perfection methods and flags items that need special treatment beyond standard UCC-1 filing. Definitely caught things I would have missed.
0 coins
Yuki Tanaka
The short answer is yes - security interests in business equipment, inventory, and accounts receivable are governed by UCC Article 9. Your UCC-1 filing will perfect the security interest in those collateral types. Just make sure your debtor name matches exactly with the Ohio Secretary of State records.
0 coins
Carmen Ortiz
•Debtor name matching is crucial. One small difference and the filing could be ineffective.
0 coins
MidnightRider
•Ohio's search logic is pretty forgiving compared to some states, but exact match is always safest.
0 coins
Yuki Tanaka
•Agreed. I always pull a fresh search from the Ohio SOS database right before filing to make sure I have the current exact legal name.
0 coins
Andre Laurent
Watch out for any software or technology assets in the equipment category. Some intellectual property components might need additional protection beyond UCC filing, especially if there are federal trademark or patent elements.
0 coins
Zoe Papadopoulos
•Good point. Embedded software in manufacturing equipment creates some gray areas between UCC coverage and IP law.
0 coins
Jamal Washington
•I usually treat it as equipment unless the software has independent licensing value separate from the machinery.
0 coins
Mei Wong
Since you mentioned this is for a commercial loan, make sure your lender's UCC-1 covers after-acquired property if the borrower will be acquiring new inventory or equipment. Most commercial security agreements include after-acquired property clauses, and your UCC-1 should reflect that coverage.
0 coins
Liam Fitzgerald
•After-acquired property language is standard in inventory financing since the inventory turns over constantly.
0 coins
PixelWarrior
•Equipment financing too, especially for growing manufacturing operations that add machinery.
0 coins
Mei Wong
•Exactly. Without after-acquired coverage, you'd need a new UCC-1 for every piece of equipment or inventory batch.
0 coins
Amara Adebayo
I've used Certana.ai's verification tool for similar UCC coverage questions. Really helpful for confirming which assets fall under UCC Article 9 versus other perfection schemes. Just upload your security agreement and it provides a detailed analysis of perfection requirements for each collateral type.
0 coins
Giovanni Rossi
•Does it handle the Ohio-specific requirements? Some states have quirks in their UCC implementation.
0 coins
Amara Adebayo
•It covers state-specific variations and filing requirements. Definitely caught some Ohio nuances I wasn't aware of.
0 coins