UCC filing complications with what is security trustee agreement - debtor name issues

That's exactly my confusion - the trust agreement says the trustee holds legal title but the operating company (our borrower) has all the beneficial rights and control. The trustee seems to be more of a holding vehicle. I'm leaning toward filing against both entities to be safe but that doubles our filing costs.

I wouldn't file against both unless you're certain both have rights in the collateral. That could create confusion later and might not even be effective if one of the entities doesn't actually have any rights to grant.

The operating company is signing as grantor, but they're doing it 'as beneficiary of the trust.' The trustee isn't signing anything. Does that help clarify who should be the UCC debtor?

If the operating company is the grantor, even if they're signing in a representative capacity, they're probably your debtor for UCC purposes. But honestly, this is getting into territory where you might want legal advice rather than forum advice.

I had a nightmare scenario with a trustee filing once. Turns out I filed against the wrong entity and didn't discover it until we tried to foreclose. The trustee structure had changed after our original filing and our UCC was basically worthless. Now I'm paranoid about these situations.

I haven't heard of that tool. How does it work with complex entity structures like trustee arrangements?

You just upload your PDFs - the trust agreement, loan docs, draft UCC-1, whatever you have. It cross-checks all the entity names and flags any mismatches or inconsistencies. Really helpful when you're dealing with multiple entities and want to make sure your UCC filing matches everything else perfectly.

Did they give you any guidance on how to determine who actually 'controls' the collateral in a trust situation? That seems like the key question but it's not always clear from the documents.

They just said to look at who has the right to sell, transfer, or encumber the property. In most trust setups, that's going to be the beneficiary, not the trustee, unless the trust specifically gives the trustee those powers.

That makes sense from a practical standpoint. If the operating company goes bankrupt, they're the ones whose creditors you'll be competing with, not the trustee's creditors.

Exactly. Plus if you ever need to enforce your security interest, you'll be dealing with the operating company's assets and operations, not the trustee's.

That's a good point. It depends on the terms of the trust agreement. Many trust agreements give the beneficiary the power to encumber the trust property, but not all do. You really need to read the specific trust document.

This is why I hate these complex structures. Half the time the documents don't clearly address who can do what, and you're left guessing.

I can't post the actual text due to confidentiality, but it basically says the beneficiary has 'full authority to operate, manage, encumber and dispose of the trust property as if they were the sole owner.' Does that sound like they can grant security interests?

That language sounds pretty broad. 'Encumber' would typically include granting security interests. I'd be comfortable filing against the beneficiary with that kind of language.

That's probably the smart approach for a $2.8M loan. The cost of an opinion is nothing compared to the potential loss if the UCC filing is wrong.

Agreed. Plus if there are problems later, you have the opinion to show you did your due diligence.

Good idea! I checked and there's one existing UCC-1 against the operating company for some accounts receivable financing. Nothing against the trustee entity. That's probably a good sign that filing against the operating company is the right approach.

That's actually really helpful. If another lender felt comfortable filing against the operating company, they probably did their homework too.

How accurate is it with complex entity structures? I'm always worried about automated tools missing nuances in legal documents.

It's pretty good at catching basic inconsistencies - like if your UCC-1 says 'ABC Company LLC' but your loan agreement says 'ABC Company, LLC' with the comma. For complex legal analysis it's not a substitute for an attorney, but for making sure all your document names match up perfectly, it's been really helpful.

Thanks, that's what I'm leaning toward too. I think I was overthinking it because of the trustee complexity, but when you break it down to the basics, the operating company is clearly the right debtor.

Exactly. Don't let the complex structure distract you from the fundamental UCC rules. File against whoever is granting the security interest and has the authority to do so.