Non-uniform Effective Dates and the Transition to Revised Article 9

Non-uniform Effective Dates and the Transition to Revised Article 9

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One of the novel features of the Article 9 revision project is that, unlike most other uniform laws and the prior revisions of Article 9, revised Article 9 was designed to be adopted simultaneously in all U.S. jurisdictions on a single date—July 1, 2001.2 This uniform effective date was essential in order for the transition from former Article 9 to revised Article 9 to go smoothly.

Uniform adoption on the July 1 effective date is critical because many changes made by the revision are inconsistent with the former law, and the two cannot easily co-exist. The most prominent examples come from the new choice of law rules that determine the proper jurisdiction in which a financing statement must be filed to perfect an Article 9 security interest. Since in some instances the different versions of Article 9 designate different states, the failure of all states to switch over to revised Article 9 simultaneously would greatly increase the cost and uncertainty in commercial financing transactions. In the words of the Official Comment, "If former Article 9 is in effect in some jurisdictions, and [the current] article is in effect in others, horrendous complications may arise."3

In January, with six months and 22 states to go, the task of obtaining uniform adoption appeared hopeless. However, because of a Herculean push in the final three months, the goal of uniform effectiveness was just barely missed. On June 28, just two days before the uniform effective date, the Massachusetts legislature became the 50th state legislature to pass enacting legislation. The governors of Massachusetts and several other late-enacting states all signed the legislation prior to July 1. Thus, as of July 1, revised Article 9 has been adopted in all 50 states, plus the District of Columbia.

The goal of a simultaneous switch-over was thwarted by four states that adopted delayed effective dates. The four states, and the effective dates of revised Article 9 in those states, are:

  • Alabama—Jan. 1, 2002
  • Connecticut—Oct. 1, 2001
  • Florida—Jan. 1, 2002
  • Mississippi—Jan. 1, 2002

Thus, as of Jan. 1, 2002, all states will have switched over to revised Article 9. Although the delayed effective dates will create some of the problems that the Official Comment predicted, the short duration of the transition period will minimize those problems.

Indeed, it is surprising that only four of the late-enacting states opted for non-uniform effective dates. Since many of the rules governing the duties of the filing offices have changed, one wonders how the secretary of state's offices in states like Massachusetts were able to revise their procedures by July 1 to accommodate a law adopted only a day or two earlier. One suspects that they did not succeed and that future litigation will bring these problems to light.

In fact, the messages posted to a major UCC listserv in early July suggested that at least one state's secretary of state office was improperly rejecting financing statements submitted under the revised act based on the type size used in the statements. Glitches like these hold much potential for mischief, both from the unexpected rejection of these financing statements and the rule that an improperly rejected financing statement is deemed filed.4

Although the problems presented by non-uniformity will be limited both by the small number of states adopting a non-uniform effective date and the relatively brief six-month duration of the transition period, no practitioner can ignore their impact—even if the transaction involves only uniform states. The reason for this is that the choice of law may depend on the state in which litigation is commenced, challenging the security interest. Thus, if the venue for such an action might lie in a non-uniform state, or if the choice of law rules might point to a non-uniform state, the parties may unexpectedly find that the rules of former Article 9 are applied to a transaction that all parties assumed was governed by revised Article 9.

Although a complete choice-of-law analysis will be necessary to determine the proper states in which to file financing statements and the permissible methods of perfection, one general filing issue that may present a trap for the unwary in the four non-uniform states must be noted. As discussed in an earlier column, a financing statement filed under the former law generally will remain fully effective even after revised Article 9 takes effect.5 In most cases, this means that a pre-effective date financing statement will remain effective for the full normal five-year period from filing before it must be continued. However, the uniform version of revised Article 9 contains a "drop-dead" date of June 30, 2006, when all non-continued old-act financing statements will lapse. §9-507(c)(2).

Although the four non-uniform states delayed the July 1, 2001, effective date of the revised act, only Alabama also extended the June 30, 2006, "drop dead" date. Thus, a financing statement or continuation statement filed during the transition period in Connecticut,6 Florida or Mississippi will be effective for less than five years and will need to be continued before June 30, 2006. The Alabama version of revised Article 9 extended the "drop-dead" date to Dec. 31, 2006. For a searcher, this means that dual searches may be required through December 2006 if there is any possibility that an Alabama old-act financing statement could cover the collateral (e.g., ordinary goods located in Alabama or a debtor with a chief executive office or residence in Alabama).

Some of the most common choice-of-law problems presented by the non-uniform effective dates are analyzed in a June 13, 2001, report of the Permanent Editorial Board of the Uniform Commercial Code that is titled, "Article 9 Perfection Choice-of-law Analysis Where Revised Article 9 Is Not in Effect in All States by July 1, 2001." The report is available at and will be published in the August issue of The Business Lawyer.

The major points of that analysis are that financing statements for ordinary goods must be filed during the transition period both in the state of the debtor's location under revised Article 9 and in the state where the goods are located. Financing statements for accounts and general intangibles must be filed during the transition period both in the state where the debtor is deemed to be located under revised Article 9 and in the state where it is deemed to be located under former Article 9. Under revised Article 9, a state-registered organization, such as a corporation, is deemed to be located in its state of registration, whereas under the former law it was deemed to be located at its place of business or chief executive office. Compare §9-307(e) with former §9-103(3)(d).

Special problems are presented by instruments and non-consumer deposit accounts. Since former Article 9 did not permit a security interest in instruments to be perfected by filing, it will be necessary during the transition period to perfect by taking possession of the instruments if either of the instruments are located in a delayed effective date jurisdiction or the debtor is located (as determined under revised Article 9) in a delayed effective date.

The problems presented by deposit accounts are much worse. Since former Article 9 did not apply to deposit accounts, its choice-of-law rules also do not apply to them. Thus, the moderately complicated choice of law analysis involving the rules under the former and revised versions of Article 9 does not yield a predictable result in many cases. Instead, non-uniform state common-law choice-of-law rules may apply, and it may not be possible to perfect a security interest by control in the state whose substantive law applies.


1 The views expressed herein are Prof. Warner's and do not necessarily reflect the views of the University of Missouri, St. John's University or the law firm of Greenberg Traurig LLP. Return to article

2 See §9-701. All citations are to the revised 1999 version of Article 9 of the Uniform Commercial Code, unless otherwise indicated. Citations to the prior version of Article 9 are indicated by the term "former." Return to article

3 UCC §9-701, cmt. Return to article

4 Although, like the former law, revised Article 9 deems an improperly rejected financing statement to be effective, unlike the former law the "deemed filing" is not effective against a later secured creditor that obtains its security interest in reasonable reliance on the absence of the financing statement from the records. Compare former §9-403(1) with §9-516(d). Return to article

5 See Warner, G. Ray, "Surviving the Transition to Revised Article 9: Maintaining Perfection," 20 Am. Bankr. Inst. J. 22 (June 2001); see, also, §9-705(c). Return to article

6 Note that Connecticut adopted a non-uniform version of §9-705 that contains some exceptions. Since the Connecticut bill was enacted only on June 28 and uses both non-uniform language and a non-uniform numbering system, the July 5 deadline for this column did not allow for more than a cursory review of the Connecticut provision, and some nuances may have been missed. Return to article

Journal Date: 
Sunday, July 1, 2001