Delaware General Assembly

Signed 5/3/13

The General Assembly has ended, the current status is the final status.

1/15/13

Walker

Rep. M. Smith
Sen. Henry

Reps. J. Johnson, Q. Johnson, Keeley, Smyk, Wilson
Sen. Townsend

AN ACT TO AMEND TITLE 6 OF THE DELAWARE CODE RELATING TO THE UNIFORM COMMERCIAL CODE.

It is the purpose of this Act to amend Article 9 of the Delaware Uniform Commercial Code dealing with secured transactions. The revisions to Article 9 are part of a national effort led by the National Conference of Commissioners on Uniform State Laws and The American Law Institute that seeks adoption of revisions in substantially the form proposed by all applicable states within, or other jurisdictions under the control of, the United States. Section 1: This amendment revises the definition of “authenticate” to more closely resemble the definition of “sign” in revised Uniform Commercial Code Articles 1 and 7, furthering the goals of electronic communication and medium-neutrality. Section 2: This amendment revises the definition of “certificate of title” to comport with the emerging practice of maintaining non-paper electronic records evidencing both ownership and security interests in certain property. Section 3 This amendment revised the definition of “jurisdiction of organization” so as to more clearly include within the definition of “registered organization” certain organizations that, under applicable law, are said to be “formed” rather than “organized.” Section 4 This amendment creates the new defined term “public organic record.” It provides greater clarity for determining both (i) whether a given organization is a registered organization, and (ii) if a registered organization, its name for filing purposes. Incidentally, it renumbers the sections following such new defined term. Additionally, it clarifies the defined term “registered organization.” Section 5: This amendment revises the prerequisites for “control” of electronic chattel paper. Section (a) derives from the Uniform Electronic Transactions Act, and sets forth the general test for control. Subsection (b) sets forth a safe harbor test for control under the general test in Section (a). Section 6: This amendment reflects the approach taken by the 2010 Official Text to an imprecision relating to the location of certain registered organizations organized under federal law. Delaware anticipated and addressed this imprecision by non-uniform text in its initial enactment of Revised Article 9 (72 Del. Laws, c. 401). Though both Delaware’s original approach and this new approach intend the same result, the text of both appear in this Amendment for avoidance of any doubt. Section 7: This amendment replaces a reference in subsection (a)(3) of Section 9-311 to certificate of title statutes with a broader reference to statutes that provide for a security interest to be indicated on a certificate of title, thus capturing other statutes providing for such security interests. Sections 8 and 9: Subsections (a) and (b) of Section 9-316 address security interests that are perfected (i.e., that have attached and as to which any required perfection step has been taken) before the debtor changes location or there is a transfer of collateral to a new debtor. Prior to this amendment to Section 9-316, collateral to which a security interest attached following a change in location of the debtor or a transfer of collateral to a new debtor, was not perfected until the security interest was perfected according to the rules of the new jurisdiction. New subsection (h) addresses security interests that attach within four months after the debtor changes its location. Under subsection (h), a filed financing statement that would have been effective to perfect a security interest in the collateral if the debtor had not changed its location is effective to perfect a security interest in collateral acquired within four months after the relocation to another jurisdiction. Such security interest will remain perfected, if before the expiration of the four month period, the security interest is perfected under the laws of the other jurisdiction. Otherwise, the security interest will become unperfected at the end of the four month period and will be deemed never to have been perfected as against a purchaser for value. New subsection (i) is similar to subsection (h). Whereas subsection (h) addressed security interests that attach within four months after a debtor changes its location, subsection (i) addresses security interests that attach with four months after a new debtor becomes bound as debtor by a security agreement entered into by another person and the new debtor is located in another jurisdiction. Subsection (i) also addresses collateral acquired by the new debtor before it becomes bound. Specifically, subsection (i) provides that following a transfer of collateral to a new debtor, the security interest of a secured party perfected prior to such transfer of collateral is effective to perfect a security interest in collateral acquired by the new debtor before, and within four month after, the new debtor became bound as debtor, upon attachment. It will remain perfected if, before the expiration of the four month period, the security interest is perfected under the laws of the other jurisdiction. Otherwise, the security interest will become unperfected at the end of the four-month period and will be deemed never to have been perfected as against a purchaser for value. Section 10: This amendment makes proper use of the terminology in Section 9-317(b) to describe a certificated security. Section 11: This amendment revises subsection (d) of Section 9-317 to clarify its applicability to all of the types of collateral in which a security interest cannot be perfected by possession. Section 12: The amendment revises the rule for subordination of security interests created by a new debtor to address the context arising under new subsection (i)(1) of Section 9-316. Sections 13 and 14: Subsection (e) of Section 9-406 and subsection (b) of Section 9-408 override certain contractual prohibitions on assignment of receivables. The former does not apply to sales of payment intangibles or promissory notes, while the latter does apply to security interests in payment intangibles and promissory notes where such security interests arise out of the sale of such property. Uncertainty has arisen as to whether a disposition of such collateral under Section 9-610 or an acceptance thereof under Section 9-620 is properly treated as a sale governed by Section 9-406 or a security interest governed by Section 9-408. This Amendment clarifies that such disposition is to be treated as a sale governed by Section 9-406, with the consequence that a buyer under Section 9-610 or an assignee under Section 9-620 can enforce those rights notwithstanding any contractual restriction. Sections 15 and 16: The amendments to Sections 9-502 and 9-503 are intended to clarify the manner in which various types of debtors are intended to be named or identified in financing statements. Section 16 offers greater specificity than current law in the case of registered organizations, and simplifies and clarifies in the cases of collateral administered by the personal representative of a decedent and collateral held in trust. With respect to debtors who are individuals, the amendments leave current law unchanged, and add a safe harbor for those providing correctly the debtor’s surname and first personal name only. Section 17: This amendment clarifies that it is the financing statement becoming seriously misleading and not the debtor’s name change that commences the four month period after which the security interest in any collateral acquired by the debtor is no longer perfected unless the financing statement is properly amended. Section 18: This amendment confirms and clarifies the application of Sections 9-507 and 9-508 in circumstances where a debtor has converted from one type of organization to another. When the laws governing the conversion provide that the post-conversion organization is the same organization as the pre-conversion organization, the converted organization does not constitute a new debtor for purposes of Section 9-508, though its name may have changed for purposes of Section 9-507(c). When the laws governing the conversion provide that the post-conversion organization is a different organization than the pre-conversion organization, the converted organization constitutes a new debtor for purposes of Section 9-508. Section 19: The amendment to subsection (f) of Section 9-515 clarifies that the designation of a debtor as a transmitting utility must be made in the initial financing statement in order for the financing statement to remain in effect indefinitely until a termination statement is filed. Sections 20-22: This amendment eliminates certain grounds upon which the filing office can reject financing statements. It also makes conforming changes to reflect the new nomenclature of “information statements” rather than “correction statements” and “surname” rather than “last name”. Also, prior to this amendment, Delaware had a non-uniform provision in subsection (e) that provided in situations where the debtor was a trust or a trustee acting with respect to property held in trust, certain information on a financing statement could be provided with respect to either the trust or the trustee. Changes were made to this non-uniform provision to conform the references to “collateral held in a trust” consistent with the related changes in Section 9-503 regarding the name of debtor provisions for “collateral held in a trust”. Section 23: This Amendment changes and clarifies the non-judicial means for indicating that a financing statement or other record was inaccurate or wrongfully filed. As before this Amendment took effect, the statement discussed in this Section is informational only, and has no legal effect. Reflecting this limitation, the statement is no longer denominated a “correction statement,” but instead an “information statement.” Where previously such statements could be filed only by debtors, they can now be filed by either debtors or secured parties of record. Sections 24 and 25: The amendments to Section 9-521 adopt new safe harbor forms of initial financing statements and financing statement amendments. In addition to adoption of the forms provided by the National Conference of Commissioners on Uniform State Laws, Delaware has also adopted an alternative version of the form for financing statement amendments (Form UCC-3). Section 26: This amendment clarifies that the affidavit of the secured party required to enforce a mortgage non-judicially must state that default occurred with respect to the obligation secured by the mortgage. Section 27. This amendment revises the heading of Section 9-625(c) to reflect more accurately the text of such provision. Section 28: This amendment adds a new Part 8 providing for transition rules governing the implementation of the other parts of the amendments set forth above. Section 29: This Section makes a conforming amendment to Section 2A-103(2).

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Takes effect upon being signed into law

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