Today’s 3-in-3 Topic is: What is the Right UCC Filing?
“3-in-3” is a 3 question, 3-minute interview with an NCS colleague.
Today’s 3-in-3 features Cindy Bordelon, Manager of our UCC Services, and her recommendations for determining the appropriate UCC filing.
Question 1: How do I figure out what filing is needed for me to protect myself?
Cindy: The best way to answer your question is with some questions. What are you selling, what is your customer doing with the goods and what do you want to secure? The type of transaction that is taking place and what you’re trying to secure will help to determine the type of filing you need.
Question 2: In these 2 examples, what would be the appropriate filing for me?
Example 1: Let’s say you’re a manufacturer and are selling product to someone that’s going to be stocking it, like a stocking distributor. And they’re going to be holding the inventory for 60 or 90 days and you would like to take a secured interest or a priority interest in your inventory, maybe the proceeds and accounts and accounts receivable.
Cindy: Well this would be a prime example of a Purchase Money Security Interest in inventory, — also known as a PMSI in inventory. So you’re looking to secure your inventory, take priority security in the inventory so you’ll be able to repossess it in the case of a default or bankruptcy, and also — depending on certain circumstances — you might want to try to secure your accounts, accounts receivable and the proceeds.
Example 2: What if you are the manufacturer of a piece of equipment that your customer is going to use in the course of their business? In this example, what would be the appropriate filing?
Cindy: This would be an equipment filing because they’re actually using the piece of equipment in the course of their business so you want to secure that piece of equipment since they’re not restocking or reselling anything.
Question 3: When would a blanket UCC apply?
Cindy: When you’re not looking to repossess anything and are just concerned about taking a secured interest in the accounts, accounts receivable and the general intangibles. So it’s kind of like laying a blanket over general items and nothing specific.
- Use a blanket UCC filing when you’re trying to take a secured interest in the personal property of your debtor or their intangibles.
- Use a PMSI in equipment filing when you want to take a priority interest in your equipment that your customers are using in the course of their business.
- Use a PMSI in inventory filing when you want to take a secured interest in your inventory accounts and accounts receivable just in case of default or bankruptcy.