PERFECTING SECURITY INTEREST IN GOODS OR CHATTEL
Under the Uniform Commercial Code (“UCC”), is a secured creditor required to file a new UCC-1 financing statement to perfect its security interest in equipment if a debtor moves its “location” to another jurisdiction? The answer may depend on whether the debtor is considered an “organization” or a “registered organization.”
UCC 9-301 dictates where a creditor must file a financing statement in order to perfect its security interest. This section confirms that the “jurisdiction” of the debtor’s location governs the perfection and priority of a security interest in collateral. UCC-9-301(1). The same section also provides that the law of the jurisdiction where the collateral is located governs the perfection and priority of a security interest in collateral.
UCC 9-102(50) defines the term “jurisdiction of organization” to mean “with respect to a registered organization, . . . the jurisdiction under whose law the organization is organized.” The term “registered organization” is defined as “an organization organized solely under the law of a single State or the United States and as to which the State or the United States must maintain a public record showing the organization to have been organized.” UCC 9-102(70).
UCC 9-307(b) offers the following general rules to determine a debtor’s location:
(1) A debtor who is an individual is located at the individual’s principal residence.
(2) A debtor that is an organization and has only one place of business is located at its place of business.
(3) A debtor that is an organization and has more than one place of business is located at its chief executive office.
However, subsection (e) of UCC 9-307 provides a specific rule to determine the location of a “registered organization,” by stating that a “registered organization” that is organized under the law of a State is located in that State.” (Emphasis added).
In the event that an individual debtor “relocates” to another jurisdiction, an entity debtor re-organizes in another jurisdiction, or a new debtor in a new jurisdiction becomes encumbered through a transfer of collateral, the burden falls on the secured party to ensure that they perfected under the law of the new jurisdiction. See UCC 9-316. The existing security interest remains perfected only until the earliest of a lapse of the financing statement, or 4 months to one year depending on whether or not a new debtor has become encumbered. Under these circumstances, to maintain a perfected security interest in collateral the creditor is required to file a new financing statement in the jurisdiction of the debtor’s new location. If a financing statement is not filed by the earlier of these events (lapsing of original UCC-1 filing, or 4 months to a year), then the security interest becomes unperfected and subject to losing priority to another secured creditor. UCC 9-316.
A reasonable reading of the UCC suggests that the re-perfection rules enumerated under UCC 9-316 do not apply to “registered organizations.” Accordingly, a debtor’s “relocation” of its business and collateralized equipment from one state to another does not constitute “a change of the debtor’s location” if the debtor is a “registered organization.” In other words, although a debtor that is a registered corporation physically moves to a different jurisdiction, it’s “location” is governed by UCC 9-307(e), and thus, is deemed to have never changed its location because it remains “located” in the state of its incorporation. Therefore, the secured creditor would only be required to file a UCC-1 financing statement in the debtor’s state of incorporation – not the new jurisdiction – to perfect its security interest.
In any event, it is best practice for a secured creditor to monitor to the location of its debtor and to file a new financing statement in each jurisdiction the debtor moves to so as to avoid issues with competing security interests in the same collateral.
 Whereas the UCC defines the term “Registered Organization,” the UCC does not provide any definition for the term “organization.” UCC 9-102.