In 2001 a major revision of Article 9 of the Uniform Commercial Code was highlighted by the requirement that the secured party get the name of the debtor “correct”. Without the correct name, the filing could be deemed “seriously misleading” and ineffective if questioned in a court proceeding.

Over the next 12 years the question as to what was a correct name for entities and individual names generated much litigation. For entities, the question was whether the correct name was on organizational documents or that which was found on the state database. For individuals, the code provided no guidance at all.

Most states in 2013 adopted provisions that provided specific answers to the question: “what is the safe harbor for filing with the correct name?” For entities it is the name that appears on the formation documents. And for individuals, the vast majority of states refer to a state issued driver’s license.

So for new filings made after the enactment of the amendments, drafters know what to look at to have an effective filing. The major potential pitfall is on Continuations.

For filings made before the amendments, the name of the debtor may have been effective due to vague guidelines. But when Continuations are required, filers must verify the “correct name” under the new rules. Failure to act on a name that is no longer deemed to be correct will result in a filing becoming ineffective as of the lapse date even though a Continuation has been filed.

BEST PRACTICE: Research needs to be done for any Continuation to be submitted on a filing made prior to the effective date of the amendments. Prior to the Continuation period verify the correct name of the entity or individual under the new rules. If different from what was placed on file originally, ADD it as an additional Debtor. If the original name would have been deemed correct under prior guidelines, the Continuation with the Added debtor name will protect your filing going forward.

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