Submitted by UCS on February 6, 2020
When I was growing up, if I wanted to find the answer to something, I would ask my parents and they would tell me to look it up. I almost always got annoyed because I knew that it meant I had to either get one of those dusty Encyclopedia Britannica books that were in our house or walk over to the library and scan through microfiche (Oh how I loved speeding through those screens!) or thumbing through note cards to find the book. Several hours later maybe I found my answer. Today, you can find just about anything and everything with the click of a button. If I want to learn how to cook a tuna casserole…click. If I want to get driving directions on how long it will take drive to Kickapoo, Kansas…click, and I’m there. How about performing a UCC search? Not so fast.
Some questions to consider before I begin my search:
• Where do I perform a UCC search?
• Can I do it myself or should I hire a professional?
If you have never performed a UCC search you should consider hiring a service company who specializes in this area.
A through search involves four parts:
• UCC/lien search
• Litigation search
• Bankruptcy search
• Federal & State Tax lien search
This information is accessible via public records usually for a fee. The information uncovered by a four-part search could effect the outcome of the transaction, so the lender wants to be sure they have requested all the financial details about the Debtor in order to make an informed lending decision.
What to look for, how to look for it and what you are looking at is where the real work begins. This four-part series covers what to expect when performing all or some parts of a UCC search. We’ll start with the most common request which is a UCC search.
What is UCC/lien Search?
A UCC search covers Financing Statements (UCC-1) and UCC Amendments (UCC-3) that have been filed to publicly announce that the lender has a security interest against the debtor’s asset(s). Depending on the circumstances, the filing will be submitted to the Secretary of State where the debtor is incorporated or in the county where the asset is located.
Searches should be conducted in the state of formation or where an individual has a legal residence. When conducting your search, use the legal name of the debtor. If the debtor is a company, find a copy of the formation document. If you are searching an individual’s name, ask for a copy of a government issued identification document such as a driver’s license. Keep in mind, companies and individuals can amend their name so if former names exist it is best practice to search those as well.
What to expect
Having a UCC lien on file is not necessarily a bad thing. Other types of liens (tax for e.g.) are filed because of a delinquency, but a UCC lien is a normal part of business financing. This lien serves as notice to all potential creditors that the borrower owes the lender money and the lender has an interest in business assets until the business repays the debt. Search results reflect active UCC filings on record for the debtor. Most states provide you with copies of both active and lapsed (no longer effective) filings so that you have a complete history. If there are no liens on records, depending on the state, the report will indicate that results were “Clear”.
When you are reviewing the results check that the following is accurate:
• Debtor & Secured Party Name(s)
• Address(es) of Debtor & Secured Party
• Date of Filing
• Collateral Description
• Was the UCC filed more than 5 years ago and was it Continued?
When filing or searching UCC’s, always keep in mind that it is not up to the filing officer to verify any of the information on the document; the burden for getting the information right falls to the secured party.
In two weeks, I will post part 2 of series. This will cover litigation searches. In the meantime, if you would like to learn more about the UCC process check out our prior blogs or visit our YouTube Channel. Feel free to reach out to a UCS Client Service Representative at (800) 899-8648.
About the author
Keith Sheppard is the Business Development Coordinator for United Corporate Services. As Business Development Coordinator, Keith utilizes his 25 years of experience as both a corporate paralegal and paralegal manager to develop relationships with all UCS clients by providing smart corporate filings and due diligence solutions.