Our product recommendations are made independently, but we may earn affiliate commissions if you use a link on this page.
The UCC is a set of laws designed to govern commercial transactions within or with, the United States. Many different articles exist within the code, each one governing a different aspect of commercial business. One of those sections is UCC 9-310.
UCC 9-310 covers the parameters for the filling paperwork to perfect the security interests within commercial transactions. More specifically, the documents that apply to these security interests and the cases where they don’t need to be filed. There are rules and procedures that must be followed when filing these documents, and this section outlines them and their exceptions.
If you want to get more information about UCC 9-310, you’ve come to the right place. It’s critical to know about the various UCC laws, especially if you are working in the finance or business industry. Read on to learn more about the specifics of this section of the UCC.
What is UCC 9-310?
Below, we have included the full text of UCC 9-310:
§ 9-310. WHEN FILING REQUIRED TO PERFECT SECURITY INTEREST OR AGRICULTURAL LIEN; SECURITY INTERESTS AND AGRICULTURAL LIENS TO WHICH FILING PROVISIONS DO NOT APPLY.
(a) .General rule: perfection by filing..
Except as otherwise provided in subsection (b) and Section 9-312(b), a financing statement must be filed to perfect all security interests and agricultural liens.
(b) .Exceptions: filing not necessary..
The filing of a financing statement is not necessary to perfect a security interest:
(1) that is perfected under Section 9-308(d), (e), (f), or (g);
(2) that is perfected under Section 9-309 when it attaches;
(3) in property subject to a statute, regulation, or treaty described in Section 9-311(a);
(4) in goods in possession of a bailee which is perfected under Section 9-312(d)(1) or (2);
(5) in certificated securities, documents, goods, or instruments which is perfected without filing
or possession under Section 9-312(e), (f), or (g);
(6) in collateral in the secured party's possession under Section 9-313;
(7) in a certificated security which is perfected by delivery of the security certificate to the secured party under Section 9-313;
(8) in deposit accounts, electronic chattel paper, investment property, or letter-of-credit rights which is perfected by control under Section 9-314;
(9) in proceeds which is perfected under Section 9-315; or
(10) that is perfected under Section 9-316.
(c) .Assignment of perfected security interest..
If a secured party assigns a perfected security interest or agricultural lien, a filing under this article is not required to continue the perfected status of the security interest against creditors of and transferees from the original debtor.
What Does UCC 9-310 Mean?
In the context of UCC 9-310, a financing statement is a document that a creditor files to publicly declare their security interest in specific collateral (usually property or assets) that a debtor has used as collateral for a loan or other credit transaction. These financing statements are typically filed with the appropriate government agency, such as the Secretary of State's office in the relevant jurisdiction, to provide notice to other potential creditors and interested parties.
UCC 9-310 specifies the rules and procedures for terminating or canceling a financing statement when the underlying debt or obligation secured by the collateral has been paid off or otherwise transferred to another party. It is crucial for creditors to properly terminate these statements to ensure that the collateral is no longer encumbered and to maintain the accuracy of public records.
The specific requirements and procedures for filing financing statements under UCC 9-310 can vary from state to state as the UCC is adopted and enacted at the state level. Therefore, it's essential to consult the relevant state's UCC statutes and regulations or seek legal advice to ensure compliance with the specific rules and requirements in your jurisdiction.
We recommend always seeking legal counsel whenever you have a question about the UCC.
Why is UCC 9-310 Important?
UCC 9-310 is important because it governs the filing of financing statements in secured transactions, and it plays a critical role in ensuring the accuracy and integrity of the public record of security interests.
Here are several specific reasons why UCC 9-310 is important:
Protects the Rights of Debtors
UCC 9-310 provides a mechanism for debtors to remove liens or security interests from their property once they have fulfilled their obligations to the creditor. This protection ensures that debtors regain full control and ownership of their assets once the debt is paid off or the secured obligation is satisfied.
It also dictates how the record must be changed after a debt has been repaid to ensure there aren’t issues for the previous debtor down the road.
Prevents Confusion and Disputes
Accurate and up-to-date records of security interests are essential to prevent disputes and confusion among creditors, debtors, and third parties. Termination statements filed under UCC 9-310 help maintain the clarity of the public record, reducing the risk of conflicting claims on the same collateral.
Supports Lending and Credit Markets
Lenders and creditors rely on the UCC's framework, including UCC 9-310, to assess the risk associated with extending credit. Having clear rules for terminating security interests allows creditors to manage their portfolios effectively and make informed lending decisions to new or future debtors.
Facilitates Asset Transactions
When individuals or businesses want to sell or transfer assets that were previously used as collateral, the termination of the relevant financing statements is often a prerequisite. UCC 9-310 ensures that these transactions can occur smoothly and without unnecessary complications.
Protects the Rights of Other Creditors
UCC 9-310 helps protect the interests of other creditors by ensuring that once a security interest is satisfied or transferred to a new party, other creditors have a clear understanding of the debtor's available collateral. This transparency is crucial for the orderly distribution of assets in case of bankruptcy or insolvency.
Legal and Regulatory Compliance
Compliance with UCC 9-310 and other UCC provisions is essential for businesses and individuals involved in secured transactions. Failing to terminate a financing statement properly can result in legal complications and may affect a party's ability to enforce its rights.
Why Was UCC 9-310 Signed Into Law?
When lenders in the US first started issuing credit to citizens, the processes for tracking these debts or naming them were few or none. Often, farmers would enter verbal agreements with their creditors (over the promise of their future crops), only to later default.
Because these situations were not well recorded, the creditor could often transfer the debt without the debtor knowing or extort the debtor for repayment (or both!) As a result, many individuals were unfairly extorted by their creditors, and this created an imbalance of wealth in the early days of the United States.
In the same way, a farmer could get credit from multiple lenders for the same crop and then disappear without repaying either of them. Not to mention that it was difficult for an individual to sell products across state lines because of the differing commercial transaction laws and regulations. This led many businesses (and farmers) to be restricted to buying and selling within their state.
When UCC 9-310 was signed into law, it was done to both protect the lenders and debtors from becoming confused over what credit was extended in place for what collateral and how this collateral could be documented and recorded. UCC 9-310 solidified record keeping for all parties and allowed both lenders and debtors to have a variety of rights when it came to giving and accepting credit.
UCC 3-910 also made commercial transactions more efficient and predictable, allowing those who need credit (and have collateral) to receive credit when they need it without a lengthy and difficult agreement process or a court case later due to a poorly recorded disagreement of how the credit/debit was handled.
Additionally, this easy legal framework encourages broader economic activity by providing businesses with the confidence they need to engage in lending, borrowing, and other transactions without worrying about poorly recorded transactions. UCC 9-310 facilitates the flow of credit and commerce by reducing the legal uncertainty often found in these types of transactions.
Overall, because the UCC applies in every state, this section also helped to create uniformity and consistency in commercial law nationwide, allowing interstate commercial transactions to process smoothly even when the businesses are located in different states. Prior to the UCC, interstate commercial transactions could often be difficult and out of reach for many smaller businesses because of their complexity and risk.
In conclusion, UCC 9-310 helps to outline the documents that must be filed to perfect an asset as well as the records the company needs to keep on hand in the case of the termination of said financial lien or the transfer to another entity. This section of the UCC applies in all states, making it easy for cross-border commercial transactions to occur within the United States.
Reference Legal Explanations
If you use any of the definitions, information, or data presented on Legal Explanations, please copy the link or reference below to properly credit us as the reference source. Thank you!
"What is UCC 9-310?". Legal Explanations. Accessed on February 28, 2024. https://legal-explanations.com/blog/what-is-ucc-9-310/.
"What is UCC 9-310?". Legal Explanations, https://legal-explanations.com/blog/what-is-ucc-9-310/. Accessed 28 February, 2024
What is UCC 9-310?. Legal Explanations. Retrieved from https://legal-explanations.com/blog/what-is-ucc-9-310/.