The following news release was received today from Corporation Service Company:
The UCC Division of the Massachusetts Secretary of the Commonwealth has announced a change to its UCC standard search logic ("SSL") that may render some currently effective financing statements seriously misleading. The revised search logic, expected to be implemented sometime around March 1, 2010, will no longer disregard ending "noise words." ("Noise words" are words, phrases, or abbreviations at the end of an organization name that indicate the existence or nature of the organization. Examples of "noise words" include Corporation, LLC, and Limited Partnership.)
This search logic change will affect filed financing statements that provide debtor names with minor errors in the ending noise words. A debtor name with errors in the ending noise words will not comply with Section 9-503(a). Section 9-506(b) provides that a debtor name that fails to comply with Section 9-503(a) makes the financing statement seriously misleading. However, under Section 9-506(c), if a search under the debtor's correct name, using the filing office's standard search logic, would disclose the record, the incorrect debtor name does not make the financing statement seriously misleading. Thus, the sufficiency of a debtor name that contains errors in ending noise words depends entirely on the search logic.
Today, a debtor name provided as "ABC, INC." would not make a financing statement filed with the Massachusetts Secretary of the Commonwealth seriously misleading if the correct debtor name was "ABC CORPORATION." The current SSL would find the name with the incorrect noise word because it disregards the endings "INC" and "CORPORATION" in each name. Therefore, Section 9-506(c) prevents the error in the filed debtor name from making the financing statement seriously misleading.
The Massachusetts Secretary of the Commonwealth plans to implement the new SSL sometime around March 1, 2010. At that point, the SSL will no longer disclose "ABC, INC." on a search of the correct name "ABC CORPORATION." Any filed financing statement that provides a debtor name with incorrect ending noise words will become seriously misleading. Secured parties that relied on SSL for sufficiency of the financing statement may find themselves unperfected.
Secured parties can take three actions before the SSL change to reduce the risk of becoming unperfected. First, the secured party should identify any financing statements they have filed with the Massachusetts Secretary of the Commonwealth that contain mistakes in the organization debtor name ending noise words. Second, if any records provide incorrect ending noise words, the secured party should order a certified search on the correct name of the debtor to ensure the record is currently sufficient under Section 9-506(c). The certified search uses the filing office SSL and will serve as evidence that the name provided did not make the financing statement seriously misleading prior to the SSL change. Finally, the secured party must file an amendment to add the correct debtor name.
For more information please contact Paul Hodnefield, Associate General Counsel for Corporation Service Company, at firstname.lastname@example.org, or 800-927-9801, ext. 2375.