On July 1, 2013, most states, including the Commonwealth of Massachusetts, enacted the 2010 amendments to Article 9 of the Uniform Commercial Code.
Broadly, Article 9 governs any transaction (other than a finance lease) that couples a debt with a creditor’s (lender) interest in a debtor’s (borrower) personal property (collateral). If the debtor defaults, the creditor may assert rights in the collateral, and in certain circumstances, repossess and sell that property to satisfy the debt. The creditor’s interest is called a "security interest." For example, a manufacturer may use its equipment as security, a retailer may use its accounts receivable, or an individual consumer may use his or her personal property, as collateral.
Provided the underlying security agreement precisely specifies the collateral, a creditor’s security interest is perfected by filing a financing statement (UCC1), thereby establishing priority over other creditors who may have legally enforceable rights to the same identified collateral.
The 2010 Amendments were suggested by a review committee, jointly appointed by the American Law Institute and the Uniform Law Commission, in an attempt to clarify some of the following issues that were creating problems in practice, and resulted in unnecessary litigation.
To read more about the changes to Article 9, click here to read Darren’s complete post on Prince Lobel’s Corporate Law Blog.