When reviewing UCC search results as part of a pre-funding due diligence investigation, it may be your first inclination to ignore a UCC that has a termination listed, assuming that the UCC record is no longer a factor in determining priority. Before deciding to ignore any terminated UCCs that turn up on your search reports – please read this!
Many UCC Financing Statements list multiple Secured Parties. It is important to note that when a termination is filed against a UCC record that has multiple Secured Parties, that termination can mean two very different things.
- The Secured Party that filed the termination could be acting as a representative for all Secured Parties. In these instances, the filed termination would mean that every Secured Party associated with that specific UCC record has ceded their priority claim to the collateral.
OR
- The Secured Party that filed the termination may be relinquishing only its own interest in the collateral, in which case the UCC record would represent a continuing, effective claim for all other Secured Parties of record.
Interestingly, there is no place on the UCC3/Amendment form where a Secured Party can indicate if they are filing a termination in representative capacity or not. UCC experts recommend searchers contact the Secured Party listed in Box 9 of the filed termination to determine the Secured Party's intent.
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For informational purposes only; content does not constitute legal advice.