HB1165--UNIFORMCOMMERCIALCODE(UCC)
SPONSOR: Hicks
TherevisionstotheUniformCommericialCode(UCC)arefocused
primarilyinthefollowingareas:digitalassets,controllable
electronicrecords;electronicmoney;chattelpaper;bundledor
hybridtransactions,consistingofthesaleorleaseofgoods
togetherwiththesale,lease,orlicensingofotherpropertyand
theprovisionofservicesasanintegratedtransaction;documents
oftitle;paymentsystems;miscellaneousUCCamendments;and
consumerissues.
GENERALPROVISIONS(Sections400.1-201to400.1-306)
Thedefinitionof"person"isamendedtoincludeaprotectedseries
establishedundernon-UCClaw.Severaldefinitionshavebeen
includedorrevised. Thedefinitionof"money"doesnotincludean
electronicrecordthatisamediumofexchangerecordedand
transferableinasystembeforethemediumofexchangewas
authorizedbythegovernment. Theterm"electronic"isdefinedto
meantechnologyhavingelectrical,digital,magnetic,wireless,
optical,electromagnetic, orsimilarcapabilities. Theterm
"person"includesaprotectedseriesasindicatedinthebill.
Thereisalsoareviseddefinitionof"conspicuous"anddefinitions
of"send"and"sign"whichaddressrecordsotherthanwritings.
SALESANDLEASES(Sections400.2-102to400.2A-205)
Thebillclarifiestheprovisionsrelatingtohybridtransactions
andchangesthecurrentreferencesto"writing"or"written"
communicationtoreferinsteadtoa"record." Thebilldefinesa
"hybridlease"tomeanasingletransactionthatinvolvesleaseof
goodsandprovisionofservices;asaleofothergoods;orasale,
lease,orlicenseofpropertyotherthangoods.
Thebillalsodefines"hybridlease"andtheapplicationofthe
sectionstoahybridlease.Inahybridlease,ifthelease-of-
goodsaspectsdonotpredominateonlytheprovisionsthatrelate
primarilytothelease-of-goodsaspectsofthetransactionapply.
Thebillincludesprovisionsthatapplyiftheleaseisafinance
leaseandforpromisesofthelesseeinafinancelease.Ifthe
lease-of-goodsaspectspredominate,Sections400.2-102to400.2A-
205,RSMo,wouldapplytothetransaction,butdonotprecludethe
applicationofotherlawsthatdonotrelatetotheleaseofgoods.
NEGOTIABLEINSTRUMENTS,BANKDEPOSITSANDCOLLECTIONS(Sections
400.3-104to400.4A-305) Thisbillincludeschangestonegotiability, remotedeposit
capture,statementsofaccount,definitionofpaymentorder,and
securityprocedures. Thebillreplacesreferencestoa"writing"
withreferencestoa"record".
LETTERSOFCREDIT(Section400.5-116)
Currently,forthepurposeofjurisdiction,choiceoflawand
recognitionofinterbranchlettersofcredit,thebranchesofa
bankareconsideredseparatejuridicalentitiesandabankis
locatedattheplacewhereitsrelevantbranchislocated. The
billclarifiesthatabranchofabankisconsideredtobethe
addressindicatedinthebranch'sundertaking. Ifmorethanone
addressisindicated,thebranchisconsideredtobelocatedatthe
addressfromwhichtheundertakingwasissued.
DOCUMENTSOFTITLE(400.7-102to400.7-106)
Underthecurrentlawsubsection(a)ofSection400.7-106sets
forththegeneraltestforcontrolinthatthesystememployedfor
evidencingthetransferofinterestsintheelectronicdocument
reliablyestablishesthatpersonasthepersontowhichthe
electronicdocumentwasissuedortransferred. Subsections(b)and
(c)ofSection400.7-106containthesafeharborstobeableto
demonstrateandidentify,atanypointintime,thepersonentitled
undertheelectronicdocument. Thesafeharborinsubsection(b)
requirestheexistenceofonlyoneauthoritativecopyofthe
documentbutthesafeharborinsubsection(c)allowsforeithera
singleauthoritativecopyormultipleauthoritativecopies.
Thebillincludesprovisionsrelatingtoexclusivityofpowersin
subsections(d)and(e)ofSection400.7-106,apresumptionof
exclusivityofpowersinsubsection(f)ofSection400.7-106,anda
newsubsection(g)inSection400.7-106oncontrolthroughanother
person.
INVESTMENTSECURITIES(Sections400.8-102to400.8-303)
Thisbillincorporatesdefinitionscontainedinothersections,as
definedinthebill,toinvestmentsecurities. Thebillspecifies
therightof"control"tomeanthatthepurchaserhastaken
whateverstepsarenecessary,giventhemannerinwhichthe
securitiesorotherfinancialassetsareheld,toplaceitselfina
positionwhereitcanhavethesecuritiesorotherfinancialassets
sold,withoutfurtheractionbytheowner,registeredowner,
entitlementholder,transferor,orotherpersonwithaninterestin
thesecuritiesorotherfinancialassets. Inaddition,thebillspecifiesthemeansbywhichapurchasercan
obtaincontrolofasecurityentitlement. Currently,apurchaser
hascontrolifitistheentitlementholder;ifthesecurities
intermediaryhasagreedtoactonentitlementordersoriginatedby
thepurchaserifnofurtherconsentbytheentitlementholderis
required. Underthebill,apurchasermayobtaincontrolif
anotherpersonhascontrolandthepersonacknowledgesthatithas
controlonthepurchaser’sbehalf.
SECUREDTRANSACTIONS(Sections400.9-102to400.9-628)
Thebillcontainsnewdefinitionsoftheterms"assignee",
"assignor","controllableaccount","controllablepayment
intangible",and"money".Italsomodifiesexistingdefinitions
suchas"account."
Thebillrelatestosecurityinterestsincontrollableelectronic
recordsandintherightstopaymentthatareembeddedinthe
controllableelectronicrecords,controllableaccounts,and
controllablepaymentintangibles. Inthebill,"perfection",means
theenforceability againstthirdpartiesofsecurityinterestsin
theseassets.Perfectionmaybeachievedbyasecuredparty
obtainingcontroloftheassetorfilingafinancingstatementin
theappropriatejurisdiction’s filingoffice.Asecurityinterest
perfectedbycontrolhaspriorityoverasecurityinterest
perfectedbyfiling.
Thebillredefines"chattelpaper",suchasinstallmentsale
contractsandpersonalpropertyleases,astherighttopaymentof
amonetaryobligationthatissecuredbyasecurityinterestin
specificgoodsorowedunderaleaseofspecificgoods,ifthe
righttopaymentandinterestinthegoodsareevidencedbya
record.Thereviseddefinitionmoreaccuratelyreflectsthe
distinctionbetweentheseller’sorlessor’srighttopaymentand
therecordevidencingthatright.Thereviseddefinitionalso
resolvesuncertaintythathasarisenwhengoodsareleasedaspart
ofahybridtransactioninvolvingservicesornon-goodspropertyas
wellasspecificgoods.Thisbilladdressesadditionalissues
relatingtohybridtransactions,andprovidesanamendeddefinition
of"control"ofanauthoritativeelectroniccopyofarecord
evidencingchattelpaper,whichreflectsamoreaccurateand
technologically flexibleapproach. Asecurityinterestinchattel
papermaybeperfectedbytakingpossessionoftheauthoritative
tangiblecopies,andobtainingcontroloftheelectronic
authoritativecopies,ifany.
Theterm"money",asdefinedinthebill,appliesthroughoutthe
UCCunlessotherwiseprovided. Thebillprovidesthatperfection
ofasecurityinterestinelectronicmoney,asubsetofmoney,as originalcollateralmustbebycontrol,notfiling.Thebill
includesareviseddefinitionof"money"thatexcludesdeposit
accountsandmoneyinanelectronicformthatcannotbesubjected
tocontrol. Thebillupdatesandclarifiesthetake-freerulesfor
transfereesofbothelectronicmoneyandtangiblemoneyand
transfereesoffundsfromdepositaccounts.
Thisbillincludesdetailedprovisionsoncontrolrelatingto
controlofdepositaccounts,controlofauthoritativeelectronic
copyofrecordevidencingchattelpaper,andcontrolofelectronic
money.
Thebillrevisestheformandinstructionsforproviding
notificationofdispositionofcollateralforaconsumer-goods
transactionandfornonconsumer-goodstransaction.
CONTROLLABLEELECTRONICRECORDS(Sections400.12-101to400.12-107)
Thebilldefinestheterms"controllableelectronicrecord",
"qualifyingpurchaser","transferablerecord",and"value". The
terms"electronic"and"record"thataredefinedinSection400.1-
201havebeenincorporatedwhichprovidesforamoreexpansive
definitionof"electronicrecord". However,thedefinitionof
"electronicrecord"containssomeexclusions.
Ifthereisaconflictbetweenthesectionsgoverningthe
controllableelectronicrecordsandthesectionsgoverningsecured
transactions,thelattercontrols. TheprovisionsofSection
400.12-104applytocontrollableaccountsandcontrollablepayment
intangiblesinthesamemannerthattheyapplytocontrollable
electronicrecords. Thepurchaserobtainscontrolbyobtaining
controlofthecontrollableelectronicrecordthatevidencesthe
accountorpaymentintangible. Undersubsection(c)ofSection
400.12-104,theresolutionofquestionsconcerningthetransferof
rightsinacontrollableelectronicrecord,suchastheactsthat
mustbetakentoeffectuateatransferofrightsandthescopeof
therightsthatatransfereeacquires,isdeterminedbyotherlaw.
Subsections(d)through(h)ofSection400.12-104,contain
importantexceptionstosubsection(c).
Thebillincludesprovisionsthatexaminescontrol. Anelectronic
recordisa"controllableelectronicrecord"underSections400.12-
101to400.12-107onlyifitcanbesubjectedtocontrolunder
Section400.12-105,andonlyapersonhavingcontrolofa
controllableelectronicrecordiseligibletobecomeaqualifying
purchaserandsototakefreeofclaimsofapropertyinterestin
thecontrollableelectronicrecord,oranycontrollableaccountor
controllablepaymentintangibleevidencedbythecontrollable
electronicrecord,andtobeprotectedbythe"no-action"rule. Thebillincludesprovisionsgoverningthemeaningofexclusive
power,whenthepowerisnotsharedwithanotherperson,the
presumptionofexclusivityofcertainpowers,andcontrolthrough
anotherperson.Thebillexplainstherequirementsonhowan
accountdebtoronacontrollableaccountorcontrollablepayment
intangiblemaydischargeitsobligation.
Thebillprovidesthatthelocallawofacontrollableelectronic
record'sjurisdictiongovernsamatterthatiscoveredbySections
400.12-101to400.12-107.Ifthechoiceoflawreferstoa
jurisdictionthathasadoptedSections400.12-101to400.12-107,
thosematterswouldincludetheinterpretation andapplicationof
thesesections,includingitsdefinitions. Thebilldesignatesthe
DistrictofColumbiaasthelocationofadebtorthatotherwise
wouldbelocatedinajurisdictionwhoselawdoesnotprovidefora
generallyapplicablesystemofpublicnotice,suchasfilingor
registration,fornonpossessorysecurityinterests. This
designationalsoassumesthattheDistrictofColumbiawillhave
adoptedArticle12andtheconformingamendmentstoArticles1and
9insubstantiallytheuniformversion,withoutmaterial
modificationoftheofficialtext.
TRANSITIONALPROVISIONSFORUCCAMENDMENTS(Sections400.199-101to
400.199-306)
Underthebill,severalmaterialchangesinthelawwouldbegiven
effectoneyearafterauniformeffectivedate.Thebillincludes
auniformadjustmentdatewhichisJuly1,2025onwhichseveral
materialprovisionswillapply,particularlynewpriorityrules
thatwouldoverridepre-effectivedateestablishedpriorities.