Feed for /2011/related/proposals/ab549 PDF
LRB-3925/1
ARG:med:ph
2011 - 2012 LEGISLATURE
February 8, 2012 - Introduced by Representatives Ballweg, Petersen, Marklein,
Spanbauer, A. Ott, Bernier, LeMahieu
and Molepske Jr, cosponsored by
Senators Grothman, Taylor, Risser and Lasee. Referred to Committee on
Financial Institutions.
AB549,2,2 1An Act to repeal 409.503 (1) (c) 1. and 2. and 409.516 (2) (e) 3.; to renumber
2and amend
409.105 (intro.), 409.105 (1) to (6), 409.502 (3) (c), 409.503 (1) (d)
3and 409.518 (3); to amend 409.102 (1) (bm) 2., 409.102 (1) (cg), 409.102 (1) (mg),
4409.102 (1) (rg), 409.307 (6) (b), 409.311 (1) (c), 409.316 (title), 409.317 (2) and
5(4), 409.326, 409.406 (5), 409.408 (2), 409.503 (1) (a), 409.503 (1) (b), 409.503 (1)
6(c) (intro.), 409.503 (2) (b), 409.507 (3), 409.515 (6), 409.516 (2) (c) 2. (intro.),
7409.516 (2) (c) 3., 409.516 (2) (e) 1., 409.516 (2) (e) 2., 409.518 (1), 409.518 (2)
8(intro.), (a) 2. and (b), 409.607 (2) (b) 1. and 409.625 (3) (title); to repeal and
9recreate
409.521 (2) (form) and 409.521 (3) (form); and to create 409.102 (1)
10(qp), 409.316 (8) and (9), 409.502 (3) (c) 2., 409.503 (1) (c) 1m. and 2m., 409.503
11(1) (dm) and (e), 409.503 (6), (7) and (8), 409.518 (3m) and (4) and subchapter
12VIII of chapter 409 [precedes 409.802] of the statutes; relating to: adopting
13amendments to the Uniform Commercial Code Article 9, relating to secured

1transactions, recommended by the National Conference of Commissioners on
2Uniform State Laws.
Analysis by the Legislative Reference Bureau
In 2001 Wisconsin Act 10, this state adopted the Revised Uniform Commercial
Code (UCC) Article 9-Secured Transactions, which was approved by the National
Conference of Commissioners on Uniform State Laws (NCCUSL) in 1998, with
amendments approved by NCCUSL in 1999 and 2000. UCC Article 9 governs
transactions that involve the granting of credit secured by personal property of a
debtor. The creditor's interest is called a "security interest." UCC Article 9 regulates
the creation and enforcement of security interests in movable property, intangible
property, and fixtures (items of personal property affixed to real property), but not
in real property. Under UCC Article 9, if a debtor defaults, the creditor may
repossess and sell the property (generally called collateral) to satisfy the debt. A
creditor with a "perfected" security interest usually has "priority" in the distribution
of the debtor's assets as compared to creditors with later-acquired security interests
(junior secured creditors) and unsecured creditors. Before or at the time a security
interest is perfected, it must "attach." Attachment arises when the security interest
becomes effective between the creditor and the debtor and usually occurs when their
security agreement becomes effective. Perfection of a security interest establishes
the creditor's priority in relation to other creditors of the debtor in the same collateral
and usually occurs with the filing by the creditor of a "financing statement" in a
central filing office - in Wisconsin, the Department of Financial Institutions (DFI).
(The only local filing of financing statements, in the local real estate records, is for
security interests in fixtures or in certain land-related collateral such as timber.)
However, filing a financing statement is not the only method for perfection,
depending upon the kind of property that is collateral. Possession of collateral by the
secured party is an alternative method of perfection for many kinds of collateral, and
"control" is the method of perfection for certain kinds of collateral.
This bill adopts the 2010 amendments to UCC Article 9 approved by NCCUSL.
Among the changes to UCC Article 9 are the following:
1. The bill makes modifications with respect to how a debtor's name must be
identified on a financing statement. Most significantly, if the debtor is an individual
to whom the Department of Transportation (DOT) has issued an operator's license
or identification card that has not expired, the financing statement, to be sufficient,
must provide the name of the individual as it appears on the operator's license or
identification card. If the debtor is an individual who does not hold an unexpired
DOT-issued operator's license or identification card, the financing statement must
provide the individual name of the debtor or the surname and first personal name
of the debtor. The bill also makes changes as to how the debtor's name must appear
on a financing statement whenever collateral is held in a trust and also requires
certain additional information on the financing statement if collateral is held in a
trust or is being administered by a personal representative. The bill makes other

minor modifications or clarifications relating to how debtor names must appear on
financing statements.
2. Under current law, the law of the jurisdiction (state) where a debtor is
located, while the debtor is located there, governs perfection of a security interest,
the effect of perfection or nonperfection, and the priority of a security interest in
collateral. If the debtor moves to a new state or collateral is transferred to a new
debtor in a new state after a security interest is perfected, the security interest
remains perfected until the earliest of the following, as applicable: the time
perfection would have ceased under the law of the original state; the expiration of
four months after the change of the debtor's location to the new state; or the
expiration of one year after the transfer of collateral to a person that becomes a
debtor and is located in the new state. If the security interest becomes perfected
under the law of the new state before any of these time periods elapse, the security
interest remains perfected; otherwise, the security interest becomes unperfected and
is deemed never to have been perfected as against a purchaser of the collateral for
value.
The bill includes provisions applicable to the filing of a financing statement
when the debtor has changed location to a new state and a security interest attaches
within four months after this change of location. The bill specifies circumstances in
which a financing statement filed before the change of location under the law of the
original state is effective to perfect a security interest and specifies when the security
interest remains perfected under the law of the new state. The bill also includes
provisions applicable if a financing statement naming an original debtor is filed
under the law of the original state where the debtor was located and a new debtor
is located in a new state. The bill specifies circumstances in which a financing
statement is effective to perfect a security interest in collateral acquired by the new
debtor before, and within four months after, the new debtor becomes bound by the
security agreement and specifies when the security interest remains perfected under
the law of the new state.
3. Under current law, among the reasons a filing office (usually DFI) may refuse
filing of an initial financing statement or certain amendments is that, if the debtor
is an organization, the financing statement or amendment does not provide a type
of organization for the debtor, a jurisdiction of organization for the debtor, or an
organizational identification number for the debtor or indicate that the debtor has
no such number. This bill eliminates these omissions as reasons for refusing to file
an initial financing statement or amendment to a financing statement.
4. Under current law, if a person believes that a filed record indexed under the
person's name is inaccurate or was wrongfully filed, the person may file a correction
statement. This bill changes the term from "correction statement" to "information
statement." The bill also specifies that a secured party of record may file an
information statement, containing certain information, relating to a filed record if
the secured party believes that the person that filed the record was not entitled to
file it.
5. Under current law, certain agreement terms involving account debtors
(persons obligated on an account, chattel paper, or general intangible) or in

promissory notes relating to the debtor's consent to certain matters affecting a
security interest are ineffective except with respect to the sale of a promissory note
or payment intangible. This bill narrows this exception so that it does not apply if
the sale is a disposition of collateral after default or is an acceptance of collateral in
satisfaction of the debtor's obligation.
6. The bill makes changes relating to a secured party's control of electronic
chattel paper by specifying that, for a secured party to have control, a system
employed for evidencing the transfer of interests in the chattel paper must reliably
establish the secured party as the person to which the chattel paper was assigned.
7. The bill includes several definitional changes, including changes to improve
compatibility of provisions with the use of electronic records. The bill also creates
a new term and definition of "public organic record" for public records relating to
entity formation or organization.
8. The bill makes various minor and technical changes to UCC Article 9 and
replaces current UCC forms with updated UCC forms that incorporate the changes
in Article 9. The bill also includes transitional provisions relating to the applicability
of the bill's changes to existing security interests.
The people of the state of Wisconsin, represented in senate and assembly, do
enact as follows:
AB549, s. 1 1Section 1. 409.102 (1) (bm) 2. of the statutes is amended to read:
AB549,4,52 409.102 (1) (bm) 2. To execute or otherwise adopt a symbol, or encrypt or
3similarly process a record in whole or in part, with the
With present intent of the
4authenticating person to identify the person and
to adopt or accept a record, to attach
5to or logically associate with the record an electronic sound, symbol, or process
.
AB549, s. 2 6Section 2. 409.102 (1) (cg) of the statutes is amended to read:
AB549,5,27 409.102 (1) (cg) "Certificate of title" means a certificate of title with respect to
8which a statute provides for the security interest in question to be indicated on the
9certificate as a condition or result of the security interest's obtaining priority over the
10rights of a lien creditor with respect to the collateral. The term includes another
11record maintained as an alternative to a certificate of title by the governmental unit
12that issues certificates of title if a statute permits the security interest in question

1to be indicated on the record as a condition or result of the security interest's
2obtaining priority over the rights of a lien creditor with respect to the collateral.
AB549, s. 3 3Section 3. 409.102 (1) (mg) of the statutes is amended to read:
AB549,5,64 409.102 (1) (mg) "Jurisdiction of organization", with respect to a registered
5organization, means the jurisdiction under whose law the organization is formed or
6organized.
AB549, s. 4 7Section 4. 409.102 (1) (qp) of the statutes is created to read:
AB549,5,98 409.102 (1) (qp) "Public organic record" means a record that is available to the
9public for inspection and is:
AB549,5,1210 1. A record consisting of the record initially filed with or issued by a state or
11the United States to form or organize an organization and any record filed with or
12issued by the state or the United States which amends or restates the initial record;
AB549,5,1613 2. An organic record of a business trust consisting of the record initially filed
14with a state and any record filed with the state which amends or restates the initial
15record, if a statute of the state governing business trusts requires that the record be
16filed with the state; or
AB549,5,2017 3. A record consisting of legislation enacted by the legislature of a state or the
18Congress of the United States which forms or organizes an organization, any record
19amending the legislation, and any record filed with or issued by the state or the
20United States which amends or restates the name of the organization.
AB549, s. 5 21Section 5. 409.102 (1) (rg) of the statutes is amended to read:
AB549,6,422 409.102 (1) (rg) "Registered organization" means an organization formed or
23organized solely under the law of a single state or the United States and as to which
24the state or the United States must maintain a public record showing the
25organization to have been organized
by the filing of a public organic record with, the

1issuance of a public organic record by, or the enactment of legislation by the state or
2the United States. The term includes a business trust that is formed or organized
3under the law of a single state if a statute of the state governing business trusts
4requires that the business trust's organic record be filed with the state
.
AB549, s. 6 5Section 6. 409.105 (intro.) of the statutes is renumbered 409.105 (1m) and
6amended to read:
AB549,6,107 409.105 (1m) General rule: control of electronic chattel paper. A secured
8party has control of electronic chattel paper if a system employed for evidencing the
9transfer of interests in the chattel paper reliably establishes the secured party as the
10person to which the chattel paper was assigned.
AB549,6,13 11(2m) Specific facts giving control. A system satisfies sub. (1m) if the record
12or records comprising the chattel paper are created, stored, and assigned in such a
13manner that:
AB549, s. 7 14Section 7. 409.105 (1) to (6) of the statutes are renumbered 409.105 (2m) (a)
15to (f), and 409.105 (2m) (a), (d) and (f), as renumbered, are amended to read:
AB549,6,1816 409.105 (2m) (a) A single authoritative copy of the record or records exists
17which is unique, identifiable, and, except as otherwise provided in subs. (4) to (6)
18pars. (d) to (f), unalterable;
AB549,6,2119 (d) Copies or revisions amendments that add or change an identified assignee
20of the authoritative copy can be made only with the participation consent of the
21secured party;
AB549,6,2322 (f) Any revision amendment of the authoritative copy is readily identifiable as
23an authorized or unauthorized revision.
AB549, s. 8 24Section 8. 409.307 (6) (b) of the statutes is amended to read:
AB549,7,4
1409.307 (6) (b) In the state that the registered organization, branch, or agency
2designates, if the law of the United States authorizes the registered organization,
3branch, or agency to designate its state of location, including by designating its main
4office, home office, or other comparable office
; or
AB549, s. 9 5Section 9. 409.311 (1) (c) of the statutes is amended to read:
AB549,7,96 409.311 (1) (c) A certificate-of-title statute of another jurisdiction which
7provides for a security interest to be indicated on the a certificate of title as a
8condition or result of the security interest's obtaining priority over the rights of a lien
9creditor with respect to the property.
AB549, s. 10 10Section 10. 409.316 (title) of the statutes is amended to read:
AB549,7,12 11409.316 (title) Continued perfection of security interest following
12Effect of change in governing law.
AB549, s. 11 13Section 11. 409.316 (8) and (9) of the statutes are created to read:
AB549,7,1614 409.316 (8) Effect on filed financing statement of change in governing law.
15The following rules apply to collateral to which a security interest attaches within
164 months after the debtor changes its location to another jurisdiction:
AB549,7,2017 (a) A financing statement filed before the change pursuant to the law of the
18jurisdiction designated in s. 409.301 (1) or 409.305 (3) is effective to perfect a security
19interest in the collateral if the financing statement would have been effective to
20perfect a security interest in the collateral had the debtor not changed its location.
AB549,8,321 (b) If a security interest perfected by a financing statement that is effective
22under par. (a) becomes perfected under the law of the other jurisdiction before the
23earlier of the time the financing statement would have become ineffective under the
24law of the jurisdiction designated in s. 409.301 (1) or 409.305 (3) or the expiration of
25the 4-month period, it remains perfected thereafter. If the security interest does not

1become perfected under the law of the other jurisdiction before the earlier time or
2event, it becomes unperfected and is deemed never to have been perfected as against
3a purchaser of the collateral for value.
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