WELCOME! Today s topic: Protecting your goods when out of your possession on consignment

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1 WELCOME! Today s topic: Protecting your goods when out of your possession on consignment

2 What is consignment? It is the same thing as a loan This loan requires collateral The collateral are the goods themselves Written agreements will protect the parties You have to do it right to be well protected!

3 Valuable tool JVC s Essential Guide on Doing Business on Memo can do this yourself if you follow the steps Can be downloaded from our web site JVC s form bank (members only) JOIN AS A MEMBER!!! Lots of benefits

4 Consignment agreement Important to have in writing Terms are important Must be signed Include conditions, the goods covered, term and more PERFECT!!!

5 And now our expert Jerry Bailey - NCS

6 Copyright 2013 C&S Associates, Inc.

7 Collateral Property pledged as a guarantee of payment for an obligation or loan. Personal Property Collaterize Receivables Real Property

8 The Uniform Commercial Code

9 Benefits of UCC Filings Secured creditor status in a Chapter 7 Right of Repossession (PMI) Part of the secured creditor team in a Chapter 11 Generally protected from preferential payment suits Public record of debt in case business is sold

10 Two different types of UCC filings 1. Blanket, or Basic 2. Purchase Money Security Interest

11 Blanket, or Basic, UCC-1 Filing Two Characteristics: 1. The filing covers all assets 2. The priority stacks

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13 Purchase Money Security Interest A priority security interest in specific identifiable goods

14 Purchase Money UCC Filings Chapter 7 PMI filers take first position on specific assets or equipment Paid on the difference before unsecured creditors receive any distribution For those selling equipment or into a stocking environment

15 INVENTORY (GOODS) Customer resells the goods to another entity Search Notify EQUIPMENT Customer uses the goods in the course of their business Contract 20-day Rule

16 UCC-11 Search

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20 Security Agreement

21 Security Agreement

22 redit pplication ecurity greement

23 Security Agreement MUST include: Identity of the debtor Identity of the secured lender A granting clause A collateral description Signature (if paper)

24 Security Agreement SHOULD include: Description of default Repossession plan Disclosure of corporate structure and name Requirement for future disclosure After-acquired property clause Authorization statement Requirement for insurance (fire, flood, etc.)

25 Financing Statement

26 UCC-1 Financing Statement: National Form

27 What s the Collateral? UCC-1 Financing Statement Security Agreement Notification Letter Matches in three places!

28 UCC-1 Financing Statement: National Form NO signatures

29 Financing Statement: New Details Registered Ohio N Type of Organization Registered Unregistered Individual Foreign Corporation LLC Jurisdiction of Organization Enter State Organizational ID Enter number If no number, check None

30 Article 9 The National Conference of Commissioners on Uniform State Laws have proposed changes to be implemented July,

31 Financing Statement: New Details Registered Ohio N Type of Organization Registered Unregistered Individual Foreign Corporation LLC Jurisdiction of Organization Enter State Organizational ID Enter number If no number, check None

32 2013 Amendments to UCC Article 9 The 2013 Amendments provide greater guidance as to the name of the debtor to be provided on a financing statement. This guidance falls under 9-503(a), the debtor name. 1) For Registered Organizations: The name will be what is found on the public organic record(s).

33 Articles of Incorporation Should be performed with each filing. Confirms: 1. State of incorporation 2. Corporate legal name of customer 3. State organizational ID number

34 2013 Amendments to UCC Article 9 The 2013 Amendments provide greater guidance as to the name of the debtor to be provided on a financing statement. This guidance falls under 9-503(a), the debtor name. 1) For Registered Organizations: The name will be what is found on the public organic record(s). 2) For Individuals: The state will have to choose between

35 The State s Two Choices for Individual Debtor s Name Alternative A: the name of an individual debtor, as it appears on the most recent unexpired driver s license. Alternative B: Provides 3 ways for the name of individual debtor: as under current law - using the individual name of the debtor debtor s last name (surname) and first name unexpired driver s license

36 The State s Two Choices for Individual Debtor s Name Alternative A: the name of an individual debtor, as it appears on the most recent unexpired driver s license.

37 Change to Debtor s Name and Location All changes must be filed within four months If late the security interest will become unperfected in assets the debtor acquired after that four-month period The only exception to the four-month rule is for changes to state of incorporation. The Secured Party has one year to correct the filing.

38 Wyoming Amendment New Wyoming Law Extends UCC Effectiveness to 10 Years

39 Transition Rules The time outlined by the amendments of Article 9 is 5 years to have the UCC filing comply with the new rules.

40 Transition Rules Secured parties now can transition the filings: En Masse As they come up for continuation Based on credit exposure

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42 Financing Statement Miscues Debtor: EDM Corporation Three Secured Creditors: Hastings State Bank, Tier One Bank, Huntington National Bank. Hastings State Bank filed a financing statement listing the debtor name as EDM Corporation d/b/a EDM Equipment

43 Due diligence Pull articles of incorporation prior to lending Know the state nuances Do reflective searches Monitor for name changes

44 Three Goals of a Collateral Description 1 General enough to write one 2 Specific enough to identify your goods 3 Collateralized to the extent you are owed money All inventory / goods manufactured by or distributed by Secured Party, whenever sold or consigned, to or for the benefit of Debtor by Secured Party, wherever located, now owned and hereafter acquired including but not limited to...; and all proceeds from the sale thereof; and all existing or subsequently arising, accounts, and all accounts receivable which may from time to time hereafter come into existence during the term of this Security Agreement.

45 Thank you for your attendance Jerry Bailey, NCS Cecelia Gardner JVC Legal Brenda Gamba Jewelers Board of Trade Copyright 2013 C&S Associates, Inc.