USA Law and Practice Contributed by: Stelios G Saffos, Dan Seale, Peter Sluka and Alfred Xue, Latham & Watkins LLP
Security interests in vehicles and other assets subject to certificates of title must be perfected by applicable state law certificate of title statutes. Security inter - ests in real estate and other assets excluded from the scope of Article 9 (such as insurance, as original col - lateral) require compliance with applicable state law governing such assets. For debtors that are “registered organizations” (which term includes most domestic corporations, limited lia - bility companies and limited partnerships), the UCC-1 financing statement must be filed in the jurisdiction in which the grantor was formed or incorporated. Spe - cial rules apply to other types of organisations, includ - ing non-US entities, natural persons and other special types of debtors. In addition to perfection by filing a UCC-1 financing statement, a secured party may perfect its security interest in certain assets by taking possession and/or “control” of such assets. Goods, instruments, tangi - ble negotiable documents, certificated securities and tangible chattel paper are examples of collateral that may be perfected by possession. Obtaining “con - trol” of assets such as deposit accounts, investment property (including share certificates), letter-of-credit rights and electronic chattel paper perfects a secu - rity interest and may provide additional protections or priority to the secured party over perfection by filing. Certain collateral such as accounts (ie, receivables that are not evidenced by an instrument or chattel paper) and general intangibles (a residual category describing intangible collateral that does not fall into another UCC category) may only be perfected by the filing of a UCC-1 financing statement. Article 12 of the UCC, which at time of writing has been enacted in the majority (including the state of New York with an effective date of 3 June 2026) of, but not all, US states, will permit perfection by control of digital assets, such as cryptocurrencies and NFTs, as well as certain elec - tronic accounts and payment intangibles that exist in controllable form. In certain circumstances, a security interest may be perfected automatically without any further action, but in commercial transactions, relying on such exceptions is unusual, and at a minimum a financing statement would be filed. A secured party may perfect its security interest by multiple methods (eg, by filing as well as by possession and/or control),
and in the case of important assets such as certifi - cated equity interests, a secured party will typically prefer to use every method of perfection available. Perfection by possession and/or control is generally preferable to perfection by filing of a UCC-1 financing statement alone, as this entitles the secured party to higher priority, may protect the secured party from third parties acquiring better rights in the collateral, and as a practical matter may facilitate enforcement on the asset in the case of a foreclosure. The security agreement is signed at closing, contem - poraneously with the loan agreement. UCC-1 financ - ing statements and intellectual property filings made with the US Copyright Office (in the case of copy - rights) and the United States Patent and Trademark Office (in the case of patents and trade marks) are typically filed at closing. Physical share certificates are usually delivered to the secured party at closing, although in the case of an acquisition these are some - times permitted to be delivered shortly after closing. Real estate mortgages and control agreements with third parties (for example, deposit account control agreements entered into with a third-party depositary bank), if they are part of the collateral package at all, are often post-closing items to be delivered within a few months of closing. It should be noted that security interest in collateral that is perfected beyond 30 days of the loan closing may be avoided as a preference transfer by a bankruptcy trustee in the event that a grantor goes into insolvency proceedings within 90 days (or one year if the lender is an “insider”) of such perfection. If a preference action is successful, the lender will need to return such collateral or proceeds thereof to the grantor’s estate. A lender should con - duct routine collateral audit post-closing to identify any gaps in perfection before the borrower group gets into potential financial distress. 5.2 Floating Charges and/or Similar Security Interests US law does not categorise grants of security as being “fixed” or “floating”, nor do those terms have legal meaning under US law, but by analogy such grants are permitted and common. Under New York law and in the United States more generally, grants of security over personal property security routinely cover both
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