Alerts

NASS Adopts Remote Notary Standards

The National Association of Secretaries of State adopted remote notary standards drafted by a task force chaired by Kentucky Secretary of State Alison Lundergan Grimes. Secretary of State Grimes has led the task force since it was convened in April, 2016, and the Notary Public Administrators have been active participants in the effort. The electronic notarization standards are designed to support transactional security, the privacy of the document signers, and the traditional assurances of the notarial act. Currently, only four states have authorized remote notarization: Montana, Nevada, Texas, and Virginia. Although Florida also allows webcam notarization, the practice is limited to certain law enforcement and correctional officers. However, many states are considering remote notarization in 2018.

Remote notarization, also known as online notarization or webcam notarization, differs from electronic notarization in that remote authorization allows the signer to personally appear before the Notary at the time of notarization using audio-visual technology over the internet. Electronic notarization, or eNotarization, is a nearly identical process to paper notarization, except the document being notarized is in digital form and the Notary signs with an electronic signature.

Delaware Extraordinary Circumstances

The Delaware Secretary of State may declare an event an “extraordinary condition”.

When an extraordinary condition has been declared, the State will allow Capitol Services to request that a corporate filing be given the file date of the date on which the State was closed (due to whatever crisis caused the closure). Capitol Services then can request that file date for up to two business days after the closure and an affidavit reflecting such is attached to the document.

Below is the relevant subsection of 8 Del. C. § 103 pertaining to this provision.

(i)(1) If:
a. Together with the actual delivery of an instrument and tender of the required taxes and fees, there is delivered to the Secretary of State a separate affidavit (which in its heading shall be designated as an “affidavit of extraordinary condition”) attesting, on the basis of personal knowledge of the affiant or a reliable source of knowledge identified in the affidavit, that an earlier effort to deliver such instrument and tender such taxes and fees was made in good faith, specifying the nature, date and time of such good faith effort and requesting that the Secretary of State establish such date and time as the filing date of such instrument; or
b. Upon the actual delivery of an instrument and tender of the required taxes and fees, the Secretary of State in the Secretary’s discretion provides a written waiver of the requirement for such an affidavit stating that it appears to the Secretary of State that an earlier effort to deliver such instrument and tender such taxes and fees was made in good faith and specifying the date and time of such effort; and
c. The Secretary of State determines that an extraordinary condition existed at such date and time, that such earlier effort was unsuccessful as a result of the existence of such extraordinary condition, and that such actual delivery and tender were made within a reasonable period (not to exceed 2 business days) after the cessation of such extraordinary condition, then the Secretary of State may establish such date and time as the filing date of such instrument. No fee shall be paid to the Secretary of State for receiving an affidavit of extraordinary condition.

(2) For purposes of this subsection, an “extraordinary condition” means: any emergency resulting from an attack on, invasion or occupation by foreign military forces of, or disaster, catastrophe, war or other armed conflict, revolution or insurrection, or rioting or civil commotion in, the United States or a locality in which the Secretary of State conducts its business or in which the good faith effort to deliver the instrument and tender the required taxes and fees is made, or the immediate threat of any of the foregoing; or any malfunction or outage of the electrical or telephone service to the Secretary of State’s office, or weather or other condition in or about a locality in which the Secretary of State conducts its business, as a result of which the Secretary of State’s office is not open for the purpose of the filing of instruments under this chapter or such filing cannot be effected without extraordinary effort. The Secretary of State may require such proof as it deems necessary to make the determination required under paragraph (i)(1)c. of this section, and any such determination shall be conclusive in the absence of actual fraud.

(3) If the Secretary of State establishes the filing date of an instrument pursuant to this subsection, the date and time of delivery of the affidavit of extraordinary condition or the date and time of the Secretary of State’s written waiver of such affidavit shall be endorsed on such affidavit or waiver and such affidavit or waiver, so endorsed, shall be attached to the filed instrument to which it relates. Such filed instrument shall be effective as of the date and time established as the filing date by the Secretary of State pursuant to this subsection, except as to those persons who are substantially and adversely affected by such establishment and, as to those persons, the instrument shall be effective from the date and time endorsed on the affidavit of extraordinary condition or written waiver attached thereto.

Five FAQs on UCC

What are 5 frequently asked questions pertaining to Uniform Commercial Code (UCC)?

Q: How do you describe the debtor on your financing statement when collateral is held in a trust?
A: It’s complicated! If the trust is a Registered Organization (like a Delaware statutory trust), then you follow the same rules for traditional organization debtors. Use the name as described in the public organic record. If, however, the trust is not a Registered Organization (like a common law trust), then first check to see if it is named in its organic formation documents. If it is, hooray! Follow the same rule as above. If not, the name of the settlor must be provided along with language indicating that the collateral is held in a trust.

Q: Are all UCCs effective for 5 years?
A: Almost! Wyoming has a non-uniform effective period of 10 years. In fact, we’ve just come upon the 5 year marker since that amendment was enacted. This means it’s time to start ensuring you are searching farther back for effective Wyoming financing statements. In all jurisdictions, if the transaction is a public finance or manufactured home transaction, then those financing statements have longer effective periods of up to 30 years. If the debtor is a transmitting utility, then the lien remains active until effectively terminated.

Q: What is the difference between a due diligence and an RA9 compliant search?
A: In order to have an effective financing statement, one of the requirements is that your lien is able to be found when searching by the correct name of the debtor using the standard search logic of the jurisdiction. The state’s standard search logic may include some corporate ending noise words that are ignored, but by and large is typically a strict logic providing results very close to the character string entered. Similar names or name variations may not be found in this type of search. Running an RA9 compliant search following the filing of your financing statement helps to ensure that you presented the correct name and that the state indexed that name correctly. This search-to-reflect your filing can also alert you to prior secured creditors who may have filed their financing statement(s) in advance of yours. A due-diligence search is often accomplished by using a database that allows for a “begins with” or “wildcard” search logic that enables the searcher to cast a wider net to identify other liens that may have been filed under similar names or filings mis-indexed that might still be effective.

Q: Is there a nationwide database for searches?
A: Nope. Other than a few database providers who have built resources that connect some jurisdictions, there is no one, reliable resource that allows you to search across all jurisdictions. Deciding where to search for due-diligence purposes requires the searcher to pick and choose which states, counties, towns, cities and courts are likely the jurisdictions within which applicable liens will be found. This is not easy. Because ancillary liens (like IRS liens) and court activity (like bankruptcy proceedings) can be almost anywhere – the searcher must consider the cost/benefit analysis when casting their net.

Q: Why do the filing offices continue to report terminated liens?
A: Shhhhhh! You must, immediately strike the word “terminated” from your vocabulary! It is a bad, dangerous word in the context of lien searching. Remember, the UCC is just a giant, messy bulletin board and anyone can file anything. Erroneous UCC records, and possibly some fraudulent filings, are recorded every single day. It is very important to understand that the filing office does not gauge the legal sufficiency or effectiveness of records as a basis for filing. The sufficiency and effectiveness of filings is left to the users of the filing system and the courts where such issues may be litigated. There is only one way to confirm that a lien has been “T-Worded” and it is not by review of your lien search results. Direct contact with the secured parties of record (all of them) must be made in order to get the evidence you need to confirm that a loan is no longer active. The filing offices do a great service by continuing to report liens until a year after their natural lapse date – giving you the ability to investigate what might still be an active filing.

Top Five Reasons to Use a Professional Registered Agent Provider

Why should you hire a professional registered agent provider? Our registered agent manager gives his top five reasons:

1. Mitigate Risk
Many business owners choose not to appoint themselves or a company representative as the registered agent due to the potential risk of legal service being mishandled. Using an experienced registered agent provider like Capitol Services can help ensure that legal service is promptly delivered to your company’s legal representatives. Additionally, many registered agent providers offer companies online access to the documents received on their behalf, making it easy for a company’s legal representatives to view past legal service.

2. Available During Business Hours
A registered agent must be available for the receipt of legal service during regular business hours. Should you appoint yourself or a company representative as the registered agent, you will need to ensure that this requirement is met. By hiring a professional registered agent provider, you will avoid this headache. The provider will be open during regular business hours to receive legal service on behalf of your company.

3. Physical Address in Every State
State laws require a company to appoint and maintain a registered agent with a physical address in each state in which it is registered to conduct business. However, many companies do not have a physical address in each state in which they conduct business to use as the registered agent address. For this reason, it is often necessary to hire a professional registered agent provider with offices in each state to act as the registered agent.

4. Keep the State Up-To-Date
It is imperative for your company’s registered agent information on file with the Secretary of State (or other state office) to always be up-to-date. If you or a company representative are appointed as the registered agent and your address changes or the representative leaves the company, you will need to make the necessary filing with the appropriate state office to update your company’s registered agent information as soon as possible. If you fail to remember to do this, you run the risk of having time-sensitive legal documents delivered to the wrong person or address. By hiring a professional registered agent provider like Capitol Services, you can avoid this headache. Should the registered agent provider’s address change in a state, it will make the necessary filing with the state to update your company’s registered agent information for you.

5. Avoid Embarrassment
Lawsuits and other legal notices are generally served on a company at its registered agent’s address. The registered agent receives the legal service (which is often delivered by a process server) on behalf of the company. It can be embarrassing for a process server (often a law enforcement officer) to show up at your residence or place of business to deliver a lawsuit. In order to avoid this embarrassment, many business owners prefer to hire a professional registered agent provider like Capitol Services rather than appointing themselves or a company representative as the registered agent.

Debtor Name Crucial for Linking Liens

There are a few central indexes that operate more like county recorder indexes—which can pose a problem for UCC Filers. Even though the Debtor name is not required on UCC-3 filings, indexes like the D.C. central index, Louisiana central index and Georgia’s Clerk’s Cooperative Authority cannot link UCC-3s to their “parent” financing statements without the inclusion of the Debtor’s name. Though not required, failure to include a reference to the Debtor’s name can result in a hidden UCC-3, unable to be found by searching parties.

Database Searches Provide
Robust Due Diligence

In those jurisdictions where state search logic is strict, a certified or limited search is ideal for confirming that your UCC filing is in compliance with Article 9, but falls short of discovering hidden liens during the due diligence process. Capitol Service has a fix for that! We have identified several jurisdictions with restricted logic and are now offering an additional Database Search product that provides a better shot at finding mis-indexed or hidden liens.

Though Double Bubble was in the wrong when filing their financing statement, if the Secretary of State had mis-indexed the filing, the burden of discovering the hidden lien would have fallen squarely on the searcher’s shoulders. Additionally, ancillary liens like Federal and State tax liens might be found within the UCC index, but follow very different rules when it comes to the Debtor name.

Tell your CSR you’d like a Database Search with your next UCC search and we’ll help give you the most robust due-diligence product possible.