BILL ANALYSIS Ó
Senate Appropriations Committee Fiscal Summary
Senator Kevin de León, Chair
AB 502 (Wagner) - Commercial law: secured transactions.
Amended: June 24, 2013 Policy Vote: Judiciary 6-0
Urgency: No Mandate: No
Hearing Date: August 30, 2013
Consultant: Jolie Onodera
SUSPENSE FILE.
Bill Summary: AB 502 would incorporate amendments made to the
Uniform Commercial Code (UCC) Article 9 into California's
comparable statute, Commercial Code Division 9, which governs
security interests in personal property, to be effective July 1,
2014. This bill makes an appropriation to the Secretary of State
(SOS), as specified.
Fiscal Impact: One-time appropriation of $240,000 (Special Fund)
from the SOS Business Fees Fund for expenditures associated with
promulgating regulations, modifying automated filing systems and
programming, and updating filing forms.
Background: Article 9 of the UCC generally governs security
interests in personal property. This Article was vastly
rewritten and modernized by the Uniform Law Commission (ULC,
formerly the National Conference of Commissioners on Uniform
State Laws, or NCCUSL) in the late 1990s. As a whole, the new
Article 9 simplified and clarified the rules for creation,
perfection, priority and enforcement of a security interest.
Every state has adopted Article 9 as revised, and California's
revised Article 9 (called "Division 9 of the Commercial Code")
took effect on July 1, 2001 (AB 45 (Sher) Chapter 991/1999).
Since the enactment of AB 45 in 1999, the ULC has adopted
additional amendments based upon experiences with respect to
filing issues and other matters that arose in practice following
a decade of experience with the prior version of the Article
("the 2010 amendments"). The ULC's goal is to have every state
and territory adopt the 2010 amendments to Article 9 by July 31,
2013. As of June 14, 2013, the ULC reports that there have been
41 enactments and 10 introductions of legislation to do so,
including this measure. This bill seeks to adopt the changes
AB 502 (Wagner)
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that have been made to the UCC Article 9 within California's
Division 9, with a delayed operative date of July 1, 2014.
Proposed Law: This bill would incorporate amendments made to the
UCC Article 9 into California's comparable statute, Commercial
Code Division 9 (governing security interests), to, among other
things:
Provide a new definition for "public organic record,"
and clarify other definitions.
Clarify rules relating to the control of electronic
chattel paper.
Clarify rules prescribing the location of debtors for
purposes of financing statements.
Specify rules relating to the perfection of a security
interest that is attached to collateral within four months
of the debtor's change in location to another jurisdiction,
as well as temporary perfection rules relating to
collateral owned or acquired by a successor to the original
debtor.
Modify provisions relating to the priority of competing
security interests.
Revise rules relating to the sufficiency of the name of
the debtor provided on financing statements.
Modify rules relating to when a change in debtor name on
a filed financing statement becomes seriously misleading.
Revise rules relating to ineffective filings.
Replace references to "correction statements" with
"information statements."
Update statutory forms and provide other clarifying and
technical amendments.
This bill would take effect July 1, 2014, and would apply to a
transaction or lien within its scope, even if entered into or
created prior to July 1, 2014, but would specify that its
changes do not affect any action, case or proceeding commenced
prior to that date. This bill would provide previously perfected
security interests one year to meet the requirements for
perfection under the amended division.
This bill appropriates $240,000 from the SOS Business Fees Fund
for expenditures in the 2013-14 fiscal year to implement the
provisions of this measure, including promulgating appropriate
regulations, modifying automated filing systems and programming,
and updating filing forms.
AB 502 (Wagner)
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Related Legislation: SB 6 (Lieu) Chapter 54/2013 reenacts
repealed provisions of California's UCC, Article 9, relating to
the rights that certain licensees take under a nonexclusive
license where a security interest exists in a general
intangible, as specified.
Staff Comments: The SOS has indicated one-time costs of $240,000
will be required for regulatory updates and computer application
modifications. These costs are addressed by an appropriation
from the Business Fees Fund (BFF). The 2013-14 Governor's Budget
reflects a year-end balance in the BFF of $35.2 million that
would appear sufficient to support the appropriation specified
in this bill. The SOS has indicated no other costs associated
with this measure.