Secured creditors need to file a UCC financing statement to perfect their security interest in assets, giving them super-priority but only if they have given the world notice by making the filing. To a perfect a security interest under UCC Article 9 by filing a UCC financing statement, the financing statement must be filed where the debtor is “located”. So, where is a limited liability partnership “located”?
A debtor’s “location” for purposes of the UCC is determined pursuant to the rules set forth in UCC §9-307.
The general rule, set forth in UCC §9-307(b), is that a debtor that is an “organization” is located at its place of business (if it has only one) or, if it has more than one place of business, at its “chief executive office”.
The principal exception to the general rule is the case of an organization that is a “registered organization”. . A “registered organization” is defined in UCC §9-102(a)(70) as “an organization organized solely under the law of a single State… and as to which the State… must maintain a public record showing the organization to have been organized.” (emphasis added). Pursuant to UCC §9-307(e), a debtor that is a “registered organization” is “located” in the jurisdiction under the laws of which it is organized.
The most common examples of registered organizations are a corporation and a limited partnership, since neither of these entities can exist without the filing of some document or record with the applicable state. A general partnership, on the other hand, is not a registered organization, since a general partnership can exist without the filing of any record or document.
Limited Liability Partnership
As is (hopefully) clear from the above, the proper place to file a financing statement against a debtor that is a limited liability partnership can only be determined by first deciding whether the entity is a “registered organization”. The Permanent Editorial Board for the Uniform Commercial Code has issued a draft PEB Commentary for public comment that addresses this issue. The PEB concludes that, in those states whose partnership laws generally follow the Uniform Partnership Act such that a limited liability partnership is a form of general partnership, a limited liability partnership is NOT a registered organization, and is therefore located at its place of business or chief executive office, as applicable.
This article is courtesy of Richard Neuman, special counsel to DLA Piper.