What Article 9 Is
Article 9 of the Uniform Commercial Code (UCC) is the set of laws that governs secured transactions in the United States. A "secured transaction" is one in which a creditor has a security interest in a debtor's property (collateral) to secure the payment of an obligation.
Article 9 establishes the rules for how security interests are created, perfected (made public), prioritized among competing creditors, and enforced.
Security Interests
A security interest is a legal interest in property that secures the performance of an obligation. In the context of MCA and revenue-based financing, the provider may claim a security interest in the business's assets—including accounts receivable, inventory, equipment, and other business property.
Whether a particular MCA agreement creates a security interest under Article 9 depends on the specific agreement and applicable law. Not all MCA agreements are identical in this respect.
Financing Statements (UCC-1)
Under Article 9, a creditor "perfects" a security interest by filing a UCC-1 financing statement with the appropriate state office. This gives public notice that the creditor claims a security interest in the described collateral.
What it does
Gives public notice of a creditor's claimed security interest in a business's assets.
What it covers
May cover all business assets (a "blanket" filing) or specific collateral, depending on how it is filed.
Accounts Receivable
Accounts receivable—money owed to a business by its customers—are a common type of collateral in MCA and revenue-based financing. A UCC-1 filing may give the creditor a claimed interest in the business's receivables, which is relevant to how the creditor may pursue collection in the event of default.
Potential Enforcement Mechanisms
Under Article 9, if a debtor defaults, a secured creditor may have certain enforcement rights. These may include:
- Repossessing or taking possession of the collateral
- Selling or otherwise disposing of the collateral
- Collecting accounts receivable directly
- Pursuing other remedies provided under the agreement and applicable law
The specific enforcement rights available depend on the agreement, applicable state law, and the facts of the situation. This is general information, not legal advice.
Important Considerations
- Not every MCA agreement has identical Article 9 rights. The specific terms of the agreement and applicable state law determine what rights the creditor has.
- Article 9 does not automatically invalidate or defeat an MCA agreement. Whether there are grounds to challenge a filing or agreement depends on the specific circumstances.
- Article 9 governs priority among competing creditors. When multiple UCC-1 filings exist, the order of priority may affect which creditor has first claim to assets.
- Challenging a UCC filing or raising Article 9 arguments may require legal expertise. Businesses should consider consulting qualified legal counsel.
Important Tradeoffs & Considerations
- This page provides general educational information about Article 9. It is not legal advice.
- Article 9 does not automatically invalidate or defeat any MCA agreement.
- Whether specific Article 9 arguments apply to a particular situation depends on the agreement, state law, and facts of the case.
- Businesses facing litigation, UCC enforcement, or other legal issues should consider obtaining advice from qualified legal counsel.
Contracts and applicable law vary. Businesses facing litigation, court deadlines, or other legal issues should consider obtaining advice from qualified legal counsel. MyMCAOptions is not a law firm and does not provide legal advice.
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