How do you perfect a security interest in an LLC?

How do you perfect a security interest in an LLC?

If the membership interests are securities, then you perfect by taking possession or control of the securities – or both. If the membership interests are certificated, then you perfect by taking possession of the certificates and by taking control by having the security interest noted in the company’s records.

Is an LLC membership interest a security?

Under this definition, a membership interest in an LLC is a security for California law purposes unless all of the members are actively engaged in management. Thus, interests in a manager-managed LLC where not all members are managers are “securities” under California law.

How would you attach and perfect a security interest under the UCC?

However, generally speaking, the primary ways for a secured party to perfect a security interest are:

1. by filing a financing statement with the appropriate public office.
2. by possessing the collateral.
3. by “controlling” the collateral; or.
4. it’s done automatically upon attachment of the security interest.

Is an LLC a registered organization under the UCC?

Under the UCC, a “registered organization” is an orga- nization formed or organized under the laws of a single state or the U.S. by filing or creating a public record of its exis- tence. 15 The master series LLC is a registered organization because it files its articles of organization with the secretary of state.

What does a UCC financing statement do?

A UCC financing statement — also called a UCC-1 financing statement or a UCC-1 filing — is a legal form that allows a lender to announce a lien on an asset to secure a loan. By filing the UCC financing statement, the lender is giving notice that it has an interest in the property listed in the filing.

How do you foreclose on LLC membership interests?

There are effectively two options to foreclose on an LLC interest: “strict foreclosure” or “commercially reasonable sale” under the UCC. In a strict foreclosure context, a lender may accept an LLC interest in “full satisfaction” or “partial satisfaction” of the debt due from the borrower.

What are LLC membership interests?

A membership interest represents a member’s ownership stake in an LLC. A person who holds a membership interest has a profit and voting interest in the LLC. Membership interests can be sold or transferred to other people or entities. The sale of membership interests must comply with federal and state securities laws.

Is investing in an LLC a security?

To put it simply, a security is a transaction in which someone invests money in a company with the expectation of receiving profits from the efforts of someone else. In California, shares of an LLC in which any member is not continuously actively involved in the management of the LLC would qualify as securities.

What does perfecting a security interest mean?

A perfected security interest is any secure interest in an asset that cannot be claimed by any other party. The interest is perfected by registering it with the appropriate statutory authority, so that it is made legally enforceable and any subsequent claim on that asset is given a junior status.

Does a UCC 1 perfect a security interest?

Article 9 of the UCC permits perfection of a security interest by control for investment property, deposit accounts, electronic chattel paper, and letters of credit.

What is a registered organization under the UCC?

(71) “Registered organization” means an organization organized solely under the law of a single State or the United States by the filing of a public organic record with, the issuance of a public organic record by, or the enactment of legislation by the State or the United States.