New Act Corrects Mistake and Makes World Safe (at Least for Today) for Central Indexing System Users

• Publication year: 1997
• Pages: 11

26 Colo.Law. 11 Colorado Lawyer 1997.

1997, December, Pg. 11. New Act Corrects Mistake and Makes World Safe (At Least for Today) for Central Indexing System Users

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Vol.26, No. 11, Pg. 11

The Colorado Lawyer
December 1997
Vol. 26, No. 12 [Page 11]

Departments
News from the Department of Legislative Relations
New Act Corrects Mistake and Makes World Safe (At Least for Today) for Central Indexing System Users
by Michael Valdez

REPORT FROM THE SPECIAL SESSION

On October 22, 1997, Governor Roy Romer signed S.B. 97S-5 into law, avoiding a year-end disaster for secured parties who wish to "continue" their Uniform Commercial Code ("UCC") financing statements beyond 1997 under recently enacted Central Indexing System ("CIS") legislation. A glitch in the form for continuation statements that has been distributed by the CIS Board and other state agencies would have meant that a large number of those secured parties would have discovered too late that their filings were insufficient under the law. However, an alert member of the Colorado Bar Association spotted the problem just in time to get corrective legislation on the Governor's Call for the October Special Session. You heard that the Call was only to figure out how to refund a $141 million surplus to Colorado taxpayers--in fact, there was more to it than met the eye

The 1995 legislation (S.B. 95-91) that established the CIS created an eighteen-month window, ending December 31, 1997 for filing special "window continuation statements." The intention was to build a database in the CIS of all financing statements that are on file in the Office of the Secretary of State or the various counties

Under that legislation, any financing statement that was filed or last continued before the opening of the eighteen-month window would lapse on December 31, 1997, if it was not the subject of a window continuation statement that recited, among other things, that the original financing statement was "still effective." However, the continuation form made available by the state agencies omitted those magic words, making the form ineffective. There are several hundred thousand active UCC filings, and, while public records do not disclose the amount of debt secured by each filing, the glitch may have imperiled billions of dollars in existing security interests.

POTENTIAL FOR DISASTER

Had the legislative patch not...