News

Recent Legislative & Administrative Developments in Corporate & Securities Law

April 2001

Major Revisions to UCC Article 9 Take Effect In July

As of January 2001, 28 states and the District of Columbia have enacted a revised version of Uniform Commercial Code (UCC) Article 9, which governs secured transactions. The revisions will become effective on July 1, 2001 in most states, including California. Many of the remaining states are planning to enact the revisions later this year.

The revised Article 9 is intended to make the filing procedures more uniform and clear. It will also cause significant changes in the creation, perfection, priority and enforcement of a security interest and the collateral descriptions used in security agreements and financing statements. The revisions also contain new provisions related to the mechanics of filing, including electronic filing and document authentication; where to file financing statements; and how to search UCC filings for competing claims.

Overall, the revised Article 9 will impact new financing documentation, internal procedures and credit policies. As a result, secured financing professionals should work with legal counsel to become familiar with the revisions.

---

New Law Exempts Smaller Mergers From Antitrust Review

Congress has recently enacted changes to the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (15 U.S.C. §§ 1311-1314). As a result, the Federal Trade Commission (FTC) issued revised regulations, which became effective on February 1, 2001. Under the new regulations, many small to mid-sized businesses pursuing mergers are now exempt from mandatory antitrust reviews by the U.S. Department of Justice (DOJ) because the threshold dollar amount that would trigger a review has been raised from $15 million to $50 million. In addition, the filing fee will now range from $45,000 for transactions valued at less than $100 million, to a fee of $280,000 for transactions valued at $500 million or more. The new regulations also limit the amount of "second request" documents the FTC and the DOJ may require if they call for additional paperwork during the review. Other revisions include annual GNP adjustments to various notification thresholds and filing fees; modification of the 30 day waiting period to accommodate weekends, holidays and second requests; and revised forms.

---

Proposed FASB Standard May Repeal Poolings-of-Interests

On February 14, 2001, the Financial Accounting Standards Board (FASB) issued proposed standards regarding mergers and acquisitions accounting. One of the proposed standards will do away with the advantageous pooling-of-interests accounting method. It would be replaced with the purchase method and all business combinations would be treated as acquisitions. Another proposed standard would change the treatment of goodwill from a compulsory write down to a required "impairment-only" approach. Under this approach, goodwill would be written down against earnings only in the periods in which the carrying, or recorded, amount of goodwill exceeds the fair market value of the asset. Some accounting observers believe the new treatment of goodwill is a way for FASB to make the loss of poolings more palatable to the business community. FASB plans to issue the final standards in June. However, that deadline could be derailed by a pending congressional bill aimed at slowing FASB’s progress.

Back