Uniform Commercial Code; amendments to provisions.

Uniform Commercial Code; amendments. Makes a number of amendments to the Uniform Commercial Code (UCC) as adopted in Virginia. The bill amends the definitions of "money" and "conspicuous" for purposes of the UCC and makes extensive amendments throughout provisions related to UCC Article 9 to accommodate emerging technologies. Such amendments include updating the traditional rules for attachment and perfection to apply to digital assets, such as controllable electronic records, and changes to several definitions, including "chattel paper," which is reconfigured to reflect the concept that chattel paper is a secured party's or lessor's right to payment that is secured by specific goods or owned by a lessee under an agreement that includes specific goods, if evidenced by a tangible or electronic record. Under current law, UCC Article 9 provides that perfection of money is through possession; however, since the definition of "money" is amended by this bill to include intangible assets, the amended provisions related to UCC Article 9 describe perfection by control, requiring the electronic money to either be in a deposit account or evidenced through a controllable electronic record. Further amendments to provisions related to UCC Article 9 include updates to governing law provisions for perfection and priority of security interests in chattel paper and in controllable electronic records, controllable accounts, and controllable payment intangibles.The bill includes amendments to provisions governing sales and leases to provide clarification regarding hybrid or bundled transactions and adds definitions for "hybrid transaction" and "hybrid lease." The bill provides the following approach to the application of provisions related to sales or leases in hybrid or bundled transactions: if the goods aspect of the hybrid transaction predominates, then the provisions that relate to sales or leases apply, but if other aspects predominate, then the provisions that relate primarily to the goods but not the transaction as a whole apply.The bill also adds a new title that parallels UCC Article 12, relating to controllable electronic records, as defined in the bill, and explaining the payment rights of a purchaser of an electronic record when such record is transferred. To fall within the scope of these provisions, the bill specifies that an electronic record must be controllable. The bill provides that to transfer the economic value associated with the controllable electronic record, or to receive the benefits associated with the controllable electronic record free of competing property interests, a person must have control of the controllable electronic record, which depends on requirements as described in the bill. The new title that parallels UCC Article 12 also describes qualifying purchasers of controllable electronic records, debtor security interests in relation to the person identified as in control of the controllable electronic record, and how to demonstrate control for purposes of priority and order of payment rights. These new provisions also include choice of law provisions to determine jurisdiction of a controllable electronic record.The bill includes a number of transition provisions to address perfection and priority issues that may arise after the effective date of the bill. Under the transition provisions of the bill, the Commonwealth may provide an adjustment date of one year after the effective date of the bill to allow persons with established perfection or priority to perfect their interests that may otherwise be affected or lost after the adjustment date based on the UCC amendments in the bill. Finally, the bill makes technical amendments throughout the UCC.As introduced, this bill was a recommendation of the Virginia Commissioners to the National Conference of Commissioners on Uniform State Laws. The bill has a delayed effective date of July 1, 2025.