Interested in training for your team? Click here to learn more

Structuring Pledge Agreements for Equity Interests in Partnerships and LLCs to Maximize Protection for Lenders

Key Provisions for the Security Agreement and the Borrower's Partnership or Operating Agreement, UCC Requirements

Recording of a 90-minute premium CLE video webinar with Q&A

This program is included with the Strafford CLE Pass. Click for more information.
This program is included with the Strafford All-Access Pass. Click for more information.

Conducted on Thursday, June 15, 2023

Recorded event now available

or call 1-800-926-7926

This CLE course will prepare lender's counsel to draft pledge and other agreements that establish a security interest in partnership and LLC interests. The panel will outline corresponding provisions to include in the borrower's operating or partnership agreement to maximize protection for the lender and discuss the application of UCC Articles 8 and 9 to the perfection and priority of the security interest.

Description

Equity interests in LLC and partnership interests are a common form of collateral in many secured finance transactions, particularly mezzanine financing. The security agreement and related documents are fundamental in establishing a security interest in an LLC or partnership interest.

Representations, warranties, and covenants in the pledge and security agreement are often different than standard provisions for other collateral. The agreement must also address the rights being pledged, including economic, voting, and management rights.

The UCC provides two distinct paths to perfect the lender's security interest: filing a financing statement under Article 9 and/or taking possession or control of the interest using the opt-in provisions of Article 8. Counsel should understand the advantages and disadvantages of each.

Listen as our authoritative panel outlines best practices for drafting security agreements and making corresponding amendments to the borrower's operating agreement or partnership agreement to maximize the lender's protection. The panel will also discuss UCC Articles 8 and 9’s requirements for the perfection and priority of a security interest in a member or partnership interest. The discussion will include the amendments to UCC Sections 9-406 and 9-408 promulgated in 2018 by the American Law Institute and the Uniform Law Commission as well as planning opportunities in anticipation of the 2022 UCC amendments becoming effective.

READ MORE

Outline

  1. Overview of UCC Articles 8 and 9 requirements
  2. Drafting the security agreement
  3. Recommended amendments to the LLC operating agreement or partnership agreement
  4. Common pitfalls and strategies to best protect the lender

Benefits

The panel will review these and other key issues:

  • Why is the UCC Article 8 opt-in and perfection by possession or "control" preferable to perfection by filing a financing statement under Article 9?
  • What steps should the lender take to ensure the borrower cannot opt out of Article 8?
  • What are the key provisions to include in the borrower's operating agreement or partnership agreement to facilitate the realization of the collateral?
  • To what extent may the lender use the operating or partnership agreement to prevent the borrower from commencing a bankruptcy case to block the lender's enforcement?

Faculty

Smith, Edwin
Edwin E. Smith
Partner
Morgan, Lewis & Bockius

Mr. Smith concentrates his practice in commercial law, debt financings, structured financings, workouts, bankruptcies,...  |  Read More

Weise, Steven
Steven O. Weise
Partner
Proskauer Rose

Mr. Weise practices in all areas of commercial law and has extensive experience in financing, especially in those...  |  Read More

Access Anytime, Anywhere

Strafford will process CLE credit for one person on each recording. All formats include course handouts.

To find out which recorded format will provide the best CLE option, select your state:

CLE On-Demand Video

Download