“Lapsed” or “Unlapsed,” and Perhaps “Active” or “Inactive,” but not “Terminated.”
The UCC’s recordkeeping requirement for filing offices (e.g., state Secretaries of State) is that the filing office must maintain records until at least one year after a financing statement would lapse. See § 9522. Lapse occurs, typically, on the five-year anniversary of the initial filing, unless, within the appropriate window of opportunity, a continuation statement is filed. See § 9-515(c).
Note: that there are different periods applicable when public-finance transactions, manufactured-home transactions, transmitting utilities, or mortgages as fixture financing statements are involved. Seek additional information and guidance in any of these special cases. The remainder of this discussion presumes that none of these special cases applies.
One could imagine dividing all financing statements into three groups: “unlapsed,” “lapsed one year or less,” and “lapsed more than one year.” Using just two simple groups, “unlapsed” and “lapsed,” would not provide enough differentiation to allow the filing office to follow the rule to keep financing statements that are “unlapsed” or “lapsed one year or less.”
In Minnesota, financing statements that are unlapsed or lapsed one year or less are labeled “active.” See Minn. R. 8282.0150 D. In Minnesota, active records must be maintained, but inactive records may be removed from the database. For a searcher, this means that a search might include “inactive” records that have not yet been removed. Other states use the term “active” differently. For example, in Delaware and Texas, financing statements are “active” until they have been removed from the database. For a searcher, this means that a search would not include “inactive” records, because they would have been removed from the database. In any case, a label of “active” or “inactive,” though useful for the filing office, is not directly relevant to a user of the UCC filing databases. In Minnesota, anyway, a searcher can ignore “inactive” records.
So, each financing statement is either “lapsed” or “unlapsed,” which merely tells us whether it has gone more than five years without being continued. Consider this “lapse status.” And, in some states, financing statements are “active” or “inactive,” which is merely a label for the filing office’s administration of its database. Consider this “activity status.” For both of these statuses, there is an objective determination that can be made by the filing office. They know whether a financing statement has lapsed because it depends solely on the calendar, and they know whether it is “active” on “inactive” because it is solely a label in their database.
Notice that “terminated” is not a label we have encountered. “Termination” does not affect the status: “active” vs. “inactive” or “unlapsed” vs. “lapsed.” This is because the effect of a termination statement cannot be objectively determined by the filing office. Why not? Like an initial financing statement or an amendment, a termination is only effective to the extent that it is filed by a person entitled to file it. See §§ 9510 & 9509. The filing office is not the arbiter on whether a termination is authorized. Consequently, though the filing office will include a termination in the database, the filing office will not change the status of a financing statement, whether or not it has been “terminated.”
NOT INTENDED TO PROVIDE LEGAL, ACCOUNTING OR OTHER PROFESSIONAL ADVICE AND SHOULD NOT BE RELIED UPON AS SUCH.