In The Marketplace
Highlights of the latest equipment leasing news from around the country.
Is Your Computer Leasing Company Responsible for Data Security?
Picture this scenario: You are the owner of a small to mid-sized business and have decided that it is in your best interest to lease your company's computer equipment. This may be because prudent financial planning dictates a lease versus buy decision; or you may want to be able to run the most current, up-to-date applications and the short time span of a computer lease allows you to do so. Whatever the case, when you make this decision, you have just assumed a very important responsibility — one that should not be taken lightly. You have just become personally responsible for the security of your own and your clients' personal data. It is your responsibility to personally safeguard the social security numbers, banking information, healthcare data, credit information, or anything else that could lead to catastrophic consequences if found in the wrong hands.
Revised Article 9's Assignment Provisions: An Analysis
Last month's article broke the assignment provisions of Chapter 4 of Revised Article 9 into four key issues: Defenses and claims of the account debtor and what constitutes an enforceable waiver of defenses (Section 9-403) and absent a waiver, under what circumstances are the account debtor's defenses and claims cut off (Section 9-404); Modification and substitution of the assigned contract and under what circumstances are modifications and substitutions effective against the assignee (Section 9-405); Discharge of the obligation and under what circumstances can the account debtor discharge its obligation by paying the assignor or the assignee (Section 9-406(a) - (c) and (g)); and Contractual or statutory restrictions on assignment and under what circumstances can such restrictions be overridden (Sections 9-406(d)(e) and (f); 9-407; 9-408; and 9-409). This month's article will review the relevant and developing case law under Chapter 4 of Revised Article 9 and provide a checklist of "Must Do" items.
Form vs. Function: When Is a Lease a 'True Lease'? The Seventh Circuit Applies Substance over Form in United Airlines v. HSBC Bank
Financing deals have become increasingly complicated as parties attempt to raise capital and take advantage of accounting and tax incentives. These transactions often face scrutiny when one party files for bankruptcy. During a Chapter 11 reorganization, a debtor must use all tools at its disposal to best restructure its obligations. In contrast, a creditor must work to ensure it receives the best possible return. The term "lease" is not defined in the Bankruptcy Code. Due to this lack of a clear definition, creditors and debtors will often attempt to recharacterize agreements between the parties. In this context, a secured creditor or debtor may argue that a "lease" is actually a disguised secured financing. In the converse, a party could also argue a secured financing is actually a "true lease." This is due to the Bankruptcy Code's different treatment of secured debt and leases. Depending on the factual scenario, this differing treatment could significantly change the parties' obligations.
Revised Article 9's Assignment Provisions: An Analysis
Chapter 4 of Revised Article 9, titled "Rights of Third Parties," deals with several issues affecting the assignment of accounts, leases, and other contract rights. See, in particular, Sections 9-403 to 9-409. These sections replace former Sections 9-206 and 9-318 and part of Section 2A-303. This article summarizes some of the key provisions of Chapter 4 of Revised Article 9, compares these provisions to former Article 9, and describes a few recent cases under this Chapter. Note that different rules apply in a consumer transaction or if the account debtor is an individual who incurred the obligation primarily for personal, family or household purposes; this article does not address these issues. In addition, this article does not address the assignment of a health care insurance receivable.
In the Marketplace
Highlights of the latest equipment leasing news from around the country.
