Consult tax counsel before a lender takes a pledge of more than 65% of the voting stock of a US borrower's controlled foreign corporation, or any guarantee or grant of security from that controlled foreign corporation (see Practice Notes, Security: Overview and Security Interests: Cross-border Issues).

If the collateral involves real property, intellectual property, aircraft, rolling stock or vessels, there may be special requirements to be fulfilled outside or in addition to those set out in the Uniform Commercial Code (UCC) (see Practice Notes, Basics of Secured Commercial Real Estate Financing, Security Interests: Intellectual Property and Security Interests: Aircraft, Vessels and Rolling Stock).

The borrower must enter into a security agreement to grant a security interest. A UCC-1 financing statement (UCC-1) taken alone cannot be considered a security agreement under the UCC (see Practice Note, UCC Creation, Perfection and Priority of Security Interests).

Describing the collateral in the security agreement solely as "all assets" does not satisfy the requirements relating to description of the collateral under the UCC (see Practice Note, UCC Creation, Perfection and Priority of Security Interests).

The security agreement should list the borrower's assets to be included in the collateral by using their respective UCC collateral type (see Practice Note, Security Agreement: Overview). Care should be taken to identify the collateral type correctly. If possible, a detailed description of the collateral should also be included in the security agreement in case the collateral type changes or is incorrect (see Practice Notes, Security Interests: Investment Property and Security Interests: LLC and LP Interests). Certain assets, for example commercial tort claims, are required by the UCC to have a more detailed description in the security agreement.

Carefully review any agreements concerning the collateral in case there are contractual constraints on the borrower granting a security interest in the assets. For example, a third party consent may be required before the lender can either take the security or enforce its rights (see Practice Notes, UCC Issues: Excluded Property and Anti-assignment Provisions, Security Interests: LLC and LP Interests and Security Interests: Capital Calls and Capital Commitments).

Before giving a legal opinion about security interests, ensure that all of the UCC requirements for a perfected security interest in that specific type of collateral have been satisfied (see Standard Document, Legal Opinion for Secured Loans). For example, it may be important to determine if the account included in the collateral is a deposit account or a securities account (see Practice Note, Security Interests: Deposit Accounts) and whether health-care-insurance receivables included in the collateral are privately paid or government paid (see Practice Note, Security Interests: Health-care-insurance Receivables).

UCC-1s should be continued every five years to maintain the lender's perfected security interest in the collateral, even if the borrower is in bankruptcy when the UCC-1 is due to be continued (see Practice Notes, UCC: Maintaining Perfection Post-closing and UCC Issues: Bankruptcy and UCC-3 Continuations).

UCC-1s must be carefully prepared by counsel (see UCC Financing Statements Preparation and Filing Checklist and UCC Financing Statements (04/20/11 Versions) Preparation and Filing Checklist). UCC-1s are filed by reference to the debtor's name. Extra care should be taken to ensure that the debtor's name is correctly noted on the UCC-1 based on the UCC requirements for the relevant state (see Practice Note, UCC: Preparing and Filing Financing Statements and Individual Debtor Names in UCC-1 Financing Statements under the 2010 UCC Amendments Checklist).

UCC-1s should be properly filed and each state has its own filing requirements. For example, the Delaware Department of State no longer accepts written UCC records for filing (see Practice Note, UCC: Preparing and Filing Financing Statements).

UCC-1s are continued, amended, assigned and terminated by filing UCC-3 financing statements (UCC-3s). UCC-3s should be filed with reference to the correct UCC-1. Filing must be done with the correct authorization. Counsel should have a system in place to double-check all UCC-1s and UCC-3s before they are filed to avoid costly mistakes (see Practice Note, UCC Issues: Rogue, Naked and Bogus Financing Statements).

A lender should conduct a lien search before it makes an advance to the borrower. A lender may want to ensure that its UCC-1 has been correctly filed before it advances its loan. Searches should always be carefully reviewed (see Practice Note, UCC: Conducting and Reviewing UCC Searches).