Alabama Senate Bill SB231

Alabama 2023 Regular Session

• Introduced: 4/20/23
• Refer: 4/20/23

Caption

Relating to the Uniform Commercial Code; to add Article 12 to the Uniform Commercial Code to govern the property rights of certain intangible digital assets (controllable electronic records), including electronic rights to payment, to provide for a manner to establish the transfer and control of those assets, to provide a mechanism for evidencing certain rights of payment, and to adopt special rules with regard to the payment obligations and conditions of discharge of account debtors on controllable accounts and controllable payment intangibles; to amend Sections 7-1-201, 7-1-204, 7-1-301, 7-1-306, 7-2-102, 7-2-106, 7-2-201, 7-2-202, 7-2-203, 7-2-205, 7-2-209, 7-2A-102, 7-2A-103, 7-2A-107, 7-2A-201, 7-2A-202, 7-2A-203, 7-2A-205, 7-2A-208, 7-3-104, 7-3-105, 7-3-401, 7-3-604, 7-4A-103, 7-4A-201, 7-4A-202, 7-4A-203, 7-4A-207, 7-4A-208, 7-4A-210, 7-4A-211, 7-4A-305, 7-5-104, 7-5-116, 7-7-102, 7-7-106, 7-8-102, 7-8-103, 7-8-106, 7-8-110, 7-8-303, 7-9A-102, 7-9A-104, 7-9A-105, 7-9A-203, 7-9A-204, 7-9A-207, 7-9A-208, 7-9A-209, 7-9A-210, 7-9A-301, 7-9A-304, 7-9A-305, 7-9A-310, 7-9A-312, 7-9A-313, 7-9A-314, 7-9A-316, 7-9A-317, 7-9A-323, 7-9A-324, 7-9A-330, 7-9A-331, 7-9A-332, 7-9A-334, 7-9A-341, 7-9A-404, 7-9A-406, 7-9A-408, 7-9A-509, 7-9A-513, 7-9A-601, 7-9A-605, 7-9A-608, 7-9A-611, 7-9A-613, 7-9A-614, 7-9A-615, 7-9A-616, 7-9A-619, 7-9A-620, 7-9A-621, 7-9A-624, and 7-9A-628, Code of Alabama 1975, and to add Sections 7-9A-107A, 7-9A-107B, 7-9A-306A, 7-9A-306B, 7-9A-314A, and 7-9A-326A to the Code of Alabama 1975, to provide a substantial revision to the Uniform Commercial Code in conformity with a substantial portion of the Uniform Commercial Code Amendments (2022), to clarify the meaning of the term chattel paper and other definitions, to define and provide for hybrid transactions, and to provide extensive amendments to the Uniform Commercial Code providing for the perfection of security interests in controllable electronic records, documents of title, chattel paper, and other assets; and to add Article 12A to the Uniform Commercial Code to provide transitional provisions for the Uniform Commercial Code Amendments (2022).Relating to the Uniform Commercial Code; to add Article 12 to the Uniform Commercial Code to govern the property rights of certain intangible digital assets (controllable electronic records), including electronic rights to payment, to provide for a manner to establish the transfer and control of those assets, to provide a mechanism for evidencing certain rights of payment, and to adopt special rules with regard to the payment obligations and conditions of discharge of account debtors on controllable accounts and controllable payment intangibles; to amend Sections 7-1-201, 7-1-204, 7-1-301, 7-1-306, 7-2-102, 7-2-106, 7-2-201, 7-2-202, 7-2-203, 7-2-205, 7-2-209, 7-2A-102, 7-2A-103, 7-2A-107, 7-2A-201, 7-2A-202, 7-2A-203, 7-2A-205, 7-2A-208, 7-3-104, 7-3-105, 7-3-401, 7-3-604, 7-4A-103, 7-4A-201, 7-4A-202, 7-4A-203, 7-4A-207, 7-4A-208, 7-4A-210, 7-4A-211, 7-4A-305, 7-5-104, 7-5-116, 7-7-102, 7-7-106, 7-8-102, 7-8-103, 7-8-106, 7-8-110, 7-8-303, 7-9A-102, 7-9A-104, 7-9A-105, 7-9A-203, 7-9A-204, 7-9A-207, 7-9A-208, 7-9A-209, 7-9A-210, 7-9A-301, 7-9A-304, 7-9A-305, 7-9A-310, 7-9A-312, 7-9A-313, 7-9A-314, 7-9A-316, 7-9A-317, 7-9A-323, 7-9A-324, 7-9A-330, 7-9A-331, 7-9A-332, 7-9A-334, 7-9A-341, 7-9A-404, 7-9A-406, 7-9A-408, 7-9A-509, 7-9A-513, 7-9A-601, 7-9A-605, 7-9A-608, 7-9A-611, 7-9A-613, 7-9A-614, 7-9A-615, 7-9A-616, 7-9A-619, 7-9A-620, 7-9A-621, 7-9A-624, and 7-9A-628, Code of Alabama 1975, and to add Sections 7-9A-107A, 7-9A-107B, 7-9A-306A, 7-9A-306B, 7-9A-314A, and 7-9A-326A to the Code of Alabama 1975, to provide a substantial revision to the Uniform Commercial Code in conformity with a substantial portion of the Uniform Commercial Code Amendments (2022), to clarify the meaning of the term chattel paper and other definitions, to define and provide for hybrid transactions, and to provide extensive amendments to the Uniform Commercial Code providing for the perfection of security interests in controllable electronic records, documents of title, chattel paper, and other assets; and to add Article 12A to the Uniform Commercial Code to provide transitional provisions for the Uniform Commercial Code Amendments (2022).

Impact

The passage of SB231 would have profound implications for state laws concerning property rights associated with intangible assets. By establishing clear rules for the control and transfer of electronic records and rights to payment, the bill aims to improve legal clarity and security for businesses engaged in digital commerce. The changes would allow secured parties to perfect their security interests either by gaining control over these digital assets or by filing financing statements, streamlining legal processes surrounding financial transactions involving digital assets.

Summary

SB231 serves as a significant amendment to the Uniform Commercial Code (UCC) by introducing changes that facilitate the governance of intangible digital assets, particularly 'controllable electronic records'. This bill provides a structured framework for the transfer and control of these digital assets, including rights to payment and the mechanisms for establishing and evidencing these rights. The incorporation of Article 12 to the UCC marks a notable advancement in adapting commercial laws to the evolving digital landscape, where businesses increasingly utilize electronic transactions and digital assets.

Contention

While the bill generally received support for modernizing the UCC, some contention surfaced during discussions regarding the implications of its provisions on existing state laws and the possible risks associated with defining and securing rights in digital assets. Critics raised concerns about the potential for misunderstandings in the terms used to define 'controllable electronic records', questioning how enforceable rights would be maintained, particularly in the instance of disputes arising from digital transactions. Overall, the dialogue around SB231 highlighted the need for ongoing clarification concerning legal definitions and transaction processes in an increasingly digital economy.