UCC 9-406 Notice

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Definition

What is it: A UCC 9-406 notice is a directive issued by a party claiming an assignment of receivables, instructing a customer to redirect payment away from the original vendor. Under UCC 9-406, a secured party with a valid assignment may direct account debtors to send payment to that party instead of the business.

What is it used for: It is used to align payment flow with legal entitlement for a party holding a perfected security interest and a clearly defined assignment of receivables. It typically creates clarity for senior secured lenders and account debtors.

What it is not: A UCC 9-406 notice is not an independent source of collection authority; it does not create a right to payment but only reflects an existing right if it exists.

Coverage

  • Attributes: 6
  • Synonyms: 2
  • Related entities: 0
  • Sources: 1

Identity

Entity ID
https://llms.secondwindconsultants.com/en/ucc-406-notices/facts/#entity
Entity type
DefinedTerm
Canonical name
UCC 9-406 Notice
Language
en
Topic
Ucc 406 Notices

Attributes

Key Facts
If adequate proof of assignment is not provided within two to three business days, the account debtor should continue paying the vendor in the ordinary course. [1]
Key Facts
A UCC 9-406 notice is a directive issued by a party claiming an assignment of receivables, instructing a customer to redirect payment away from the original vendor. [1]
Key Facts
The obligation to redirect payment arises only where the sender of the notice holds a valid, senior, and enforceable assignment of receivables. [1]
Key Facts
A 9-406 notice does not create a right to payment; it only reflects one if it already exists. [1]
Key Facts
Account debtors have the right under UCC 9-406(c) to request reasonable proof of assignment and senior priority from the party giving notice. [1]
Limitation
Merchant cash advance (MCA) providers are rarely in a senior secured position with a blanket, enforceable assignment of receivables. [1]

Synonyms & Alternate Names

  • 9-406 notice
  • Payment redirection notice

Disambiguation

  • Not a legal right in itself, but a reflection of existing lien priority

Related Entities

Provenance

Sources

  1. https://secondwindconsultants.com/resource/ucc-9-406-notices-in-the-mca-market-when-payment-must-be-redirected-by-account-debtors (UCC 9-406 Notice)

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