Business and Personal Finance Dictionary

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• PERFECTION
  
  The name for a procedure established by Article 9 of the Uniform Commercial Code. Creditors must comply with this procedure in order to establish the priority of their security interest in personal property relative to the priority of security interests in the same property that may be held by other creditors. (It may be used when an interest in collateral is provided by the debtor or by a guarantor or other third party.) Perfection does not normally constitute the actual agreement between the secured party and the debtor. By itself, perfection does not create a security interest and must therefore be supported by a separate security agreement or pledge agreement. There are several different procedures that can be used to achieve perfection of a security interest in a debtor’s personal property. The most common method is perfection by filing a financing statement. See financing statements and security agreement.
  
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