Colorado Code
Part 2 - Effectiveness of Security Agreement; Attachment of Security Interest; Rights of Parties to Security Agreement
§ 4-9-203. Attachment and Enforceability of Security Interest; Proceeds; Supporting Obligations; Formal Requisites

(1) The security agreement becomes effective to create a security interest in the person's property; or
(2) The person becomes generally obligated for the obligations of the other person, including the obligation secured under the security agreement, and acquires or succeeds to all or substantially all of the assets of the other person.

(1) The agreement satisfies paragraph (3) of subsection (b) of this section with respect to existing or after-acquired property of the new debtor to the extent the property is described in the agreement; and
(2) Another agreement is not necessary to make a security interest in the property enforceable.

Source: L. 2001: Entire article R&RE, p. 1334, § 1, effective July 1. L. 2006: (b)(3)(D) amended, p. 500, § 34, effective September 1.
Editor's note: (1) The provisions of this section are similar to provisions of several former sections as they existed prior to 2001. For a detailed comparison, see the comparative tables located in the back of the index.
(2) Colorado legislative change: Colorado added a new subsection (j).

Certain exceptions to the baseline rule enable a debtor to transfer, and a security interest to attach to, greater rights than the debtor has. See Part 3, Subpart 3 (priority rules). The phrase, "or the power to transfer rights in the collateral to a secured party," accommodates those exceptions. In some cases, a debtor may have power to transfer another person's rights only to a class of transferees that excludes secured parties. See, e.g., Section 2-403(2) (giving certain merchants power to transfer an entruster's rights to a buyer in ordinary course of business). Under those circumstances, the debtor would not have the power to create a security interest in the other person's rights, and the condition in subsection (b)(2) would not be satisfied.
Subsection (d) explains when a new debtor becomes bound. Persons who become bound under paragraph (2) are limited to those who both become primarily liable for the original debtor's obligations and succeed to (or acquire) its assets. Thus, the paragraph excludes sureties and other secondary obligors as well as persons who become obligated through veil piercing and other non-successorship doctrines. In many cases, paragraph (2) will exclude successors to the assets and liabilities of a division of a debtor. See also Section 9-508, Comment 3.