SB 450

This bill adopts the Uniform Law Commission's 2014 modifications to the

Uniform Fraudulent Transfer Act, including its renaming as the Uniform Voidable

Transactions Law.

Current law incorporates the Uniform Fraudulent Transfer Act (1984), adopted

in this state in 1988. Under current law, a creditor may challenge certain transfers

of property or obligations incurred by a debtor that may deprive the creditor of assets

that would otherwise be available to satisfy debts if the debtor is or is about to become

insolvent, such as the transfer of the debtor's assets to a family member or corporate

insider. A “creditor” is any person who has a claim and a “debtor” is any person who

is liable on a claim. A “claim” is a right to payment, whether it arises by contract,

tort, or otherwise, and a “debt” means liability on a claim. There are four basic

situations in which the creditor may challenge a transfer made or obligation incurred

by the debtor (hereafter referred to as voidable transactions):

1. If the transfer is made or obligation incurred by the debtor to intentionally

hinder, delay, or defraud the creditor.

2. If the debtor transfers property or incurs the obligation without receiving a

reasonably equivalent value in exchange, and the debtor engages in business or a

transaction for which the debtor's remaining assets are unreasonably small or the

debtor intends to incur debts beyond the debtor's ability to pay as they become due.

3. If there is an existing creditor-debtor relationship, the debtor makes a

transfer or incurs an obligation without receiving a reasonably equivalent value in

exchange, and the debtor was insolvent at that time or the debtor became insolvent

as a result of the transfer or obligation. A debtor is insolvent if the sum of the debtor's

debts is greater than all of the debtor's assets at a fair valuation. A debtor who is

generally not paying debts as they become due is presumed to be insolvent.

4. If the debtor makes a transfer to an insider for a preexisting debt, the debtor

was insolvent at the time of the transfer, and the insider had reasonable cause to

believe that the debtor was insolvent. “Insider” is a defined term and includes

certain relatives of an individual debtor and officers and directors of a corporate

debtor.

Current law specifies various remedies available to a creditor if a voidable

transaction has occurred. These remedies include the avoidance of the transfer or

obligation to the extent necessary to satisfy the creditor's claim, attachment against

the asset transferred or other property of the person to whom the asset was

transferred, an injunction, and appointment of a receiver.

The bill adopts the ULC's 2014 modifications to the uniform act, including the

following:

1. The bill renames the provisions of the act to be the Uniform Voidable

Transactions Law and replaces the term “fraudulent” with “voidable” in various

provisions. The ULC specified that these changes were not intended to have