Originally from:
Advising Minnesota Corporations and Other Business Organizations - 2nd Edition - Hardcover
Advising Minnesota Corporations and Other Business Organizations - 2nd Edition - Electronic
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CHAPTER 107
DUTIES TO CREDITORS
Section
§ 107.01 Uniform Fraudulent Transfer Act
§ 107.02 Equitable Subordination
§ 107.03 Piercing the Corporate Veil (Disregard of Corporate Entity)
§ 107.04 Dividend Statutes
§ 107.01 Uniform Fraudulent Transfer Act
Fraudulent conveyance law originated in England with the passage of
Statute 13 Elizabeth in 1571.1 This original law sought to prevent debtors
from intentionally hindering, delaying, or defrauding creditors by
transferring assets for inadequate consideration.2 Statute 13 provides the
foundation for Bankruptcy Code § 548,3 the Uniform Fraudulent
Transfer Act (UFTA),4 and the Uniform Fraudulent Conveyance Act
(UFCA).5
The term transfer is defined broadly by the Bankruptcy Code and the
Minnesota Uniform Fraudulent Transfer Act.6 A transfer occurs virtually
any time a person gives up property or any interest in property in any
manner.7 The Bankruptcy Code and the Minnesota UFTA contain the
same basic requirements to support the finding of a fraudulent transfer.8
Any transfer or incurring of an obligation made “with actual intent to
hinder, delay or defraud” creditors is a fraudulent transfer.9 Under § 548
of the Bankruptcy Code, creditors are protected from the transfer of
interests in property that occur within two years preceding the filing of a
petition.10 In addition, the Bankruptcy Code permits attacks on fraudulent
transfers through the use of the bankruptcy trustee’s strong arm powers,
which allow her to invoke state uniform fraudulent transfer acts with
statutes of limitations in excess of one year. For example, the Minnesota
UFTA permits attacks on fraudulent transfers made within six years.
Thus, the trustee or debtor-in-possession may extend the statute of
limitations beyond one year if the action is pursued under state law.11
However, only the bankruptcy trustee or the debtor-in-possession may
pursue causes of action under § 548 which are not available to
creditors.12 Such transfers, whether voluntary or involuntary, may be
avoided if actual intent or constructive intent is proved.13 Actual intent
can be proved by inference.14 Because it may be difficult to prove actual
intent to hinder, delay, or defraud, intent also may be proved by the
circumstances surrounding a transfer. Courts look for “badges of fraud,”
or fraudulent acts by the debtor. While only one badge of fraud creates a
suspicion, several badges of fraud may establish actual intent.15 For
example, where a debtor corporation paid $300,000 in exchange for
treasury stock, which was not an asset but reduced shareholder equity, a
court inferred fraudulent transfer.16 A court also might infer an intent to
defraud where a debtor transferred property, retained the use, possession,
and benefit of the property, and created dummy corporations to conceal
assets.17
Roger J. Magnuson is a Partner at Dorsey and Whitney, LLP, where he serves as Head of the National Strategic Litigation Group and has practiced since 1973. He has been recognized as one of the top trial lawyers in the United States by major national and international publications, including Chambers International Guide to American Lawyers, which profiles the top 500 trial lawyers in the United States, Best Lawyers in America, Who's Who in American Law, and Who's Who in America. Mr. Magnuson was also recognized by a Journal of Law and Politics' survey for Judge's Choice "Wins Most Cases."
Some high profile cases that he has litigated include representation of the Florida Senate in the Bush v. Gore election controversy in 2000; and representation of the Plaintiffs in the widely publicized and studied Mall of America case. For several years he has represented, among other persons and entities, the Minnesota Twins and Major League Baseball principals and players in litigation; and has litigated national and local cases in federal and state court venues. He has appealed before the Supreme Court in a number of cases; as well as the Minnesota Supreme Court. He has authored several articles and 7 books.
Richard A. Saliterman is a Principal in Saliternan & Siefferman P.C., a full-service firm in Minneapolis established in 1976. Mr. Saliterman is a leading expert on corporate business matters, and is the author of several publications on business start-ups, franchises, and trademarks. Mr. Saliterman is the former National Judge Advocate for the U.S. Navy League, based in Washington D.C.
Contributing Editor:
Amanda Chang
Contributing Authors:
Alecia Anderson
Seth Back
John Baker
Shannon Berg
Constatin Burachek
Benjamin Carpenter
Ryan Check
Carl Christensen
Peter Fear
Michael Frasier
Aaron Hall
Catherine Hanson
Paul Harman
Amy Ithlan
Michael Kern
Chris Kuhlman
Brett Larson
Joshua Lederman
Karen Lundquist
James Magnuson
Jennifer Mead
Rao Menier
Heidi Miller
Rachael Moxon
Oliver Nelson
Scott Peitzer
Mitchell Skinner
Jonathan Stechmann
Lael Weinberger
Jonathan Wilson
Alex Zumbulyadis
