asset acquisitions - Jackson Walker LLP

forced to dispose of the assets or the amount that could be realized from a protracted searchfor a buyer under special circumstances or having a particular ability to use the assets. For abusiness which is a going concern, it is proper to make a valuation of the assets as a goingconcern, and not on an item-by-item basis.The UFTA avoidance provisions are divided between those avoidable to creditorsholding claims at the time of the transfer in issue, and those whose claims arose after thetransfer. The statute is less protective of a creditor who began doing business with a debtorafter the debtor made the transfer rendering it insolvent. Most fraudulent transfer actions,however, are brought by a bankruptcy trustee, who under Section 544(b) of the BankruptcyCode, 11 U.S.C. § 544(b) (1994), can use the avoiding powers of any actual creditor holdingan unsecured claim who could avoid the transfer under applicable non-bankruptcy law.Intent to Hinder, Delay, or Defraud Creditors. An asset transfer would be inviolation of UFTA § 4(a)(1), and would be fraudulent if the transfer was made “with actualintent to hinder, delay, or defraud any creditor of the debtor.” If “actual intent” is found, itdoes not matter if value was given in exchange for the assets, or if the seller was solvent. Anumber of factors (commonly referred to as “badges of fraud”) which are to be considered indetermining actual intent under UFTA § 4(a)(1) are set out in UFTA § 4(b), and includewhether:(1) the transfer or obligation was to an insider;(2) the debtor retained possession or control of the property transferred after thetransfer;(3) the transfer or obligation was disclosed or concealed;(4) before the transfer was made or obligation was incurred, the debtor hadbeen sued or threatened with suit;(5) the transfer was of substantially all the debtor’s assets; Ψ [and](10) the transfer occurred shortly before or shortly after a substantial debt wasincurred.Although the existence of one or more “badges of fraud” may not be sufficient to establishactual fraudulent intent, “the confluence of several can constitute conclusive evidence of anactual intent to defraud, absent ‘significantly clear’ evidence of a legitimate, superveningpurpose.” Max Sugarman Funeral Home, Inc. v. A.D.B. Investors, 926 F.2d 1248, 1254-55(1st Cir. 1991).Fraudulent Transfer Without Intent to Defraud. An asset purchase may be found tobe fraudulent if it was effected by the seller “without receiving a reasonably equivalent valuein exchange for the transfer or obligation,” and:(A)the seller’s remaining assets, after the transaction, were unreasonably small inrelation to the business or transaction that the seller was engaged in or was about toengage in, or3148166v1- 108 -