| HB 257 - Uniform Fraudulent Transfers Act; enact |
First Reader Summary
A BILL to amend Article 2 of Chapter 3 of Title 9 of the Official
Code of Georgia Annotated, relating to specific periods of
limitation, and Chapter 2 of Title 18 of the Official Code of
Georgia Annotated, relating to debtor and creditor relations, so
as to enact the Uniform Fraudulent Transfers Act; and for other
purposes.
| House |
Action |
Senate |
| 1/27/99 |
Read 1st Time |
3/9/99 |
| 1/28/99 |
Read 2nd Time |
3/17/99 |
| 2/24/99 |
Favorably Reported |
3/14/00 |
| Sub |
Committee Amend/Sub |
|
|
Recommitted |
1/10/00 |
| 3/8/99 |
Read 3rd Time |
1/10/00 |
| 3/8/99 |
Passed/Adopted |
|
| CS |
Comm/Floor Amend/Sub |
|
HB 257 LC 22 3575S
______________________________ offers the following
substitute to HB 257:
A BILL TO BE ENTITLED
AN ACT
1- 1 To amend Article 2 of Chapter 3 of Title 9 of the Official
1- 2 Code of Georgia Annotated, relating to specific periods of
1- 3 limitation, and Chapter 2 of Title 18 of the Official Code
1- 4 of Georgia Annotated, relating to debtor and creditor
1- 5 relations, so as to enact the Uniform Fraudulent Transfers
1- 6 Act; to provide for a short title and for definitions; to
1- 7 provide for circumstances when a debtor or a debtor
1- 8 partnership is insolvent, when a debtor is presumed
1- 9 insolvent, when value is given for a transfer or obligation,
1-10 when a transfer made or obligation incurred by a debtor is
1-11 fraudulent as to a creditor, and when a transfer is made and
1-12 an obligation is incurred; to provide factors for
1-13 determining actual intent in a transfer or obligation; to
1-14 provide for relief for a creditor against a fraudulent
1-15 transfer or obligation; to provide for instances when a
1-16 transfer or obligation is not voidable; to provide for
1-17 rights of a good faith transferee or obligee if a transfer
1-18 or obligation is voided; to provide for statutes of
1-19 limitation; to provide for supplementation of this Act; to
1-20 remove certain duplicate or redundant provisions relating to
1-21 conveyances by debtors deemed fraudulent and the validity of
1-22 a conveyance to an innocent subsequent purchaser; to repeal
1-23 conflicting laws; and for other purposes.
1-24 BE IT ENACTED BY THE GENERAL ASSEMBLY OF GEORGIA:
1-25 SECTION 1.
1-26 Article 2 of Chapter 3 of Title 9 of the Official Code of
1-27 Georgia Annotated, relating to specific periods of
1-28 limitation, is amended by inserting a new Code section to be
1-29 designated Code Section 9-3-35 to read as follows:
1-30 "9-3-35.
1-31 An action by a creditor seeking relief under the
1-32 provisions of Article 4 of Chapter 2 of Title 18, known as
1-33 the 'Uniform Fraudulent Transfers Act,' shall be brought
-1-
2- 1 within the applicable period set out in Code Section
2- 2 18-2-79."
2- 3 SECTION 2.
2- 4 Chapter 2 of Title 18 of the Official Code of Georgia
2- 5 Annotated, relating to debtor and creditor relations, is
2- 6 amended in Article 2, relating to acts void as against
2- 7 creditors, by striking Code Sections 18-2-22, relating to
2- 8 conveyances by debtors deemed fraudulent, and 18-2-23,
2- 9 relating to validity of conveyance to innocent subsequent
2-10 purchaser, and inserting in lieu thereof the following:
2-11 "18-2-22.
2-12 The following acts by debtors shall be fraudulent in law
2-13 against creditors and others and as to them shall be null
2-14 and void: (1) Every assignment or transfer by a debtor, insolvent
2-16 at the time, of real or personal property or choses in
2-17 action of any description to any person, either in trust
2-18 or for the benefit of or on behalf of creditors, where
2-19 any trust or benefit is reserved to the assignor or any
2-20 person for him; (2) Every conveyance of real or personal estate, by
2-22 writing or otherwise, and every bond, suit, judgment and
2-23 execution, or contract of any description had or made
2-24 with intention to delay or defraud creditors, where such
2-25 intention is known to the taking party; a bona fide
2-26 transaction on a valuable consideration, where the
2-27 taking party is without notice or ground for reasonable
2-28 suspicion of said intent of the debtor, shall be valid;
2-29 and (3) Every voluntary deed or conveyance, not for a
2-31 valuable consideration, made by a debtor who is
2-32 insolvent at the time of the conveyance. Reserved.
2-33 18-2-23.
2-34 Where a sale void as against creditors is made, the
2-35 property has not been seized, and no step has been taken
2-36 to set the sale aside, the fraudulent vendee can convey to
2-37 an innocent purchaser from him, for value and without
2-38 notice of the fraud, a title good as against the claims or
2-39 judgments of the defrauded creditors. Reserved."
-2-
3- 1 SECTION 3.
3- 2 Said chapter is further amended by inserting a new article
3- 3 to be designated Article 4 to read as follows:
3- 4 18-2-70.
3- 5 This article shall be known and may be cited as the
3- 6 'Uniform Fraudulent Transfers Act.'
3- 7 18-2-71.
3- 8 As used in this article:
3- 9 (1) 'Affiliate' means:
3-10 (A) A person who directly or indirectly owns,
3-11 controls, or holds with power to vote, 20 percent or
3-12 more of the outstanding voting securities of the
3-13 debtor, other than a person who holds the securities:
3-14 (i) As a fiduciary or agent without sole
3-15 discretionary power to vote the securities; or
3-16 (ii) Solely to secure a debt, if the person has not
3-17 exercised the power to vote;
3-18 (B) A corporation 20 percent or more of whose
3-19 outstanding voting securities are directly or
3-20 indirectly owned, controlled, or held with power to
3-21 vote, by the debtor or a person who directly or
3-22 indirectly owns, controls, or holds with power to
3-23 vote, 20 percent or more of the outstanding voting
3-24 securities of the debtor, other than a person who
3-25 holds the securities:
3-26 (i) As a fiduciary or agent without sole power to
3-27 vote the securities; or
3-28 (ii) Solely to secure a debt, if the person has not
3-29 in fact exercised the power to vote;
3-30 (C) A person whose business is operated by the debtor
3-31 under a lease or other agreement, or a person
3-32 substantially all of whose assets are controlled by
3-33 the debtor; or
3-34 (D) A person who operates the debtor's business under
3-35 a lease or other agreement or controls substantially
3-36 all of the debtor's assets.
-3-
4- 1 (2) 'Asset' means property of a debtor, but the term
4- 2 does not include:
4- 3 (A) Property to the extent it is encumbered by a valid
4- 4 lien;
4- 5 (B) Property to the extent it is generally exempt
4- 6 under nonbankruptcy law; or
4- 7 (C) An interest in property held in tenancy by the
4- 8 entireties to the extent it is not subject to process
4- 9 by a creditor holding a claim against only one tenant.
4-10 (3) 'Claim' means a right to payment, whether or not the
4-11 right is reduced to judgment, liquidated, unliquidated,
4-12 fixed, contingent, matured, unmatured, disputed,
4-13 undisputed, legal, equitable, secured, or unsecured.
4-14 (4) 'Creditor' means a person who has a claim.
4-15 (5) 'Debt' means liability on a claim.
4-16 (6) 'Debtor' means a person who is liable on a claim.
4-17 (7) 'Insider' includes:
4-18 (A) If the debtor is an individual:
4-19 (i) A relative of the debtor or of a general partner
4-20 of the debtor;
4-21 (ii) A partnership in which the debtor is a general
4-22 partner;
4-23 (iii) A general partner in a partnership described
4-24 in division (ii) of this subparagraph; or
4-25 (iv) A corporation of which the debtor is a
4-26 director, officer, or person in control;
4-27 (B) If the debtor is a corporation:
4-28 (i) A director of the debtor;
4-29 (ii) An officer of the debtor;
4-30 (iii) A person in control of the debtor;
4-31 (iv) A partnership in which the debtor is a general
4-32 partner;
4-33 (v) A general partner in a partnership described in
4-34 division (iv) of this subparagraph; or
4-35 (vi) A relative of a general partner, director,
4-36 officer, or person in control of the debtor;
-4-
5- 1 (C) If the debtor is a partnership:
5- 2 (i) A general partner in the debtor;
5- 3 (ii) A relative of a general partner in, or a
5- 4 general partner of, or a person in control of the
5- 5 debtor;
5- 6 (iii) Another partnership in which the debtor is a
5- 7 general partner;
5- 8 (iv) A general partner in a partnership described in
5- 9 division (iii) of this subparagraph; or
5-10 (v) A person in control of the debtor;
5-11 (D) An affiliate, or an insider of an affiliate as if
5-12 the affiliate were the debtor; and
5-13 (E) A managing agent of the debtor.
5-14 (8) 'Lien' means a charge against or an interest in
5-15 property to secure payment of a debt or performance of
5-16 an obligation, and includes a security interest created
5-17 by agreement, a judicial lien obtained by legal or
5-18 equitable process or proceedings, a common-law lien, or
5-19 a statutory lien.
5-20 (9) 'Person' means an individual, partnership,
5-21 corporation, association, organization, government or
5-22 governmental subdivision or agency, business trust,
5-23 estate, trust, or any other legal or commercial entity.
5-24 (10) 'Property' means anything that may be the subject
5-25 of ownership.
5-26 (11) 'Relative' means an individual related by
5-27 consanguinity within the third degree as determined by
5-28 the common law, a spouse, or an individual related to a
5-29 spouse within the third degree as so determined and
5-30 includes an individual in an adoptive relationship
5-31 within the third degree.
5-32 (12) 'Transfer' means every mode, direct or indirect,
5-33 absolute or conditional, voluntary or involuntary, of
5-34 disposing of or parting with an asset or an interest in
5-35 an asset, and includes payment of money, release, lease,
5-36 and creation of a lien or other encumbrance.
5-37 (13) 'Valid lien' means a lien that is effective against
5-38 the holder of a judicial lien subsequently obtained by
5-39 legal or equitable process or proceedings.
-5-
6- 1 18-2-72.
6- 2 (a) A debtor is insolvent if the sum of the debtor's debts
6- 3 is greater than all of the debtor's assets, at a fair
6- 4 valuation.
6- 5 (b) A debtor who is generally not paying his or her debts
6- 6 as they become due is presumed to be insolvent.
6- 7 (c) A partnership is insolvent under subsection (a) of
6- 8 this Code section if the sum of the partnership's debts is
6- 9 greater than the aggregate of all of the partnership's
6-10 assets, at a fair valuation, and the sum of the excess of
6-11 the value of each general partner's nonpartnership assets
6-12 over the partner's nonpartnership debts.
6-13 (d) Assets under this Code section do not include property
6-14 that has been transferred, concealed, or removed with
6-15 intent to hinder, delay, or defraud creditors or that has
6-16 been transferred in a manner making the transfer voidable
6-17 under this article.
6-18 (e) Debts under this Code section do not include an
6-19 obligation to the extent it is secured by a valid lien on
6-20 property of the debtor not included as an asset.
6-21 18-2-73.
6-22 (a) Value is given for a transfer or an obligation if, in
6-23 exchange for the transfer or obligation, property is
6-24 transferred or an antecedent debt is secured or satisfied,
6-25 but value does not include an unperformed promise made
6-26 otherwise than in the ordinary course of the promisor's
6-27 business to furnish support to the debtor or another
6-28 person.
6-29 (b) For the purposes of paragraph (2) of subsection (a) of
6-30 Code Section 18-2-74 and Code Section 18-2-75, a person
6-31 gives a reasonably equivalent value if the person acquires
6-32 an interest of the debtor in an asset pursuant to a
6-33 regularly conducted, noncollusive foreclosure sale or
6-34 execution of a power of sale for the acquisition or
6-35 disposition of the interest of the debtor upon default
6-36 under a mortgage, deed of trust, or security agreement.
6-37 (c) A transfer is made for present value if the exchange
6-38 between the debtor and the transferee is intended by them
6-39 to be contemporaneous and is in fact substantially
6-40 contemporaneous.
-6-
7- 1 18-2-74.
7- 2 (a) A transfer made or obligation incurred by a debtor is
7- 3 fraudulent as to a creditor, whether the creditor's claim
7- 4 arose before or after the transfer was made or the
7- 5 obligation was incurred, if the debtor made the transfer
7- 6 or incurred the obligation:
7- 7 (1) With actual intent to hinder, delay, or defraud any
7- 8 creditor of the debtor; or
7- 9 (2) Without receiving a reasonably equivalent value in
7-10 exchange for the transfer or obligation, and the debtor:
7-11 (A) Was engaged or was about to engage in a business
7-12 or a transaction for which the remaining assets of the
7-13 debtor were unreasonably small in relation to the
7-14 business or transaction; or
7-15 (B) Intended to incur, or believed or reasonably
7-16 should have believed that he or she would incur, debts
7-17 beyond his or her ability to pay as they became due.
7-18 (b) In determining actual intent under paragraph (1) of
7-19 subsection (a) of this Code section, consideration may be
7-20 given, among other factors, to whether:
7-21 (1) The transfer or obligation was to an insider;
7-22 (2) The debtor retained possession or control of the
7-23 property transferred after the transfer;
7-24 (3) The transfer or obligation was disclosed or
7-25 concealed;
7-26 (4) Before the transfer was made or obligation was
7-27 incurred, the debtor had been sued or threatened with
7-28 suit;
7-29 (5) The transfer was of substantially all the debtor's
7-30 assets;
7-31 (6) The debtor absconded;
7-32 (7) The debtor removed or concealed assets;
7-33 (8) The value of the consideration received by the
7-34 debtor was reasonably equivalent to the value of the
7-35 asset transferred or the amount of the obligation
7-36 incurred;
-7-
8- 1 (9) The debtor was insolvent or became insolvent shortly
8- 2 after the transfer was made or the obligation was
8- 3 incurred;
8- 4 (10) The transfer occurred shortly before or shortly
8- 5 after a substantial debt was incurred; and
8- 6 (11) The debtor transferred the essential assets of the
8- 7 business to a lienor who transferred the assets to an
8- 8 insider of the debtor.
8- 9 18-2-75.
8-10 (a) A transfer made or obligation incurred by a debtor is
8-11 fraudulent as to a creditor whose claim arose before the
8-12 transfer was made or the obligation was incurred if the
8-13 debtor made the transfer or incurred the obligation
8-14 without receiving a reasonably equivalent value in
8-15 exchange for the transfer or obligation and the debtor was
8-16 insolvent at that time or the debtor became insolvent as a
8-17 result of the transfer or obligation.
8-18 (b) A transfer made by a debtor is fraudulent as to a
8-19 creditor whose claim arose before the transfer was made if
8-20 the transfer was made to an insider for an antecedent
8-21 debt, the debtor was insolvent at that time, and the
8-22 insider had reasonable cause to believe that the debtor
8-23 was insolvent.
8-24 18-2-76.
8-25 For the purposes of this article:
8-26 (1) A transfer is made:
8-27 (A) With respect to an asset that is real property
8-28 other than a fixture, but including the interest of a
8-29 seller or purchaser under a contract for the sale of
8-30 the asset, when the transfer is so far perfected that
8-31 a good faith purchaser of the asset from the debtor
8-32 against whom applicable law permits the transfer to be
8-33 perfected cannot acquire an interest in the asset that
8-34 is superior to the interest of the transferee; and
8-35 (B) With respect to an asset that is not real property
8-36 or that is a fixture, when the transfer is so far
8-37 perfected that a creditor on a simple contract cannot
8-38 acquire a judicial lien otherwise than under this
8-39 article that is superior to the interest of the
8-40 transferee;
-8-
9- 1 (2) If applicable law permits the transfer to be
9- 2 perfected as provided in paragraph (1) of this Code
9- 3 section and the transfer is not so perfected before the
9- 4 commencement of an action for relief under this article,
9- 5 the transfer is deemed made immediately before the
9- 6 commencement of the action;
9- 7 (3) If applicable law does not permit the transfer to be
9- 8 perfected as provided in paragraph (1) of this Code
9- 9 section, the transfer is made when it becomes effective
9-10 between the debtor and the transferee;
9-11 (4) A transfer is not made until the debtor has acquired
9-12 rights in the asset transferred; and
9-13 (5) An obligation is incurred:
9-14 (A) If oral, when it becomes effective between the
9-15 parties; or
9-16 (B) If evidenced by a writing, when the writing
9-17 executed by the obligor is delivered to or for the
9-18 benefit of the obligee.
9-19 18-2-77.
9-20 (a) In an action for relief against a transfer or
9-21 obligation under this article, a creditor, subject to the
9-22 limitations in Code Section 18-2-78, may obtain:
9-23 (1) Avoidance of the transfer or obligation to the
9-24 extent necessary to satisfy the creditor's claim;
9-25 (2) An attachment or other provisional remedy against
9-26 the asset transferred or other property of the
9-27 transferee in accordance with the procedure prescribed
9-28 by Chapter 3 of this title;
9-29 (3) Subject to applicable principles of equity and in
9-30 accordance with applicable rules of civil procedure:
9-31 (A) An injunction against further disposition by the
9-32 debtor or a transferee, or both, of the asset
9-33 transferred or of other property;
9-34 (B) Appointment of a receiver to take charge of the
9-35 asset transferred or of other property of the
9-36 transferee; or
9-37 (C) Any other relief the circumstances may require.
9-38 (b) If a creditor has obtained a judgment on a claim
9-39 against the debtor, the creditor, if the court so orders,
-9-
10- 1 may levy execution on the asset transferred or its
10- 2 proceeds.
10- 3 18-2-78.
10- 4 (a) A transfer or obligation is not voidable under
10- 5 paragraph (1) of subsection (a) of Code Section 18-2-74
10- 6 against a person who took in good faith and for a
10- 7 reasonably equivalent value or against any subsequent
10- 8 transferee or obligee.
10- 9 (b) Except as otherwise provided in this Code section, to
10-10 the extent a transfer is voidable in an action by a
10-11 creditor under paragraph (1) of subsection (a) of Code
10-12 Section 18-2-77, the creditor may recover judgment for the
10-13 value of the asset transferred, as adjusted under
10-14 subsection (c) of this Code section, or the amount
10-15 necessary to satisfy the creditor's claim, whichever is
10-16 less. The judgment may be entered against:
10-17 (1) The first transferee of the asset or the person for
10-18 whose benefit the transfer was made; or
10-19 (2) Any subsequent transferee other than a good faith
10-20 transferee or obligee who took for value or from any
10-21 subsequent transferee or obligee.
10-22 (c) If the judgment under subsection (b) of this Code
10-23 section is based upon the value of the asset transferred,
10-24 the judgment must be for an amount equal to the value of
10-25 the asset at the time of the transfer, subject to
10-26 adjustment as the equities may require.
10-27 (d) Notwithstanding voidability of a transfer or an
10-28 obligation under this article, a good faith transferee or
10-29 obligee is entitled, to the extent of the value given the
10-30 debtor for the transfer or obligation, to:
10-31 (1) A lien on or a right to retain any interest in the
10-32 asset transferred;
10-33 (2) Enforcement of any obligation incurred; or
10-34 (3) A reduction in the amount of the liability on the
10-35 judgment.
10-36 (e) A transfer is not voidable under paragraph (2) of
10-37 subsection (a) of Code Section 18-2-74 or Code Section
10-38 18-2-75 if the transfer results from:
-10-
11- 1 (1) Termination of a lease upon default by the debtor
11- 2 when the termination is pursuant to the lease and
11- 3 applicable law; or
11- 4 (2) Enforcement of a security interest in compliance
11- 5 with Article 9 of the Uniform Commercial Code.
11- 6 (f) A transfer is not voidable under subsection (b) of
11- 7 Code Section 18-2-75:
11- 8 (1) To the extent the insider gave new value to or for
11- 9 the benefit of the debtor after the transfer was made
11-10 unless the new value was secured by a valid lien;
11-11 (2) If made in the ordinary course of business or
11-12 financial affairs of the debtor and the insider; or
11-13 (3) If made pursuant to a good faith effort to
11-14 rehabilitate the debtor and the transfer secured the
11-15 present value given for that purpose as well as an
11-16 antecedent debt of the debtor.
11-17 18-2-79.
11-18 A cause of action with respect to a fraudulent transfer or
11-19 obligation under this article is extinguished unless
11-20 action is brought:
11-21 (1) Under paragraph (1) of subsection (a) of Code
11-22 Section 18-2-74, within four years after the transfer
11-23 was made or the obligation was incurred or, if later,
11-24 within one year after the transfer or obligation was or
11-25 could reasonably have been discovered by the claimant;
11-26 (2) Under paragraph (2) of subsection (a) of Code
11-27 Section 18-2-74 or subsection (a) of Code Section
11-28 18-2-75, within four years after the transfer was made
11-29 or the obligation was incurred; or
11-30 (3) Under subsection (b) of Code Section 18-2-75, within
11-31 one year after the transfer was made or the obligation
11-32 was incurred.
11-33 18-2-80.
11-34 Unless displaced by the provisions of this article, the
11-35 principles of law and equity, including the law merchant
11-36 and the law relating to principal and agent, estoppel,
11-37 laches, fraud, misrepresentation, duress, coercion,
11-38 mistake, insolvency, or other validating or invalidating
11-39 cause, supplement its provisions."
-11-
12- 1 SECTION 4.
12- 2 All laws and parts of laws in conflict with this Act are
12- 3 repealed.
-12-
Clerk of the House
Robert E. Rivers, Jr., Clerk
Last Updated on 03/14/00
