Massachusetts 2023-2024 Regular Session

Massachusetts House Bill H1716 Compare Versions

Only one version of the bill is available at this time.

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2	2	HOUSE DOCKET, NO. 3382 FILED ON: 1/20/2023
3	3	HOUSE . . . . . . . . . . . . . . . No. 1716
4	4	The Commonwealth of Massachusetts
5	5	_________________
6	6	PRESENTED BY:
7	7	Alice Hanlon Peisch
8	8	_________________
9	9	To the Honorable Senate and House of Representatives of the Commonwealth of Massachusetts in General
10	10	Court assembled:
11	11	The undersigned legislators and/or citizens respectfully petition for the adoption of the accompanying bill:
12	12	An Act relative to the uniform voidable transactions act.
13	13	_______________
14	14	PETITION OF:
15	15	NAME:DISTRICT/ADDRESS :DATE ADDED:Alice Hanlon Peisch14th Norfolk1/11/2023 1 of 15
16	16	HOUSE DOCKET, NO. 3382 FILED ON: 1/20/2023
17	17	HOUSE . . . . . . . . . . . . . . . No. 1716
18	18	By Representative Peisch of Wellesley, a petition (accompanied by bill, House, No. 1716) of
19	19	Alice Hanlon Peisch relative to uniform voidable transactions. The Judiciary.
20	20	The Commonwealth of Massachusetts
21	21	_______________
22	22	In the One Hundred and Ninety-Third General Court
23	23	(2023-2024)
24	24	_______________
25	25	An Act relative to the uniform voidable transactions act.
26	26	Be it enacted by the Senate and House of Representatives in General Court assembled, and by the authority
27	27	of the same, as follows:
28	28	1 SECTION 1. The title of chapter 109A of the General Laws is hereby amended by
29	29	2striking out the words “FRAUDULENT TRANSFER” in that title and by inserting in place
30	30	3thereof the following words:-- “VOIDABLE TRANSACTIONS”.
31	31	4 SECTION 2. Said chapter 109A is hereby amended by striking out Section 1 and by
32	32	5inserting in place thereof the following Section:--
33	33	6 § 1. Citation of chapter
34	34	7 This chapter, which was formerly cited as the Uniform Fraudulent Transfer Act, may be
35	35	8cited as the Uniform Voidable Transactions Act.
36	36	9 SECTION 3. Said chapter 109A is hereby amended by striking out Section 2 and by
37	37	10inserting in place thereof the following Section:--
38	38	11 § 2. Definitions 2 of 15
39	39	12 As used in this chapter, the following words shall, unless the context requires otherwise,
40	40	13have the following meanings:—
41	41	14 “Affiliate”, (i) a person that directly or indirectly owns, controls, or holds with power to
42	42	15vote, twenty percent or more of the outstanding voting securities of the debtor, other than a
43	43	16person that holds the securities:
44	44	17 (A) as a fiduciary or agent without sole discretionary power to vote the securities; or
45	45	18 (B) solely to secure a debt, if the person has not in fact exercised the power to vote;
46	46	19 (ii) a corporation twenty percent or more of whose outstanding voting securities are
47	47	20directly or indirectly owned, controlled, or held with power to vote, by the debtor or a person that
48	48	21directly or indirectly owns, controls, or holds, with power to vote, twenty percent or more of the
49	49	22outstanding voting securities of the debtor, other than a person that holds the securities:
50	50	23 (A) as a fiduciary or agent without sole discretionary power to vote the securities; or
51	51	24 (B) solely to secure a debt, if the person has not in fact exercised the power to vote;
52	52	25 (iii) a person whose business is operated by the debtor under a lease or other agreement,
53	53	26or a person substantially all of whose assets are controlled by the debtor; or
54	54	27 (iv) a person that operates the debtor’s business under a lease or other agreement or
55	55	28controls substantially all of the debtor’s assets.
56	56	29 “Asset”, property of a debtor, but the term shall not include:
57	57	30 (i) property to the extent it is encumbered by a valid lien; 3 of 15
58	58	31 (ii) property to the extent it is generally exempt under nonbankruptcy law; or
59	59	32 (iii) an interest in property held in tenancy by the entireties to the extent it is not subject
60	60	33to process by a creditor holding a claim against only one tenant.
61	61	34 “Claim”, except as used in “claim for relief”, a right to payment, whether or not the right
62	62	35is reduced to judgment, liquidated, unliquidated, fixed, contingent, matured, unmatured,
63	63	36disputed, undisputed, legal, equitable, secured, or unsecured.
64	64	37 “Creditor”, a person that has a claim.
65	65	38 “Debt”, liability on a claim.
66	66	39 “Debtor”, a person that is liable on a claim.
67	67	40 “Electronic”, relating to technology having electrical, digital, magnetic, wireless, optical,
68	68	41electromagnetic, or similar capabilities.
69	69	42 “Insider”, includes:
70	70	43 (i) if the debtor is an individual:
71	71	44 (A) a relative of the debtor or of a general partner of the debtor;
72	72	45 (B) a partnership in which the debtor is a general partner;
73	73	46 (C) a general partner in a partnership described in clause (B); or
74	74	47 (D) a corporation of which the debtor is a director, officer, or person in control;
75	75	48 (ii) if the debtor is a corporation: 4 of 15
76	76	49 (A) a director of the debtor;
77	77	50 (B) an officer of the debtor;
78	78	51 (C) a person in control of the debtor;
79	79	52 (D) a partnership in which the debtor is a general partner;
80	80	53 (E) a general partner in a partnership described in clause (D); or
81	81	54 (F) a relative of a general partner, director, officer, or person in control of the debtor;
82	82	55 (iii) if the debtor is a partnership:
83	83	56 (A) a general partner in the debtor;
84	84	57 (B) a relative of a general partner in, a general partner of, or a person in control of the
85	85	58debtor;
86	86	59 (C) another partnership in which the debtor is a general partner;
87	87	60 (D) a general partner in a partnership described in clause (C); or
88	88	61 (E) a person in control of the debtor;
89	89	62 (iv) an affiliate, or an insider of an affiliate as if the affiliate were the debtor; and
90	90	63 (v) a managing agent of the debtor.
91	91	64 “Lien”, a charge against or an interest in property to secure payment of a debt or
92	92	65performance of an obligation, and includes a security interest created by agreement, a judicial 5 of 15
93	93	66lien obtained by legal or equitable process or proceedings, a common-law lien, or a statutory
94	94	67lien.
95	95	68 “Organization”, a person other than an individual.
96	96	69 “Person”, an individual, estate, partnership, association, trust, business or nonprofit
97	97	70entity, public corporation, government or governmental subdivision, agency, or instrumentality,
98	98	71or other legal or commercial entity.
99	99	72 “Property”, anything that may be the subject of ownership.
100	100	73 “Record”, information that is inscribed on a tangible medium or that is stored in an
101	101	74electronic or other medium and is retrievable in perceivable form.
102	102	75 “Relative”, an individual related by consanguinity within the third degree as determined
103	103	76by the common law, a spouse, or an individual related to a spouse within the third degree as so
104	104	77determined, and includes an individual in an adoptive relationship within the third degree.
105	105	78 “Sign”, with present intent to authenticate or adopt a record:
106	106	79 (i) to execute or adopt a tangible symbol; or
107	107	80 (ii) to attach to or logically associate with the record an electronic symbol, sound, or
108	108	81process.
109	109	82 “Transfer”, every mode, direct or indirect, absolute or conditional, voluntary or
110	110	83involuntary, of disposing of or parting with an asset or an interest in an asset, and includes
111	111	84payment of money, release, lease, license and creation of a lien or other encumbrance. 6 of 15
112	112	85 “Valid lien”, a lien that is effective against the holder of a judicial lien subsequently
113	113	86obtained by legal or equitable process or proceedings.
114	114	87 SECTION 4. Said chapter 109A is hereby amended by striking out Section 3 and by
115	115	88inserting in place thereof the following Section:--
116	116	89 § 3. Insolvency; excluded assets
117	117	90 (a) A debtor is insolvent if, at a fair valuation, the sum of the debtor’s debts is greater
118	118	91than the sum of the debtor’s assets.
119	119	92 (b) A debtor that is generally not paying the debtor’s debts as they become due other than
120	120	93as a result of a bona fide dispute is presumed to be insolvent. The presumption imposes on the
121	121	94party against which the presumption is directed the burden of proving that the nonexistence of
122	122	95insolvency is more probable than its existence.
123	123	96 (c) Assets under this section shall not include property that has been transferred,
124	124	97concealed, or removed with intent to hinder, delay, or defraud creditors or that has been
125	125	98transferred in a manner making the transfer voidable under this chapter.
126	126	99 (d) Debts under this section shall not include an obligation to the extent it is secured by a
127	127	100valid lien on property of the debtor not included as an asset.
128	128	101 SECTION 5. The title of Section 5 of said chapter 109A is hereby amended by striking
129	129	102out the word “Fraudulent” in that title and by inserting in place thereof the following word:--
130	130	103“Voidable”. 7 of 15
131	131	104 SECTION 6. Section 5 of said chapter 109A is hereby further amended by striking out
132	132	105the word “fraudulent” in Section 5(a) and by inserting in place thereof the following word:--
133	133	106“voidable”.
134	134	107 SECTION 7. Section 5 of said chapter 109A is hereby further amended by striking out
135	135	108Section 5(a)(2)(ii) and by inserting in place thereof the following subsection:--
136	136	109 (ii) intended to incur, or believed or reasonably should have believed that the debtor
137	137	110would incur, debts beyond the debtor’s ability to pay as they became due.
138	138	111 SECTION 8. Section 5 of said chapter 109A is hereby further amended by striking out
139	139	112the word “who” in Section 5(b)(11) and by inserting in place thereof the following word:--
140	140	113“that”.
141	141	114 SECTION 9. Section 5 of said chapter 109A is hereby further amended by inserting the
142	142	115following new subsection at the end of Section 5:--
143	143	116 (c) A creditor making a claim for relief under subsection (a) has the burden of proving the
144	144	117elements of the claim for relief by a preponderance of the evidence.
145	145	118 SECTION 10. The title of Section 6 of said chapter 109A is hereby amended by striking
146	146	119out the word “Fraudulent” in that title and by inserting in place thereof the following word:--
147	147	120“Voidable”.
148	148	121 SECTION 11. Section 6 of said chapter 109A is hereby further amended by striking out
149	149	122the word
150	150	123 “fraudulent” wherever it appears in that Section and by inserting in each place thereof the
151	151	124following word:-- “voidable”. 8 of 15
152	152	125 SECTION 12. Section 6 of said chapter 109A is hereby further amended by inserting the
153	153	126following new subsection at the end of Section 6:--
154	154	127 (c) Subject to subsection (b) of section three, a creditor making a claim for relief under
155	155	128subsection (a) or (b) has the burden of proving the elements of the claim for relief by a
156	156	129preponderance of the evidence.
157	157	130 SECTION 13. Section 7(1)(i) of said chapter 109A is hereby amended by striking out the
158	158	131word “whom” in that Section and by inserting in place thereof the following word:-- “which”.
159	159	132 SECTION 14. Section 7 of said chapter 109A is hereby further amended by inserting the
160	160	133word “and” after the word “transferred;” in Section 7(4).
161	161	134 SECTION 15. Section 7 of said chapter 109A is hereby further amended by striking out
162	162	135Section 7(5)(ii) and by inserting in place thereof the following subsection:--
163	163	136 (ii) if evidenced by a record, when the record signed by the obligor is delivered to or for
164	164	137the benefit of the obligee.
165	165	138 SECTION 16. Section 8(a)(2) of said chapter 109A is hereby amended by striking out
166	166	139that Section and by inserting in place thereof the following subsection:--
167	167	140 (2) an attachment or other provisional remedy against the asset transferred or other
168	168	141property of the transferee if available under applicable law; and
169	169	142 SECTION 17. Section 8 of said chapter 109A is hereby further amended by striking out
170	170	143the comma after the word “procedure” in Section 8(a)(3) and by inserting in place thereof the
171	171	144following:-- “:”. 9 of 15
172	172	145 SECTION 18. Said chapter 109A is hereby amended by striking out Section 9 and by
173	173	146inserting in place thereof the following Section:--
174	174	147 § 9. Voidable transfers; creditor’s judgment
175	175	148 (a) A transfer or obligation is not voidable under paragraph (1) of subsection (a) of
176	176	149section five against a person that took in good-faith and for a reasonably equivalent value given
177	177	150the debtor or against any subsequent transferee or obligee.
178	178	151 (b) To the extent a transfer is avoidable in an action by a credit under paragraph (1) of
179	179	152subsection (a) of section eight, the following rules apply:
180	180	153 (1) Except as otherwise provided in this section, the creditor may recover judgment for
181	181	154the value of the asset transferred, as adjusted under subsection (c), or the amount necessary to
182	182	155satisfy the creditor’s claim, whichever is less. The judgment may be entered against:
183	183	156 (i) the first transferee of the asset or the person for whose benefit the transfer was made;
184	184	157or
185	185	158 (ii) an immediate or mediate transferee of the first transferee, other than:
186	186	159 (A) a good-faith transferee that took for value; or
187	187	160 (B) an immediate or mediate good-faith transferee of a person described in clause (A).
188	188	161 (2) Recovery pursuant to paragraph (1) of subsection (a) or (b) of section eight of or from
189	189	162the asset transferred or its proceeds, by levy or otherwise, is available only against a person
190	190	163described in clause (i) or (ii) of paragraph (1). 10 of 15
191	191	164 (c) If the judgment under subsection (b) is based upon the value of the asset transferred,
192	192	165the judgment shall be for an amount equal to the value of the asset at the time of the transfer,
193	193	166subject to adjustment as the equities may require.
194	194	167 (d) Notwithstanding voidability of a transfer or an obligation under this chapter, a good-
195	195	168faith transferee or obligee is entitled, to the extent of the value given the debtor for the transfer or
196	196	169obligation, to:
197	197	170 (1) a lien on or a right to retain an interest in the asset transferred;
198	198	171 (2) enforcement of an obligation incurred; or
199	199	172 (3) a reduction in the amount of the liability on the judgment.
200	200	173 (e) A transfer is not voidable under paragraph (2) of subsection (a) of section five or
201	201	174section six if the transfer results from:
202	202	175 (1) termination of a lease upon default by the debtor when the termination is pursuant to
203	203	176the lease and applicable law; or
204	204	177 (2) enforcement of a security interest in compliance with Article 9 of chapter one hundred
205	205	178and six, other than acceptance of collateral in full or partial satisfaction of the obligation it
206	206	179secures.
207	207	180 (f) A transfer is not voidable under subsection (b) of section six:
208	208	181 (1) to the extent the insider gave new value to or for the benefit of the debtor after the
209	209	182transfer was made, except to the extent the new value was secured by a valid lien; 11 of 15
210	210	183 (2) if made in the ordinary course of business or financial affairs of the debtor and the
211	211	184insider; or
212	212	185 (3) if made pursuant to a good-faith effort to rehabilitate the debtor and the transfer
213	213	186secured present value given for that purpose as well as an antecedent debt of the debtor.
214	214	187 (g) The following rules determine the burden of proving matters referred to in this
215	215	188section:
216	216	189 (1) A party that seeks to invoke subsection (a), (d), (e), or (f) has the burden of proving
217	217	190the applicability of that subsection.
218	218	191 (2) Except as otherwise provided in paragraphs (3) and (4), the creditor has the burden of
219	219	192proving each applicable element of subsection (b) or (c).
220	220	193 (3) The transferee has the burden of proving the applicability to the transferee of clause
221	221	194(A) or (B) of clause (ii) of paragraph 1 of subsection (b).
222	222	195 (4) A party that seeks adjustment under subsection (c) has the burden of proving the
223	223	196adjustment.
224	224	197 (h) The standard of proof required to establish matters referred to in this section is
225	225	198preponderance of the evidence.
226	226	199 SECTION 19. Said chapter 109A is hereby amended by striking out Section 10 and by
227	227	200inserting in place thereof the following Section:--
228	228	201 § 10.Limitation of actions 12 of 15
229	229	202 A claim for relief with respect to a transfer or obligation under this chapter shall be
230	230	203extinguished unless action is brought:
231	231	204 (a) under paragraph (1) of subsection (a) of section five, not later than four years after the
232	232	205transfer was made or the obligation was incurred or, if later, not later than one year after the
233	233	206transfer or obligation was or could reasonably have been discovered by the claimant;
234	234	207 (b) under paragraph (2) of subsection (a) of section five or subsection (a) of section six,
235	235	208not later than four years after the transfer was made or the obligation was incurred; or
236	236	209 (c) under subsection (b) of section six, not later than one year after the transfer was made.
237	237	210 SECTION 20. Said chapter 109A is hereby amended by renumbering Section 11 as
238	238	211follows:-- “§ 13.” and by inserting the following new Section 11:--
239	239	212 § 11.Governing Law
240	240	213 (a) In this section, the following rules determine a debtor’s location:
241	241	214 (1) A debtor who is an individual is located at the individual’s principal residence.
242	242	215 (2) A debtor that is an organization and has only one place of business is located at its
243	243	216place of business.
244	244	217 (3) A debtor that is an organization and has more than one place of business is located at
245	245	218its chief executive office.
246	246	219 (b) A claim for relief in the nature of a claim for relief under this chapter is governed by
247	247	220the local law of the jurisdiction in which the debtor is located when the transfer is made or the
248	248	221obligation is incurred. 13 of 15
249	249	222 SECTION 21. Said chapter 109A is hereby amended by renumbering the original Section
250	250	22313 as follows:-- “§ 17.”.
251	251	224 SECTION 22. Said chapter 109A is hereby amended by renumbering Section 12 as
252	252	225follows:-- “§ 14.” and by inserting the following new Section 12:--
253	253	226 § 12.Application to series organization
254	254	227 (a) In this section:
255	255	228 (1) “Protected series” means an arrangement, however denominated, created by a series
256	256	229organization that, pursuant to the law under which the series organization is organized, has the
257	257	230characteristics set forth in paragraph (2).
258	258	231 (2) “Series organization” means an organization that, pursuant to the law under which it
259	259	232is organized, has the following characteristics:
260	260	233 (i) The organic record of the organization provides for creation by the organization of one
261	261	234or more protected series, however denominated, with respect to specified property of the
262	262	235organization, and for records to be maintained for each protected series that identify the property
263	263	236of or associated with the protected series.
264	264	237 (ii) Debt incurred or existing with respect to the activities of, or property of or associated
265	265	238with, a particular protected series is enforceable against the property of or associated with the
266	266	239protected series only, and not against the property of or associated with the organization or other
267	267	240protected series of the organization. 14 of 15
268	268	241 (iii) Debt incurred or existing with respect to the activities or property of the organization
269	269	242is enforceable against the property of the organization only, and not against the property of or
270	270	243associated with a protected series of the organization.
271	271	244 (b) A series organization and each protected series of the organization is a separate
272	272	245person for purposes of this chapter, even if for other purposes a protected series is not a person
273	273	246separate from the organization or other protected series of the organization.
274	274	247 SECTION 23. Said chapter 109A is hereby amended by inserting the following new
275	275	248Sections 15 and 16:--
276	276	249 § 15.Relation to electronic signatures in Global and National Commerce Act
277	277	250 This chapter modifies, limits, or supersedes the Electronic Signatures in Global and
278	278	251National Commerce Act, 15 U.S.C. Section 7001 et seq., but does not modify, limit, or supersede
279	279	252Section 101(c) of that act, 15 U.S.C. Section 7001(c), or authorize electronic delivery of any of
280	280	253the notices described in Section 103(b) of that act, 15 U.S.C. Section 7003(b).
281	281	254 § 16.Relation to the Official Comments
282	282	255 The official comments to the Uniform Voidable Transactions Act, as added by the
283	283	256Uniform Law Commission in 2014 with the adoption of the changes to the Uniform Fraudulent
284	284	257Transfer Act, are not part of this act and may or may not reflect current Massachusetts law.
285	285	258 SECTION 24. The amendments to chapter 109A made by this bill: (a) apply to a transfer
286	286	259made or obligation incurred on or after the effective date of the amendments; (b) do not apply to
287	287	260a transfer made or obligation incurred before the effective date of the amendments; and (c) do
288	288	261not apply to a right of action that has accrued before the effective date of the amendments. For 15 of 15
289	289	262the foregoing purposes a transfer is made and an obligation is incurred at the time provided in
290	290	263section six of the chapter.