Near the end of 2019, New York State approved the Uniform Voidable Transactions Act (UVTA), which will become effective on April 4, 2020. The UVTA is intended to modernize New York’s existing fraudulent conveyance laws and bring New York law in line with the law held in the majority of other states, as well as with the federal Bankruptcy Code. The legislation itself is complex and involves clauses that you or anyone engaging in any business should seek to understand.
How does UVTA differ from New York’s long-standing fraudulent conveyance law?
The main reason for implementing the UVTA stems from a need to reduce unnecessary costs, time, and measures brought on by 90 years of fraudulent conveyance cases under New York’s existing fraudulent conveyance laws. Some of the essential legal updates made by the UVTA include:
· New standards: The UVTA has replaced the use of “fair consideration” in favor of “reasonably equivalent value” in determining whether a fraudulent conveyance has occurred. This new standard could mean that some transactions, which would have been valid under the old law, are now voidable.
· Reduced timelines: The former reach-back period for claims involving voidable transactions was six years. Under the UVTA, the reach-back period has decreased to four years. While the actual consequence of this change is currently unknown, the reduced timeframe to file a voidable transaction claim may make it more difficult to do so. The short timeframe in which you could initiate the claim is one of the main hindrances to successfully bringing a voidable transaction claim. Yet, UVTA tends to otherwise simplify the process.
· Jurisdictional clarity: The UVTA also clarifies the law applicable to a case involving a voidable transaction claim. Greater clarity surrounding choice of law and jurisdiction can streamline and simplify litigation of this kind.
· Updated burden of proof: Formerly, someone bringing an intentional fraudulent transfer claim would have to prove the evidence under a clear and convincing standard. Under the UVTA, the standard that needs to be met is a preponderance of the evidence. A preponderance of the evidence standard is lower than a clear and convincing standard, which will make a claim of this kind significantly easier to prove in court.
These are some of the most critical changes in New York law as a result of this new legislation. In many ways, the law has become simpler and more friendly for anyone considering a voidable transaction claim. The long-term effects of these changes and updates are unknown, but it remains crucial for businesses and individuals to understand these laws in the event of disputes over transactions. An attorney could help you further understand the intricacies of the Uniform Voidable Transactions Act.