HF 1384

3rd Engrossment - 87th Legislature (2011 - 2012) Posted on 05/22/2012 12:17pm

A bill for an act
relating to fraudulent transfers; excluding certain transfers to charitable or
religious organizations from the fraudulent transfers act; amending Minnesota
Statutes 2010, section 513.41.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA:

Section 1.

Minnesota Statutes 2010, section 513.41, is amended to read:

513.41 DEFINITIONS.

As used in sections 513.41 to 513.51:

(1) "Affiliate" means:

(i) a person who directly or indirectly owns, controls, or holds with power to vote,
20 percent or more of the outstanding voting securities of the debtor, other than a person
who holds the securities,

(A) as a fiduciary or agent without sole discretionary power to vote the securities; or

(B) solely to secure a debt, if the person has not exercised the power to vote;

(ii) a corporation 20 percent or more of whose outstanding voting securities are
directly or indirectly owned, controlled, or held with power to vote, by the debtor or a
person who directly or indirectly owns, controls, or holds with power to vote, 20 percent
or more of the outstanding voting securities of the debtor, other than a person who holds
the securities,

(A) as a fiduciary or agent without sole power to vote the securities; or

(B) solely to secure a debt, if the person has not in fact exercised the power to vote;

(iii) a person whose business is operated by the debtor under a lease or other
agreement, or a person substantially all of whose assets are controlled by the debtor; or

(iv) a person who operates the debtor's business under a lease or other agreement or
controls substantially all of the debtor's assets.

(2) "Asset" means property of a debtor, but the term does not include:

(i) property to the extent it is encumbered by a valid lien;

(ii) property to the extent it is generally exempt under nonbankruptcy law; or

(iii) an interest in property held in tenancy by the entireties to the extent it is not
subject to process by a creditor holding a claim against only one tenant.

(3) "Claim" means a right to payment, whether or not the right is reduced to
judgment, liquidated, unliquidated, fixed, contingent, matured, unmatured, disputed,
undisputed, legal, equitable, secured, or unsecured.

(4) "Creditor" means a person who has a claim.

(5) "Debt" means liability on a claim.

(6) "Debtor" means a person who is liable on a claim.

(7) "Insider" includes:

(i) if the debtor is an individual,

(A) a relative of the debtor or of a general partner of the debtor;

(B) a partnership in which the debtor is a general partner;

(C) a general partner in a partnership described in clause (B); or

(D) a corporation of which the debtor is a director, officer, or a person in control;

(ii) if the debtor is a corporation,

(A) a director of the debtor;

(B) an officer of the debtor;

(C) a person in control of the debtor;

(D) a partnership in which the debtor is a general partner;

(E) a general partner in a partnership described in clause (D); or

(F) a relative of a general partner, director, officer, or person in control of the debtor;

(iii) if the debtor is a partnership,

(A) a general partner in the debtor;

(B) a relative of a general partner in, or a general partner of, or a person in control
of the debtor;

(C) another partnership in which the debtor is a general partner;

(D) a general partner in a partnership described in clause (C); or

(E) a person in control of the debtor;

(iv) an affiliate, or an insider of an affiliate as if the affiliate were the debtor; and

(v) a managing agent of the debtor.

(8) "Lien" means a charge against or an interest in property to secure payment
of a debt or performance of an obligation, and includes a security interest created by
agreement, a judicial lien obtained by legal or equitable process or proceedings, a
common-law lien, or a statutory lien.

(9) "Person" means an individual, partnership, corporation, association, organization,
government or governmental subdivision or agency, business trust, estate, trust, or any
other legal or commercial entity.

(10) "Property" means anything that may be subject of ownership.

(11) "Relative" means an individual related by consanguinity within the third degree
as determined by the common law, a spouse, or an individual related to a spouse within
the third degree as so determined, and includes an individual in an adoptive relationship
within the third degree.

(12) "Transfer" means every mode, direct or indirect, absolute or conditional,
voluntary or involuntary, of disposing of or parting with an asset or an interest in an
asset, and includes payment of money, release, lease, and creation of a lien or other
encumbrance. new text begin "Transfer" does not include a contribution of money or an asset made to a
qualified charitable or religious organization or entity unless the contribution was made
within two years of commencement of an action under sections 513.41 to 513.51 against
the qualified charitable or religious organization or entity and:
new text end

new text begin (i) the debtor made the charitable contribution with actual intent to hinder, delay,
or defraud any creditor of the debtor, or
new text end

new text begin (ii) the debtor:
new text end

new text begin (A) was insolvent at the time of the contribution or would be rendered insolvent by
reason of the contribution;
new text end

new text begin (B) was engaged or was about to engage in a business or a transaction for which
the remaining assets of the debtor were unreasonably small in relation to the business or
transaction; or
new text end

new text begin (C) intended to incur, or the charitable or religious organization or entity believed
or had reason to believe that the debtor would incur, debts beyond the debtor's ability
to pay as the debts become due.
new text end

new text begin A transfer of a charitable contribution to a qualified charitable or religious
organization or entity is not considered a transfer covered under item (ii) if the amount
of that contribution did not exceed 15 percent of the gross annual income of the debtor
for the year in which the transfer of the contribution was made; or the contribution
exceeded that amount but the transfer was consistent with practices of the debtor in
making charitable contributions.
new text end

new text begin Transfer does include a return on investment made by a qualified charitable
or religious organization or entity. "Qualified charitable or religious organization or
entity" means an organization or entity described in United States Code, title 26, section
170(c)(1), (2), or (3).
new text end

(13) "Valid lien" means a lien that is effective against the holder of a judicial lien
subsequently obtained by legal or equitable process or proceedings.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective the day following final enactment
and applies to a cause of action existing on, or arising on or after, that date.
new text end