HF 1384

1st Unofficial Engrossment - 87th Legislature (2011 - 2012)

Posted on 03/23/2012 11:50 a.m.

1.1A bill for an act 1.2relating to fraudulent transfers; excluding certain transfers to charitable or 1.3religious organizations from the fraudulent transfers act;amending Minnesota 1.4Statutes 2010, section 513.41. 1.5BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA: 1.6    Section 1. Minnesota Statutes 2010, section 513.41, is amended to read: 1.7513.41 DEFINITIONS. 1.8As used in sections 513.41 to 513.51: 1.9(1) "Affiliate" means: 1.10(i) a person who directly or indirectly owns, controls, or holds with power to vote, 1.1120 percent or more of the outstanding voting securities of the debtor, other than a person 1.12who holds the securities, 1.13(A) as a fiduciary or agent without sole discretionary power to vote the securities; or 1.14(B) solely to secure a debt, if the person has not exercised the power to vote; 1.15(ii) a corporation 20 percent or more of whose outstanding voting securities are 1.16directly or indirectly owned, controlled, or held with power to vote, by the debtor or a 1.17person who directly or indirectly owns, controls, or holds with power to vote, 20 percent 1.18or more of the outstanding voting securities of the debtor, other than a person who holds 1.19the securities, 1.20(A) as a fiduciary or agent without sole power to vote the securities; or 1.21(B) solely to secure a debt, if the person has not in fact exercised the power to vote; 1.22(iii) a person whose business is operated by the debtor under a lease or other 1.23agreement, or a person substantially all of whose assets are controlled by the debtor; or 2.1(iv) a person who operates the debtor's business under a lease or other agreement or 2.2controls substantially all of the debtor's assets. 2.3(2) "Asset" means property of a debtor, but the term does not include: 2.4(i) property to the extent it is encumbered by a valid lien; 2.5(ii) property to the extent it is generally exempt under nonbankruptcy law; or 2.6(iii) an interest in property held in tenancy by the entireties to the extent it is not 2.7subject to process by a creditor holding a claim against only one tenant. 2.8(3) "Claim" means a right to payment, whether or not the right is reduced to 2.9judgment, liquidated, unliquidated, fixed, contingent, matured, unmatured, disputed, 2.10undisputed, legal, equitable, secured, or unsecured. 2.11(4) "Creditor" means a person who has a claim. 2.12(5) "Debt" means liability on a claim. 2.13(6) "Debtor" means a person who is liable on a claim. 2.14(7) "Insider" includes: 2.15(i) if the debtor is an individual, 2.16(A) a relative of the debtor or of a general partner of the debtor; 2.17(B) a partnership in which the debtor is a general partner; 2.18(C) a general partner in a partnership described in clause (B); or 2.19(D) a corporation of which the debtor is a director, officer, or a person in control; 2.20(ii) if the debtor is a corporation, 2.21(A) a director of the debtor; 2.22(B) an officer of the debtor; 2.23(C) a person in control of the debtor; 2.24(D) a partnership in which the debtor is a general partner; 2.25(E) a general partner in a partnership described in clause (D); or 2.26(F) a relative of a general partner, director, officer, or person in control of the debtor; 2.27(iii) if the debtor is a partnership, 2.28(A) a general partner in the debtor; 2.29(B) a relative of a general partner in, or a general partner of, or a person in control 2.30of the debtor; 2.31(C) another partnership in which the debtor is a general partner; 2.32(D) a general partner in a partnership described in clause (C); or 2.33(E) a person in control of the debtor; 2.34(iv) an affiliate, or an insider of an affiliate as if the affiliate were the debtor; and 2.35(v) a managing agent of the debtor. 3.1(8) "Lien" means a charge against or an interest in property to secure payment 3.2of a debt or performance of an obligation, and includes a security interest created by 3.3agreement, a judicial lien obtained by legal or equitable process or proceedings, a 3.4common-law lien, or a statutory lien. 3.5(9) "Person" means an individual, partnership, corporation, association, organization, 3.6government or governmental subdivision or agency, business trust, estate, trust, or any 3.7other legal or commercial entity. 3.8(10) "Property" means anything that may be subject of ownership. 3.9(11) "Relative" means an individual related by consanguinity within the third degree 3.10as determined by the common law, a spouse, or an individual related to a spouse within 3.11the third degree as so determined, and includes an individual in an adoptive relationship 3.12within the third degree. 3.13(12) "Transfer" means every mode, direct or indirect, absolute or conditional, 3.14voluntary or involuntary, of disposing of or parting with an asset or an interest in an 3.15asset, and includes payment of money, release, lease, and creation of a lien or other 3.16encumbrance. new text begin "Transfer" does not include a contribution of money or an asset made to a new text end 3.17 new text begin qualified charitable or religious organization or entity unless the contribution was made new text end 3.18 new text begin within two years of commencement of an action under sections 513.41 to 513.51 against new text end 3.19 new text begin the qualified charitable or religious organization or entity and: new text end 3.20 new text begin (i) the debtor made the charitable contribution with actual intent to hinder, delay, new text end 3.21 new text begin or defraud any creditor of the debtor, or new text end 3.22 new text begin (ii) the debtor: new text end 3.23 new text begin (A) was insolvent at the time of the contribution or would be rendered insolvent by new text end 3.24 new text begin reason of the contribution; new text end 3.25 new text begin (B) was engaged or was about to engage in a business or a transaction for which new text end 3.26 new text begin the remaining assets of the debtor were unreasonably small in relation to the business or new text end 3.27 new text begin transaction; or new text end 3.28 new text begin (C) intended to incur, or the charitable or religious organization or entity believed new text end 3.29 new text begin or had reason to believe that the debtor would incur, debts beyond the debtor's ability new text end 3.30 new text begin to pay as the debts become due. new text end 3.31 new text begin A transfer of a charitable contribution to a qualified charitable or religious new text end 3.32 new text begin organization or entity is not considered a transfer covered under item (ii) if the amount new text end 3.33 new text begin of that contribution did not exceed 15 percent of the gross annual income of the debtor new text end 3.34 new text begin for the year in which the transfer of the contribution was made; or the contribution new text end 3.35 new text begin exceeded that amount but the transfer was consistent with practices of the debtor in new text end 3.36 new text begin making charitable contributions. new text end 4.1 new text begin Transfer does include a return on investment made by a qualified charitable new text end 4.2 new text begin or religious organization or entity. "Qualified charitable or religious organization or new text end 4.3 new text begin entity" means an organization or entity described in United States Code, title 26, section new text end 4.4 new text begin 170(c)(1), (2), or (3). new text end 4.5(13) "Valid lien" means a lien that is effective against the holder of a judicial lien 4.6subsequently obtained by legal or equitable process or proceedings. 4.7 new text begin EFFECTIVE DATE. new text end new text begin This section is effective the day following final enactment new text end 4.8 new text begin and applies to a cause of action existing on, or arising on or after, that date. new text end