CHAPTER 24. UNIFORM FRAUDULENT TRANSFER ACT
BUSINESS AND COMMERCE CODE
TITLE 3. INSOLVENCY, FRAUDULENT TRANSFERS, AND FRAUD
CHAPTER 24. UNIFORM FRAUDULENT TRANSFER ACT
Sec. 24.001. SHORT TITLE. This chapter may be cited as the
Uniform Fraudulent Transfer Act.
Amended by Acts 1987, 70th Leg., ch. 1004, Sec. 1, eff. Sept. 1,
1987.
Sec. 24.002. DEFINITIONS. In this chapter:
(1) "Affiliate" means:
(A) 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:
(i) as a fiduciary or agent without sole discretionary power to
vote the securities; or
(ii) solely to secure a debt, if the person has not exercised
the power to vote;
(B) 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:
(i) as a fiduciary or agent without sole power to vote the
securities; or
(ii) solely to secure a debt, if the person has not in fact
exercised the power to vote;
(C) 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
(D) 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:
(A) property to the extent it is encumbered by a valid lien;
(B) property to the extent it is generally exempt under
nonbankruptcy law; or
(C) 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, under the law of another
jurisdiction.
(3) "Claim" means a right to payment or property, 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, including a spouse, minor, person
entitled to receive court or administratively ordered child
support for the benefit of a child, or ward, who has a claim.
(5) "Debt" means a liability on a claim.
(6) "Debtor" means a person who is liable on a claim.
(7) "Insider" includes:
(A) if the debtor is an individual:
(i) a relative of the debtor or of a general partner of the
debtor;
(ii) a partnership in which the debtor is a general partner;
(iii) a general partner in a partnership described in
Subparagraph (ii) of this paragraph; or
(iv) a corporation of which the debtor is a director, officer,
or person in control;
(B) if the debtor is a corporation:
(i) a director of the debtor;
(ii) an officer of the debtor;
(iii) a person in control of the debtor;
(iv) a partnership in which the debtor is a general partner;
(v) a general partner in a partnership described in Subparagraph
(iv) of this paragraph; or
(vi) a relative of a general partner, director, officer, or
person in control of the debtor;
(C) if the debtor is a partnership:
(i) a general partner in the debtor;
(ii) a relative of a general partner in, a general partner of,
or a person in control of the debtor;
(iii) another partnership in which the debtor is a general
partner;
(iv) a general partner in a partnership described in
Subparagraph (iii) of this paragraph; or
(v) a person in control of the debtor;
(D) an affiliate, or an insider of an affiliate as if the
affiliate were the debtor; and
(E) 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 the 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. The term does not include a transfer under a
disclaimer filed under Section 37A, Texas Probate Code, or
Section 112.010, Property Code.
(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.
Amended by Acts 1987, 70th Leg., ch. 1004, Sec. 1, eff. Sept. 1,
1987; Acts 1993, 73rd Leg., ch. 846, Sec. 2, eff. Sept. 1, 1993;
Acts 1997, 75th Leg., ch. 911, Sec. 95, eff. Sept. 1, 1997.
Sec. 24.003. INSOLVENCY. (a) A debtor is insolvent if the sum
of the debtor's debts is greater than all of the debtor's assets
at a fair valuation.
(b) A debtor who is generally not paying the debtor's debts as
they become due is presumed to be insolvent.
(c) A partnership is insolvent under Subsection (a) of this
section if the sum of the partnership's debts is greater than the
aggregate, at a fair valuation, of all of the partnership's
assets and the sum of the excess of the value of each general
partner's nonpartnership assets over the partner's nonpartnership
debts.
(d) Assets under this section do not include property that has
been transferred, concealed, or removed with intent to hinder,
delay, or defraud creditors or that has been transferred in a
manner making the transfer voidable under this chapter.
(e) Debts under this section do not include an obligation to the
extent it is secured by a valid lien on property of the debtor
not included as an asset.
Amended by Acts 1987, 70th Leg., ch. 1004, Sec. 1, eff. Sept. 1,
1987; Acts 1993, 73rd Leg., ch. 570, Sec. 8, eff. Sept. 1, 1993.
Sec. 24.004. VALUE. (a) Value is given for a transfer or an
obligation if, in exchange for the transfer or obligation,
property is transferred or an antecedent debt is secured or
satisfied, but value does not include an unperformed promise made
otherwise than in the ordinary course of the promisor's business
to furnish support to the debtor or another person.
(b) For the purposes of Sections 24.005(a)(2) and 24.006 of this
code, a person gives a reasonably equivalent value if the person
acquires an interest of the debtor in an asset pursuant to a
regularly conducted, noncollusive foreclosure sale or execution
of a power of sale for the acquisition or disposition of the
interest of the debtor upon default under a mortgage, deed of
trust, or security agreement.
(c) A transfer is made for present value if the exchange between
the debtor and the transferee is intended by them to be
contemporaneous and is in fact substantially contemporaneous.
(d) "Reasonably equivalent value" includes without limitation, a
transfer or obligation that is within the range of values for
which the transferor would have sold the assets in an arm's
length transaction.
Amended by Acts 1987, 70th Leg., ch. 1004, Sec. 1, eff. Sept. 1,
1987; Acts 1993, 73rd Leg., ch. 570, Sec. 9, eff. Sept. 1, 1993.
Sec. 24.005. TRANSFERS FRAUDULENT AS TO PRESENT AND FUTURE
CREDITORS. (a) A transfer made or obligation incurred by a
debtor is fraudulent as to a creditor, whether the creditor's
claim arose before or within a reasonable time after the transfer
was made or the obligation was incurred, if the debtor made the
transfer or incurred the obligation:
(1) with actual intent to hinder, delay, or defraud any creditor
of the debtor; or
(2) without receiving a reasonably equivalent value in exchange
for the transfer or obligation, and the debtor:
(A) 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
(B) intended to incur, or believed or reasonably should have
believed that the debtor would incur, debts beyond the debtor's
ability to pay as they became due.
(b) In determining actual intent under Subsection (a)(1) of this
section, consideration may be given, among other factors, to
whether:
(1) the transfer or obligation was to an insider;
(2) the debtor retained possession or control of the property
transferred after the transfer;
(3) the transfer or obligation was concealed;
(4) before the transfer was made or obligation was incurred, the
debtor had been sued or threatened with suit;
(5) the transfer was of substantially all the debtor's assets;
(6) the debtor absconded;
(7) the debtor removed or concealed assets;
(8) the value of the consideration received by the debtor was
reasonably equivalent to the value of the asset transferred or
the amount of the obligation incurred;
(9) the debtor was insolvent or became insolvent shortly after
the transfer was made or the obligation was incurred;
(10) the transfer occurred shortly before or shortly after a
substantial debt was incurred; and
(11) the debtor transferred the essential assets of the business
to a lienor who transferred the assets to an insider of the
debtor.
Amended by Acts 1987, 70th Leg., ch. 1004, Sec. 1, eff. Sept. 1,
1987; Acts 1993, 73rd Leg., ch. 570, Sec. 10, eff. Sept. 1, 1993.
Sec. 24.006. TRANSFERS FRAUDULENT AS TO PRESENT CREDITORS. (a)
A transfer made or obligation incurred by a debtor is fraudulent
as to a creditor whose claim arose before the transfer was made
or the obligation was incurred if the debtor made the transfer or
incurred the obligation without receiving a reasonably equivalent
value in exchange for the transfer or obligation and the debtor
was insolvent at that time or the debtor became insolvent as a
result of the transfer or obligation.
(b) A transfer made by a debtor is fraudulent as to a creditor
whose claim arose before the transfer was made if the transfer
was made to an insider for an antecedent debt, the debtor was
insolvent at that time, and the insider had reasonable cause to
believe that the debtor was insolvent.
Amended by Acts 1987, 70th Leg., ch. 1004, Sec. 1, eff. Sept. 1,
1987.
Sec. 24.007. WHEN TRANSFER IS MADE OR OBLIGATION IS INCURRED.
For the purposes of this chapter:
(1) a transfer is made:
(A) with respect to an asset that is real property other than a
fixture, but including the interest of a seller or purchaser
under a contract for the sale of the asset, when the transfer is
so far perfected that a good faith purchaser of the asset from
the debtor against whom applicable law permits the transfer to be
perfected cannot acquire an interest in the asset that is
superior to the interest of the transferee; and
(B) with respect to an asset that is not real property or that
is a fixture, when the transfer is so far perfected that a
creditor on a simple contract cannot acquire a judicial lien
otherwise than under this chapter that is superior to the
interest of the transferee;
(2) if applicable law permits the transfer to be perfected as
provided in Subdivision (1) of this section and the transfer is
not so perfected before the commencement of an action for relief
under this chapter, the transfer is deemed made immediately
before the commencement of the action;
(3) if applicable law does not permit the transfer to be
perfected as provided in Subdivision (1) of this section, the
transfer is made when it becomes effective between the debtor and
the transferee;
(4) a transfer is not made until the debtor has acquired rights
in the asset transferred; and
(5) an obligation is incurred:
(A) if oral, when it becomes effective between the parties; or
(B) if evidenced by a writing, when the writing executed by the
obligor is delivered to or for the benefit of the obligee.
Amended by Acts 1987, 70th Leg., ch. 1004, Sec. 1, eff. Sept. 1,
1987.
Sec. 24.008. REMEDIES OF CREDITORS. (a) In an action for
relief against a transfer or obligation under this chapter, a
creditor, subject to the limitations in Section 24.009 of this
code, may obtain:
(1) avoidance of the transfer or obligation to the extent
necessary to satisfy the creditor's claim;
(2) an attachment or other provisional remedy against the asset
transferred or other property of the transferee in accordance
with the applicable Texas Rules of Civil Procedure and the Civil
Practice and Remedies Code relating to ancillary proceedings; or
(3) subject to applicable principles of equity and in accordance
with applicable rules of civil procedure:
(A) an injunction against further disposition by the debtor or a
transferee, or both, of the asset transferred or of other
property;
(B) appointment of a receiver to take charge of the asset
transferred or of other property of the transferee; or
(C) any other relief the circumstances may require.
(b) If a creditor has obtained a judgment on a claim against the
debtor, the creditor, if the court so orders, may levy execution
on the asset transferred or its proceeds.
Amended by Acts 1987, 70th Leg., ch. 1004, Sec. 1, eff. Sept. 1,
1987.
Sec. 24.009. DEFENSES, LIABILITY, AND PROTECTION OF TRANSFEREE.
(a) A transfer or obligation is not voidable under Section
24.005(a)(1) of this code against a person who took in good faith
and for a reasonably equivalent value or against any subsequent
transferee or obligee.
(b) Except as otherwise provided in this section, to the extent
a transfer is voidable in an action by a creditor under Section
24.008(a)(1) of this code, the creditor may recover judgment for
the value of the asset transferred, as adjusted under Subsection
(c) of this section, or the amount necessary to satisfy the
creditor's claim, whichever is less. The judgment may be entered
against:
(1) the first transferee of the asset or the person for whose
benefit the transfer was made; or
(2) any subsequent transferee other than a good faith transferee
who took for value or from any subsequent transferee.
(c)(1) Except as provided by Subdivision (2) of this subsection,
if the judgment under Subsection (b) of this section is based
upon the value of the asset transferred, the judgment must be for
an amount equal to the value of the asset at the time of the
transfer, subject to adjustment as the equities may require.
(2) The value of the asset transferred is not to be adjusted to
include the value of improvements made by a good faith
transferee, including:
(A) physical additions or changes to the asset transferred;
(B) repairs to the asset;
(C) payment of any tax on the asset;
(D) payment of any debt secured by a lien on the asset that is
superior or equal to the rights of a voiding creditor under this
chapter; and
(E) preservation of the asset.
(d)(1) Notwithstanding voidability of a transfer or an obligation
under this chapter, a good faith transferee or obligee is
entitled, at the transferee's or obligee's election, to the
extent of the value given the debtor for the transfer or
obligation, to:
(A) a lien, prior to the rights of a voiding creditor under this
chapter, or a right to retain any interest in the asset
transferred;
(B) enforcement of any obligation incurred; or
(C) a reduction in the amount of the liability on the judgment.
(2) Notwithstanding voidability of a transfer under this
chapter, to the extent of the value of any improvements made by a
good faith transferee, the good faith transferee is entitled to a
lien on the asset transferred prior to the rights of a voiding
creditor under this chapter
(e) A transfer is not voidable under Section 24.005(a)(2) or
Section 24.006 of this code if the transfer results from:
(1) termination of a lease upon default by the debtor when the
termination is pursuant to the lease and applicable law; or
(2) enforcement of a security interest in compliance with
Chapter 9 of this code.
(f) A transfer is not voidable under Section 24.006(b) of this
code:
(1) to the extent the insider gave new value to or for the
benefit of the debtor after the transfer was made unless the new
value was secured by a valid lien;
(2) if made in the ordinary course of business or financial
affairs of the debtor and the insider; or
(3) if made pursuant to a good-faith effort to rehabilitate the
debtor and the transfer secured present value given for that
purpose as well as an antecedent debt of the debtor.
Amended by Acts 1987, 70th Leg., ch. 1004, Sec. 1, eff. Sept. 1,
1987; Acts 1993, 73rd Leg., ch. 570, Sec. 11, eff. Sept. 1, 1993.
Sec. 24.010. EXTINGUISHMENT OF CAUSE OF ACTION. (a) Except as
provided by Subsection (b) of this section, a cause of action
with respect to a fraudulent transfer or obligation under this
chapter is extinguished unless action is brought:
(1) under Section 24.005(a)(1) of this code, within four years
after the transfer was made or the obligation was incurred or, if
later, within one year after the transfer or obligation was or
could reasonably have been discovered by the claimant;
(2) under Section 24.005(a)(2) or 24.006(a) of this code, within
four years after the transfer was made or the obligation was
incurred; or
(3) under Section 24.006(b) of this code, within one year after
the transfer was made.
(b) A cause of action on behalf of a spouse, minor, or ward with
respect to a fraudulent transfer or obligation under this chapter
is extinguished unless the action is brought:
(1) under Section 24.005(a) or 24.006(a) of this code, within
two years after the cause of action accrues, or if later, within
one year after the transfer or obligation was or could reasonably
have been discovered by the claimant; or
(2) under Section 24.006(b) of this code within one year after
the date the transfer was made.
(c) If a creditor entitled to bring an action under this chapter
is under a legal disability when a time period prescribed by this
section starts, the time of the disability is not included in the
period. A disability that arises after the period starts does not
suspend the running of the period. A creditor may not tack one
legal disability to another to extend the period. For the
purposes of this subsection, a creditor is under a legal
disability if the creditor is:
(1) younger than 18 years of age, regardless of whether the
person is married; or
(2) of unsound mind.
Amended by Acts 1987, 70th Leg., ch. 1004, Sec. 1, eff. Sept. 1,
1987; Acts 1993, 73rd Leg., ch. 570, Sec. 12, eff. Sept. 1, 1993.
Sec. 24.011. SUPPLEMENTARY PROVISIONS. Unless displaced by the
provisions of this chapter, the principles of law and equity,
including the law merchant and the law relating to principal and
agent, estoppel, laches, fraud, misrepresentation, duress,
coercion, mistake, insolvency, or other validating or
invalidating cause, supplement its provisions.
Amended by Acts 1987, 70th Leg., ch. 1004, Sec. 1, eff. Sept. 1,
1987.
Sec. 24.012. UNIFORMITY OF APPLICATION AND CONSTRUCTION. This
chapter shall be applied and construed to effectuate its general
purpose to make uniform the law with respect to the subject of
this chapter among states enacting it.
Amended by Acts 1987, 70th Leg., ch. 1004, Sec. 1, eff. Sept. 1,
1987.
Sec. 24.013. COSTS. In any proceeding under this chapter, the
court may award costs and reasonable attorney's fees as are
equitable and just.
Added by Acts 2003, 78th Leg., ch. 420, Sec. 1, eff. Sept. 1,
2003.