August 01, 2014

Is it appropriate to consider the individual assets of a corporation’s majority shareholder in assessing the corporation’s solvency for purposes of fraudulent-transfer litigation? The answer to this question is complex. A 2007 decision from the U.S. Bankruptcy Court for the Northern District of Illinois, which was affirmed in 2009, provides guidance regarding whether it is appropriate to consider a majority shareholder’s wealth and how that shareholder’s wealth impacts a solvency analysis. In 2010, the U.S. Court of Appeals for the Seventh Circuit vacated the judgment and remanded the case, again raising the following questions: Can they (the majority shareholders) pay? Will they pay? Must they pay?

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