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Investors Of A Failing Company May Get Paid Last

On Behalf of | Jun 21, 2016 | Business Disputes

New Hampshire, like most states, has a Uniform Fraudulent Transfer Act which addresses when transfers of the assets of an insolvent company can be reversed for the benefit of other creditors. N.H. RSA 545-A, in part, allows a general creditor to take back a legitimate debt repayment to an insider of an insolvent company.

For example if the president of a company has loaned money to the company, the president may believe that as long as she clearly documents the loan transaction with a signed promissory note, then repayment to her of that loan before other creditors are paid is permitted. That may not be the case if the creditor can prove the repayment of the debt to the president was made within one year of the filing of the creditor’s action or the company was insolvent at the time of the transfer or was made insolvent by the transfer; and the president did not give additional value to the company, If these conditions are met, the creditor may be able to recover that money for repayment of his own debt even if the president only had a portion of her debt paid back and is still owed money by the company.

In such circumstances, the creditor owed money may want to seek legal counsel to discuss the possibilities of pursuing a claim for the amount of the debt repayment to the officer as a voidable transfer under N.H. RSA 545 in addition to filing a regular debt collection action against the company.

J. Daniel Marr is a Director and Shareholder at Hamblett & Kerrigan, P.A. His legal practice includes counseling businesses and individuals on a variety of legal issues and advocating on their behalf. Attorney Marr is licensed and practices in both New Hampshire and Massachusetts. Attorney Marr can be reached at [email protected].