2023 - 2024 LEGISLATURE
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2023 SENATE BILL 450
September 20, 2023 - Introduced by Senators WIMBERGER and BALLWEG,
cosponsored by Representatives TUSLER and O'CONNOR. Referred to
Committee on Financial Institutions and Sporting Heritage.
1 AN ACT to repeal 242.02 (4); to renumber 242.08 (2) (a); to renumber and
2 amend 242.08 (2) (b); to amend chapter 242 (title), 242.01 (3), 242.01 (9),
3 242.01 (12), 242.02 (2), 242.02 (3), 242.04 (title), 242.04 (1) (intro.), 242.05
4 (title), 242.05 (1), 242.05 (2), 242.06 (5) (b), 242.07 (1) (b), 242.08 (title), 242.08
5 (1), 242.08 (2) (intro.), 242.08 (5) (b), 402.402 (3) (b), 411.308 (2) (b), 705.07 (2),
6 815.18 (10) and 893.425; and to create 242.01 (6m), 242.01 (8m), 242.01 (10m),
7 242.01 (11m), 242.04 (3), 242.05 (3), 242.08 (2) (am) 2. b. and (bm), 242.08 (7)
8 and (8), 242.094, 242.096, 242.12 and 242.13 of the statutes; relating to:
9 adopting modifications to, and renaming, the Uniform Fraudulent Transfer
10 Act.
Analysis by the Legislative Reference Bureau
This bill adopts the Uniform Law Commission's 2014 modifications to the
Uniform Fraudulent Transfer Act, including its renaming as the Uniform Voidable
Transactions Law.
Current law incorporates the Uniform Fraudulent Transfer Act (1984), adopted
in this state in 1988. Under current law, a creditor may challenge certain transfers
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SENATE BILL 450
of property or obligations incurred by a debtor that may deprive the creditor of assets
that would otherwise be available to satisfy debts if the debtor is or is about to become
insolvent, such as the transfer of the debtor's assets to a family member or corporate
insider. A “creditor” is any person who has a claim and a “debtor” is any person who
is liable on a claim. A “claim” is a right to payment, whether it arises by contract,
tort, or otherwise, and a “debt” means liability on a claim. There are four basic
situations in which the creditor may challenge a transfer made or obligation incurred
by the debtor (hereafter referred to as voidable transactions):
1. If the transfer is made or obligation incurred by the debtor to intentionally
hinder, delay, or defraud the creditor.
2. If the debtor transfers property or incurs the obligation without receiving a
reasonably equivalent value in exchange, and the debtor engages in business or a
transaction for which the debtor's remaining assets are unreasonably small or the
debtor intends to incur debts beyond the debtor's ability to pay as they become due.
3. If there is an existing creditor-debtor relationship, the debtor makes a
transfer or incurs an obligation without receiving a reasonably equivalent value in
exchange, and the debtor was insolvent at that time or the debtor became insolvent
as a result of the transfer or obligation. 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. A debtor who is
generally not paying debts as they become due is presumed to be insolvent.
4. If the debtor makes a transfer to an insider for a preexisting debt, the debtor
was insolvent at the time of the transfer, and the insider had reasonable cause to
believe that the debtor was insolvent. “Insider” is a defined term and includes
certain relatives of an individual debtor and officers and directors of a corporate
debtor.
Current law specifies various remedies available to a creditor if a voidable
transaction has occurred. These remedies include the avoidance of the transfer or
obligation to the extent necessary to satisfy the creditor's claim, attachment against
the asset transferred or other property of the person to whom the asset was
transferred, an injunction, and appointment of a receiver.
The bill adopts the ULC's 2014 modifications to the uniform act, including the
following:
1. The bill renames the provisions of the act to be the Uniform Voidable
Transactions Law and replaces the term “fraudulent” with “voidable” in various
provisions. The ULC specified that these changes were not intended to have
substantive effect and were made to more accurately convey the effect of current law,
which frequently uses the term “fraudulent” but does not actually require fraudulent
activity as a condition to its application.
2. The bill creates provisions that specify, for claims and defenses related to
voidable transactions, which party has the burden of proof and establishes the
standard of proof as a preponderance of the evidence.
3. The bill creates a choice-of-law rule for courts to determine which state's
voidable transactions law applies in a given case. Under the bill, a court must apply
the law of the state where the debtor is located at the time the transfer is made or
obligation incurred.
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SENATE BILL 450
4. The bill eliminates a provision that applies a different standard for
determining insolvency for a partnership, so that the general insolvency standard
applies to partnerships.
The people of the state of Wisconsin, represented in senate and assembly, do
enact as follows:
1 SECTION 1. Chapter 242 (title) of the statutes is amended to read:
2 CHAPTER 242
3 UNIFORM FRAUDULENT TRANSFER ACT
4 VOIDABLE TRANSACTIONS LAW
5 SECTION 2. 242.01 (3) of the statutes is amended to read:
6 242.01 (3) “Claim" “Claim,” except as used in “claim for relief,” means a right
7 to payment, whether or not the right is reduced to judgment, liquidated,
8 unliquidated, fixed, contingent, matured, unmatured, disputed, undisputed, legal,
9 equitable, secured or unsecured.
10 SECTION 3. 242.01 (6m) of the statutes is created to read:
11 242.01 (6m) “Electronic" means relating to technology having electrical,
12 digital, magnetic, wireless, optical, electromagnetic, or similar capabilities.
13 SECTION 4. 242.01 (8m) of the statutes is created to read:
14 242.01 (8m) “Organization” means a person other than an individual.
15 SECTION 5. 242.01 (9) of the statutes is amended to read:
16 242.01 (9) “Person" means an individual, estate, partnership, corporation,
17 limited liability company, association, organization, trust, business or nonprofit
18 entity, public corporation, government or governmental subdivision or, agency,
19 business trust, estate, trust or instrumentality, or any other legal or commercial
20 entity.
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SENATE BILL 450 SECTION 6
1 SECTION 6. 242.01 (10m) of the statutes is created to read:
2 242.01 (10m) “Record" means information that is inscribed on a tangible
3 medium or that is stored in an electronic or other medium and is retrievable in
4 perceivable form.
5 SECTION 7. 242.01 (11m) of the statutes is created to read:
6 242.01 (11m) “Sign" means, with present intent to authenticate or adopt a
7 record, any of the following:
8 (a) To execute or adopt a tangible symbol.
9 (b) To attach to or logically associate with the record an electronic symbol,
10 sound, or process.
11 SECTION 8. 242.01 (12) of the statutes is amended to read:
12 242.01 (12) “Transfer" means every mode, direct or indirect, absolute or
13 conditional, voluntary or involuntary, of disposing of or parting with an asset or an
14 interest in an asset, and includes payment of money, release, lease, license, and
15 creation of a lien or other encumbrance.
16 SECTION 9. 242.02 (2) of the statutes is amended to read:
17 242.02 (2) A debtor is insolvent if, at a fair valuation, the sum of the debtor's
18 debts is greater than all the sum of the debtor's assets at a fair valuation.
19 SECTION 10. 242.02 (3) of the statutes is amended to read:
20 242.02 (3) A debtor who is generally not paying the debtor's debts as they
21 become due other than as a result of a bona fide dispute is presumed to be insolvent.
22 The presumption imposes on the party against which the presumption is directed the
23 burden of proving that the nonexistence of insolvency is more probable than its
24 existence.
25 SECTION 11. 242.02 (4) of the statutes is repealed.
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SENATE BILL 450 SECTION 12
1 SECTION 12. 242.04 (title) of the statutes is amended to read:
2 242.04 (title) Transfers fraudulent Transfer or obligation voidable as
3 to present and or future creditors creditor.
4 SECTION 13. 242.04 (1) (intro.) of the statutes is amended to read:
5 242.04 (1) (intro.) A transfer made or obligations obligation incurred by a
6 debtor is fraudulent voidable as to a creditor, whether the creditor's claim arose
7 before or after the transfer was made or the obligation was incurred, if the debtor
8 made the transfer or incurred the obligation:
9 SECTION 14. 242.04 (3) of the statutes is created to read:
10 242.04 (3) A creditor making a claim for relief under sub. (1) has the burden
11 of proving the elements of the claim for relief by a preponderance of the evidence.
12 SECTION 15. 242.05 (title) of the statutes is amended to read:
13 242.05 (title) Transfers fraudulent Transfer or obligation voidable as
14 to present creditors creditor.
15 SECTION 16. 242.05 (1) of the statutes is amended to read:
16 242.05 (1) A transfer made or obligation incurred by a debtor is fraudulent
17 voidable as to a creditor whose claim arose before the transfer was made or the
18 obligation was incurred if the debtor made the transfer or incurred the obligation
19 without receiving a reasonably equivalent value in exchange for the transfer or
20 obligation and the debtor was insolvent at that time or the debtor became insolvent
21 as a result of the transfer or obligation.
22 SECTION 17. 242.05 (2) of the statutes is amended to read:
23 242.05 (2) A transfer made by a debtor is fraudulent voidable as to a creditor
24 whose claim arose before the transfer was made if the transfer was made to an
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1 insider for an antecedent debt, the debtor was insolvent at that time and the insider
2 had reasonable cause to believe that the debtor was insolvent.
3 SECTION 18. 242.05 (3) of the statutes is created to read:
4 242.05 (3) Subject to s. 242.02 (3), a creditor making a claim for relief under
5 sub. (1) or (2) has the burden of proving the elements of the claim for relief by a
6 preponderance of the evidence.
7 SECTION 19. 242.06 (5) (b) of the statutes is amended to read:
8 242.06 (5) (b) If evidenced by a writing record, when the writing executed
9 record signed by the obligor is delivered to or for the benefit of the obligee.
10 SECTION 20. 242.07 (1) (b) of the statutes is amended to read:
11 242.07 (1) (b) An attachment or other provisional remedy against the asset
12 transferred or other property of the transferee in accordance with if available under
13 chs. 810 to 813 or other applicable law.
14 SECTION 21. 242.08 (title) of the statutes is amended to read:
15 242.08 (title) Defenses, liability, and protection of transferee or obligee.
16 SECTION 22. 242.08 (1) of the statutes is amended to read:
17 242.08 (1) A transfer or obligation is not voidable under s. 242.04 (1) (a) against
18 a person who took in good faith and for a reasonably equivalent value given the
19 debtor or against any subsequent transferee or obligee.
20 SECTION 23. 242.08 (2) (intro.) of the statutes is amended to read:
21 242.08 (2) (intro.) Except as otherwise provided in this section, to To the extent
22 a transfer is voidable in an action by a creditor under s. 242.07 (1) (a), all of the
23 following rules apply:
24 (am) Except as otherwise provided in this section, the creditor may recover
25 judgment for the value of the asset transferred, as adjusted under sub. (3), or the
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1 amount necessary to satisfy the creditor's claim, whichever is less. The judgment
2 may be entered against any of the following:
3 SECTION 24. 242.08 (2) (a) of the statutes is renumbered 242.08 (2) (am) 1.
4 SECTION 25. 242.08 (2) (am) 2. b. and (bm) of the statutes are created to read:
5 242.08 (2) (am) 2. b. An immediate or mediate good faith transferee of a person
6 described in subd. 2. a.
7 (bm) Recovery pursuant to s. 242.07 (1) (a) or (2) of or from the asset transferred
8 or its proceeds, by levy or otherwise, is available only against a person described in
9 par. (am) 1. or 2.
10 SECTION 26. 242.08 (2) (b) of the statutes is renumbered 242.08 (2) (am) 2. and
11 amended to read:
12 242.08 (2) (am) 2. Any subsequent An immediate or mediate transferee of the
13 first transferee, other than a any of the following:
14 a. A good faith transferee who took for value or from any subsequent transferee.
15 SECTION 27. 242.08 (5) (b) of the statutes is amended to read:
16 242.08 (5) (b) Enforcement of a security interest in compliance with ch. 409,
17 other than acceptance of collateral in full or partial satisfaction of the obligation it
18 secures.
19 SECTION 28. 242.08 (7) and (8) of the statutes are created to read:
20 242.08 (7) The following rules determine the burden of proving matters
21 referred to in this section:
22 (a) A party that seeks to invoke sub. (1), (4), (5), or (6) has the burden of proving
23 the applicability of that subsection.
24 (b) Except as otherwise provided in pars. (c) and (d), the creditor has the burden
25 of proving each applicable element of sub. (2) or (3).
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1 (c) The transferee has the burden of proving the applicability to the transferee
2 of sub. (2) (am) 2. a. or b.
3 (d) A party that seeks adjustment under sub. (3) has the burden of proving the
4 adjustment.
5 (8) The standard of proof required to establish matters referred to in this
6 section is preponderance of the evidence.
7 SECTION 29. 242.094 of the statutes is created to read:
8 242.094 Governing law. (1) In this section, the following rules determine a
9 debtor's location:
10 (a) A debtor who is an individual is located at the individual's principal
11 residence.
12 (b) A debtor that is an organization and has only one place of business is located
13 at its place of business.
14 (c) A debtor that is an organization and that has more than one place of
15 business is located at its chief executive office.
16 (2) A claim for relief in the nature of a claim for relief under this chapter is
17 governed by the local law of the jurisdiction in which the debtor is located when the
18 transfer is made or the obligation is incurred.
19 SECTION 30. 242.096 of the statutes is created to read:
20 242.096 Application to series organization. (1) In this section:
21 (a) “Protected series” means an arrangement, however denominated, created
22 by a series organization that, pursuant to the law under which the series
23 organization is organized, has the characteristics set forth in par. (b).
24 (b) “Series organization” means an organization that, pursuant to the law
25 under which it is organized, has the following characteristics:
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1 1. The organic record of the organization provides for creation by the
2 organization of one or more protected series, however denominated, with respect to
3 specified property of the organization, and for records to be maintained for each
4 protected series that identify the property of or associated with the protected series.
5 2. Debt incurred or existing with respect to the activities of, or property of or
6 associated with, a particular protected series is enforceable against the property of
7 or associated with the protected series only, and not against the property of or
8 associated with the organization or other protected series of the org