Commentary on 'Enron and the Long Shadow of Stat. 13 Eliz.': Does the Proper Domain of Fraudulent Conveyance Law Include Deceptive but Fair Transactions?
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Description
The Enron debacle has led many commentators to denounce the American corporate governance regime as an expensive anachronism, chronically incapable of keeping pace with the innovations of sophisticated financiers intent upon gaming the system. Douglas Baird’s contribution to this collection bucks that trend. He argues that whatever the failings of other components of the legal system, ancient principles traditionally embodied in the law of fraudulent conveyances can be relied upon to provide creditors with proper recourse against the players who connived with Enron to swindle them out of their money. In its traditional form, the law of fraudulent conveyances allows a court to set aside transfers made or obligations incurred by a debtor with the intent to ‘delay, hinder or defraud’ creditors. Most fraudulent conveyances involve transfers at an undervalue, that is to say, transactions in which the debtor receives less than the full value of the property that it has transferred or the obligations it has incurred. However, Professor Baird emphasises the potential breadth of fraudulent conveyance law, noting that in its original form—which has been retained in some jurisdictions—a fraudulent conveyance did not necessarily involve a transaction at an undervalue. He argues that in addition to transactions at an undervalue, fraudulent conveyance law can and should encompass transactions between closely related parties that have no legitimate business justification other than to make it difficult for creditors to understand a debtor’s affairs, even if the debtor receives fair value throughout. Professor Baird suggests that it would be not only possible but also positively desirable for the New York bankruptcy court seized with Enron’s chapter 11 proceeding to adopt this expansive definition of a fraudulent conveyance. I am not inclined to challenge Professor Baird’s interpretation of New York law, but I am inclined to challenge his endorsement of the expansive definition of a fraudulent conveyance.
Source Publication
Commercial Law and Commercial Practice
Source Editors/Authors
Sarah Worthington
Publication Date
2003
Recommended Citation
Davis, Kevin E. and Prado, Mariana, "Commentary on 'Enron and the Long Shadow of Stat. 13 Eliz.': Does the Proper Domain of Fraudulent Conveyance Law Include
Deceptive but Fair Transactions?" (2003). Faculty Chapters. 292.
https://gretchen.law.nyu.edu/fac-chapt/292
