The acquisition of the stock or assets of a financially distressed company for less than reasonably equivalent value or fair consideration may give rise to a claim that the transaction constituted a fraudulent conveyance.
Under 11 U.S.C. § 548 (a) (2), a transfer made or obligation incurred is avoidable, regardless of intent, if the debtor receives less than reasonably equivalent value for the transfer made or obligation incurred and the debtor:
(a) was insolvent at the time, or becomes insolvent due to the transfer made or obligation incurred; or
(b) was engaged in a business for which it had or retained unreasonably small capital; or
(c) intended to incur or believed it would incur debts beyond its ability to repay.
The threshold question is: Did the debtor receive reasonably equivalent value for the transfer made or obligation incurred?
If the company conveys assets and subsequently files for protection from creditors under the Code and the claim of fraudulent conveyance is affirmed, the trustee for the debtor may seek damages from the acquirer or may seek to reclaim the asset(s) sold.
A reasonably equivalent value opinion is a written statement by a qualified provider that the consideration received or to be received by the distressed or insolvent transferor is equal to or greater than the fair market value of the assets conveyed or to be conveyed. A reasonably equivalent value opinion may facilitate consummation of a pending transaction or defend a past transaction.