Borrower Liability

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Alabama has joined approximately 17 other states in adopting the Uniform Voidable Transactions Act (the “VTA”) to replace the Uniform Fraudulent Transfer Act (the “FTA”). The VTA will govern transactions occurring on or after January 1, 2019. The VTA clarifies issues that had become points of contention in avoidance actions under the FTA. For example, the new law makes clear that a finding of fraud (as that term is used in common law) is not a prerequisite to avoiding a transfer. The VTA also includes a choice of law provision to help minimize the confusion over which state’s avoidance laws govern a transaction that crossed multiple state lines. The VTA also seeks to modernize avoidance law in part by addressing series limited liability companies.

For a more information regarding the VTA, click here.

Alabama law permits the creation of public corporations known as “improvement districts,” which can then issue bonds that are similar to bonds issued by a municipal corporation. These bonds can be used to finance improvements within the district. In Aliant Bank v. Four Star Investments, Inc., the Alabama Supreme Court allowed claims against the directors of one of these improvement districts to go forward despite claims of immunity. The Court also allowed certain fraud claims to go forward against the directors as well as other related individuals and entities. In addition to authorizing lenders to bring suit, the opinion also serves as a strong reminder that lenders should monitor their collateral and promptly investigate any signs of misconduct.

Continue Reading Alabama Supreme Court: Lender can sue directors of a public improvement district for negligence, breach of fiduciary duty