February 15, 2018 flightdigital

New section 43(a) of the Nevis limited liability company ordinance: fraudulent transfer

As readers of INsight know, recently the Nevis Assembly amended its Limited Liability Company and International Exempt Trust legislation. The amendments, which became effective on 1 July 2015, make what were already exemplary statutes that much better.

The amendments made to §43 of the Ordinance clarify available remedies where a creditor seeks to recover from an LLC or its members. In addition to reworking §43, Nevis added a completely new §43(A) which extends to LLCs the protections that most attorneys practicing in this field will recognize as the ‘deeming provisions’ previously afforded settlements upon Trusts. (See the Nevis International Exempt Trust Ordinance, §24 et seq.) Like the Trust Ordinance, the new LLC language essentially ‘deems’ what is and what is not fraudulently transferred to an LLC, and the remedies if fraudulent transfer is found.

Some of the highlights are as follows (All citations are to §43(A) of the Nevis Limited Liability Company (Amendment) Ordinance, 2015):

  •  To recover property from an LLC, the creditor must prove beyond reasonable doubt that property disposed to an LLC was done so with:

(a) intent to defraud such creditor; and

(b) at the time of such establishment or disposition, such establishment or disposition rendered such member insolvent.

Even if the creditor can satisfy (a) and (b) above, the establishment or disposition shall not be void or voidable and the limited liability company shall be liable only to the extent of the interest that such member had in the property prior to such establishment or disposition. §43(A)(1).

  • Transferring the property to the LLC is not fraudulent against a creditor:

(a) if established or the disposition takes place after the expiration of 2 years from the date of that creditor’s cause of action accruing; or

(b) Where established or the disposition takes place before the expiration of 2 years from the date that the creditor’s cause of action accrued, but such creditor fails to commence such action before the expiration of 1 year from the date such establishment or disposition took place. §43(A)(3).

  • Disposition of property to the limited liability company shall not be fraudulent as against a creditor if the establishment or disposition took place before such creditor’s cause of action accrued or had arisen. §43(A)(4).
  • Intent to defraud may not be imputed simply because the LLC was established within 2 years of the date the cause of action accrued or because the putative debtor retains the power of management. §43(A)(5).
  • The burden of proving intent to defraud is on the creditor. §43(A)(7).
  • In the event that a creditor is able to navigate §43(A)(1) then if neither the limited liability company nor any member has acted in bad faith, the member and the LLC shall have a joint first charge over LLC property at issue of an amount equal to the entire costs of defense (not merely costs allowed by the Court). §43(A)(12).
  • A bond of ECD100,000 must be posted before bringing any cause of action under the ordinance. §43(A)(16).

I would encourage anyone practicing in this field to give the new statute a ‘once-over’.  The verbiage of the statute, along with most other relevant legislation in Nevis and the Cook Islands can be found here at our website: http://www.southpactrust.com/southpac-publications/legal-references/.

As always I, or any of the attorneys at Southpac Trust are happy to discuss how to utilize these new provisions for your benefit or your clients.  If you are interested in taking advantage of the recent updates in this legislation you can contact me and I can assist you to re-domicile an existing entity, or establish a new entity in Nevis.

Craig Redler – CRedler@southpactrust.com
Attorney at Law, Client Services Manager

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