Valuation experts spar over fraudulent transfer matter

BVWireIssue #230-1
November 3, 2021

goodwill, cash flow, fraudulent transfer, insolvency, balance sheet, reasonably equivalent value, bankruptcy code, reasonably foreseeable

In the bankruptcy court, two valuation experts squared off in a case where the trustee argued that a cash transfer by the debtor was a constructively fraudulent transfer under the bankruptcy code. The expert for the trustee was not able to show that the debtor was insolvent at the date of the transfer or became insolvent as a result of the transfer. The expert did not perform a balance sheet insolvency test but noted that, while total assets were about $20 million greater than liabilities, the bulk of the assets consisted of goodwill and was likely significantly overstated. The defendant’s expert did perform a balance sheet test and opined that the company was solvent at the date of the transaction. He valued the business as a going concern, which includes goodwill, and he offered credible evidence that the goodwill represented the results of a competitive market transaction.

The case is Yaquinto v. Thompson St. Capital Partners (In re Stone Panels, Inc.), 2021 Bankr. LEXIS 2635; 2021 WL 4436166 (Sept. 27, 2021). A case digest and full court opinion are available on the BVLaw platform.

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