Fraudulent conveyance

A buyer of business assets meets this term when the seller owes money and a later challenge could reach the sale. Ontario’s Act says every conveyance of real or personal property made with intent to defeat, hinder, delay or defraud creditors or others of their just and lawful actions, suits, debts, accounts, damages, penalties or forfeitures is void as against those persons and their assigns.

What the Act carves out

The Act says that rule does not apply to property conveyed upon good consideration and in good faith to a person who, at the time, had no notice or knowledge of the intent. It also says no lawful mortgage made in good faith, without fraud, and upon good consideration is impeached or impaired by force of the Act. Read the full text before relying on either point.

What to check or ask

• Whether the seller owed creditors when it sold, and what the buyer was told about those debts, since the carve-out turns on notice or knowledge of the intent
• What consideration was paid, because the carve-out speaks of good consideration
• Whether Ontario’s Assignments and Preferences Act also applies: subject to its section 5, it separately addresses transfers made by a person who is insolvent, unable to pay debts in full or knows of being on the eve of insolvency, with intent to defeat, hinder, delay or prejudice creditors

See how to check title and liens when buying from an insolvency and transfer at undervalue. This entry covers Ontario only; check the rules where you are.