Enforcement mechanisms available to creditors of Delaware corporations may include, inter alia, claims against directors to recover unlawful dividends under Section 174 of the Delaware General Corporation Law (8 Del. C. Section 174), and fraudulent transfer claims against the corporation and transferees including, where Delaware law applies, under Delaware’s Uniform Fraudulent Transfer Act, referred to as DUFTA (6 Del. C. Section 1301). In JPMorgan Chase Bank v. Ballard, C.A. No. 2018-0274-AGB (Del. Ch. July 11, 2019), Chancellor Andre G. Bouchard of the Delaware Court of Chancery addressed three important questions of first impression concerning standing and limitations periods issues under these statutes.BackgroundData Treasury Corp. (DTC) is a Delaware corporation whose primary business allegedly was suing financial institutions for infringement of check-imaging patents.

Because BBIG acknowledged in its briefs that it breached the TSAs, MPSA stated a colorable claim on its breach of contract claim against BBIG.With respect to its fraudulent transfers claim, MPSA had to demonstrate a colorable claim that BBIG intended to engage in fraudulent transfers in the near future. Under the Delaware Uniform Fraudulent Transfer Act, 6 Del. C. § 1301 et. seq., a debtor makes a fraudulent transfer as to a creditor, whose claim arose before the transfer, if (i) the debtor did not receive reasonably equivalent value in exchange for the transfer and was insolvent (i.e., the value of its debts were greater than its assets) at the time of the transfer) or (b) the debtor made the transfer to an insider for antecedent debt and the debtor was insolvent. The Court concluded that BBIG was insolvent.