Under the Texas Uniform Fraudulent Transfer Act (TUFTA) codified in Texas Business & Commerce Code § 24.005, a fraudulent transfer occurs when a debtor transfers valuable property or assets to another party in order to prevent having that property seized as payment for the debt. TUFTA applies to both individual and corporate/business debtors, so businesses may be involved in litigation pursuant to TUFTA on either side of the equation, as debtors or as the creditors trying to collect on those debts. Fraudulent transfers claims often arise in connection with business closures, judgments, asset sales, restructuring, and insolvency proceedings.
At the same time, most businesses will at some point need employees, contractors, and others who may need access to the trade secret knowledge in order to efficiently perform their work for the company. In these instances, a non-disclosure agreement (NDA) acts as a sort of “frontline defense” against trade secret theft. NDAs allow the business to share sensitive information with employees, contractors, vendors, and business partners. The NDA serves as first line protection against trade secret misappropriation: first, by creating an enforceable contractual obligation, allowing businesses to pursue breach of contract claims if confidential information is disclosed or misused; and second, by creating evidence that can later be used in court to show that the business took “reasonable” measures to protect its trade secrets from improper disclosures.
Collecting payment or partial compensation from an insolvent debtor can also be a frustrating endeavor, particularly when assets appear to have been transferred to related parties, new entities, or third parties shortly before or after judgment or default. Often, whether the debtor is an individual or another business can make a difference in the size of the debt. In either case, however, the presence of other creditors and their claims can become additional variables that further complicate an already less-than-ideal situation. A conversation with an attorney may help you to weigh your options for collecting on the debt and prepare your company for navigating the process. TUFTA may allow creditors to pursue remedies such as avoidance of the fraudulent transfer, recovery of the transferred assets or their value, injunction preventing further transfers, and claims against transferees in certain circumstances.
