Abstract
Avoidance of leveraged transactions as fraudulent transfers has proliferated in the aftermath of the recent financial crisis and during the resultant economic recession. When planning leveraged deals, such as buyouts, spinoffs, and intercorporate guarantees, corporate boards rely on solvency opinions prepared by outside financial advisors. If a leveraged transaction is challenged in court by a shareholder, the business judgment rule provides a highly deferential standard of judicial review of corporate decisions, as long the decision was well-informed and not tainted by fraud, illegality, or self-interest. If that same transaction is subject to fraudulent transfer avoidance, however, courts routinely employ a probing analysis, informed by 20/20-hindsight and according no deference to directorial decision making. Highlighting that irreconcilable discrepancy in the standards of judicial review, this Article argues that, under the current legal regime, the most reasonable solution from a transaction- planning perspective is to structure the leveraged deal in reliance on a good-faith solvency opinion procured from an independent expert. This Article reviews examples of post-financial crisis avoidance actions, identifies the most frequently recurring legal criticisms of solvency opinions, and provides tips for ensuring that a solvency opinion obtained contemporaneously with a transaction will minimize risk of avoidance in the future.