This is purely hypothetical, but as a total layman it's gotten my curiosity.

Say Person A owns, say, 50% equity in a company.

Person B, the plaintiff, is awarded that equity as damages in a lawsuit.

Person A writes out a contract after the judgement that transfers all the equity to a trusted family member or friend.

Doesn't that mean that Person B isn't able to get that equity anymore? How are situations like this not commonplace?

Or instead of money, maybe Person A only has $50k in the bank, or some IP, and they quickly "give" a trusted friend that money before the judgement is to be collected by Person B, so now they don't actually have any of that to their name - it's owned by someone else now (even though it's someone that Person A knows will give it back to them when they're ready).

  • 2
    I think the term to look up is fraudulent conveyance. Jan 12, 2018 at 5:28
  • At the moment of deciding that equity/money is to be awarded to B, isn't it known that it is definitely A who owns the equity and not their friend/family member? If it is known, and thereafter A is found to not be the owner anymore, then clearly A commits fraud.
    – Greendrake
    Jan 12, 2018 at 7:10
  • "A" could have seen the judgement coming and sold the equity or got rid of the cash one day before the judgement.
    – gnasher729
    Jan 12, 2018 at 19:13

2 Answers 2


These are called fraudulent transfers and most states have some version of the Uniform Fraudulent Transfer Act (in addition to parallel provisions in bankruptcy).

There are basically two kinds of transactions covered, those with an intent to defraud creditor which can be void even if you are solvent at the time, and those that are fraudulent as a matter of law without regard to intent because they transfer property for less than reasonably equivalent value at a time when someone is, or imminently will be, insolvent. The relevant definitions are very broad.

Transfers to recipients of fraudulent transfers can be unwound even if the recipient is totally innocent and a donee with no knowledge that the transfer was fraudulent.


It would be very unusual that B is awarded "A's equity in company X" as damages. Normally damages are just awarded in cash, and it would be up to A to sell his equity in X to raise the cash, or get a loan, or whatever. This kind of thing would normally only happen if the judge decided that B actually was the owner of that equity, for example and A just has to transfer it. If that was the case, then A should not even be able to sell the equity legally.

A judgement for say $50,000 would be much more likely to happen. In that case, see ohwilleke's anwser.

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