business for which it had unreasonably small capital, or intended to incur debts beyond
its ability to pay.
Both state law and federal law provide a panoply of remedies in order to protect
creditors injured by a wrongful conveyance, including avoidance, attachment,
injunctions, appointment of a receiver, and virtually any other relief the circumstances
may require.84 In a fraudulent conveyance suit challenging the reorganization, Trenwick
itself would have been a proper defendant — as the supposed beneficiary of the
fraudulent transfers from Trenwick America — and the creditors of Trenwick America
would have had direct standing to prosecute an action.
The law of fraudulent conveyance is, of course, not the only or primary protection
for creditors. The financial creditors of companies like Trenwick and Trenwick America
know how to craft contractual protections that restrict their debtors’ use of assets. In a
situation when creditors cannot state a claim that such contractual protections have been
breached and cannot prove a fraudulent conveyance claim, the creditors’ frustration does
not mean that there is a gap in the remedial fabric of the business law that equity should
fill. Rather, it means that we remain a society that recognizes that reward and risk go
together, and that there will be situations when business failure results in both equity and
debt-holders losing some money. As this court has said:
Having complied with all legal obligations owed to the firm’s creditors, the board would . . . ordinarily be free to take economic risk for the benefit of the firm’s equity owners, so long as the directors comply with their
. § 1307; 11 U.S.C. §§ 544, 548. Other common remedies available to injured
creditors are replevin, sequestration, constructive trust, equitable liens, and garnishment.