April 27, 2019 Articles

Documents Produced in Discovery That Can Inform an Assessment of Solvency

Certain types may be particularly useful to a financial expert when assessing solvency under three different tests.

By Ann Hughes

When assessing whether a fraudulent transfer has occurred, financial experts are frequently hired to assist counsel in assessing solvency as of a specific transfer date. While publicly available documents like Securities and Exchange Commission filings are often the starting point for such a solvency analysis, they are not always directly contemporaneous with the transfer in question, nor do they necessarily reflect all the facts known or knowable by the parties, especially insiders. Consider for example transfers made on the eve of the financial crisis in early September 2008. Public reporting may only provide financial data before or after the transfer date because financial reporting for the second quarter of the calendar year is typically released in August while financial reporting for the third quarter of the calendar year is typically released in November. The reporting in August 2008 may not fully reflect all available information as of the transfer date in September 2008, and the public reporting in November 2008 could include new information occurring after the transfer date. While helpful, neither may fully present a contemporaneous view pertinent to a solvency analysis for transfers in September 2008.

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