(215 ILCS 5/34.1) (from Ch. 73, par. 646.1)
(Section scheduled to be repealed on January 1, 2027)
Sec. 34.1.
Subordinated indebtedness.
A company organized under this Article may borrow or assume a liability
for the repayment of a sum of money under a written agreement. The loan
or advance shall bear interest either (1) at a fixed rate not exceeding
the corporate base rate as reported by the largest bank (measured by assets)
with its head office located in Chicago, Illinois, in effect on the first
business day of the month in which the loan document is executed, plus 3% per
annum or (2) at a variable rate equal to the corporate base rate determined on
the first business day of each month during the term of the loan plus 2% per
annum. In no event shall the variable interest rate for any month exceed the
initial rate for the loan or advance by more than 10% per annum. The insurer
shall elect at the time of execution of the loan or advance agreement whether
the interest rate is to be fixed or floating for the term of the agreement.
The loan and interest shall be repaid only out of surplus of the company in
excess of the minimum surplus as is stipulated in and by the agreement. The
agreement shall first be submitted to and approved by not less than a majority
of the voting shares of the company and the Director. Repayment of principal or
payment of interest may be made only with the approval of the Director when he
is satisfied that the financial condition of the company warrants that action,
but approval may not be withheld if the company shall have and submit
satisfactory evidence of surplus of not less than the amount stipulated in the
repayment of principal or interest payment clause of the agreement. No loan or
advance made under this Section or interest accruing thereon shall form a part
of the legal liabilities of the company until authorized for payment by the
Director but until that authorization all statements published by the company
or filed with the Director shall show the amount thereof then remaining unpaid
as a special surplus account. Subject to approval of the Director, the
interest rate on all subordinated surplus debentures existing on the effective
date of this amendatory Act of 1991 can be amended to the rate as permitted in
this Section with the mutual agreement of the company and the subordinated
surplus debenture holder. Nothing in this Section shall be construed to mean
that a company may not otherwise borrow money, but the amount so borrowed with
accrued interest thereon shall be carried by the company as a liability.
(Source: P.A. 87-777; 87-1090.)
|