Sec. 35B-40. Resulting company liabilities.

576 words·~3 min read·/il/chapter-215/act-5/35b-40

A research copy — for the controlling text, always check the official state or federal source. Not legal advice.

(a)Except as otherwise expressly provided in this Section, when a division becomes effective, each resulting company is responsible, automatically, by operation of law, for:

(1)individually, the liabilities, including policy liabilities, that the resulting

company issues, undertakes, or incurs in its own name after the division;

(2)individually, the liabilities, including policy liabilities, of the dividing company

that are allocated to or remain the liability of the resulting company to the extent specified in the plan of division; and

(3)jointly and severally with the other resulting companies, the liabilities, including

policy liabilities, of the dividing company that are not allocated by the plan of division.

(b)Except as otherwise expressly provided in this Section, when a division becomes effective, no resulting company is responsible for or shall have any liability or obligation in respect of:

(1)any liabilities, including policy liabilities, that another resulting company

issues, undertakes, or incurs in its own name after the division; or

(2)any liabilities, including policy liabilities, of the dividing company that are

allocated to or remain the liability of another resulting company in accordance with the plan of division.

(c)If a provision of a debt security, note, or similar evidence of indebtedness for money borrowed, whether secured or unsecured, indenture or other contract relating to indebtedness, or a provision of any other type of contract other than an insurance policy, annuity, or reinsurance agreement, that was issued, incurred, or executed by the domestic stock company before requires the consent of the obligee to a merger of the dividing company or treats the merger as a default, that provision applies to a division of the dividing company as if the division was a merger.

(d)If a division breaches a contractual obligation of the dividing company at the time the division becomes effective, all of the resulting companies are liable, jointly and severally, for the contractual breach, but the validity and effectiveness of the division, including, without limitation, the allocation of liabilities in accordance with the plan of division, shall not be affected by the contractual breach.

(e)A direct or indirect allocation of capital, surplus, assets, or liabilities, including policy liabilities, in a division shall occur automatically, by operation of law, and shall not be treated as a distribution or transfer for any purpose with respect to either the dividing company or any of the resulting companies.

(f)Liens, security interests, and other charges on the capital, surplus, or other assets of the dividing company are not impaired by the division, notwithstanding any otherwise enforceable allocation of liabilities, including policy liabilities, of the dividing company.

(g)If the dividing company is bound by a security agreement governed by Article 9 of the Uniform Commercial Code as enacted in this State or in any other jurisdiction, and the security agreement provides that the security interest attaches to after-acquired collateral, each resulting company is bound by the security agreement.

(h)An allocation of a policy or other liability does not:

(1)except as provided in the plan of division and specifically approved by the

Director, affect the rights that a policyholder or creditor has under other law in respect of the policy or other liability, except that those rights are available only against a resulting company responsible for the policy or liability under this Section; or

(2)release or reduce the obligation of a reinsurer, surety, or guarantor of the policy

or liability.