215 ILCS 5/204
2021 Illinois Compiled Statutes|Chapter 215 - INSURANCE|215 ILCS 5/ - Illinois Insurance Code.|Article XIII - Rehabilitation, Liquidation, Conservation And Dissolution Of Companies

 (from Ch. 73, par. 816)Sec. 204. Prohibited and voidable transfers and liens.(a)(1) A preference is a transfer of any of the property of a company  to or for the benefit of a creditor, for or on account of an antecedent  debt, made or suffered by the company within 2 years before  the  filing of  a complaint under this Article, the effect of which may be to  enable the creditor to obtain a greater percentage of this debt than  another creditor of the same class would receive.(2) Any preference may be avoided by the Director as rehabilitator,  liquidator, or conservator if:(A) the company was insolvent at the time of the     transfer; and(B) the transfer was made within 4 months before the     filing of the complaint; or the creditor receiving it was (i) an officer, or any employee or attorney or other person who was in fact in a position of comparable influence in the company to an officer whether or not that person held such a position, (ii) any shareholder holding, directly or indirectly, more than 5% of any class of any equity security issued by the company, or (iii) any other person, firm, corporation, association, or aggregation of individuals with whom the company did not deal at arm's length.(3) Where the preference is voidable, the Director as rehabilitator,  liquidator, or conservator may recover the property or, if it has been  converted, its value from any person who has received or converted the  property; except where a bona fide purchaser or lienor has given less than  fair equivalent value, the purchaser or lienor shall have a lien upon the  property to the extent of the consideration actually given.  Where a  preference by way of lien or security title is voidable, the court may on  due notice order the lien or title to be preserved for the benefit of the  estate, in which event the lien or title shall pass to the Director as  rehabilitator or liquidator.(b)(1) A transfer of property other than real property shall be deemed  to be made or suffered when it becomes so far perfected that no subsequent  lien obtainable by legal or equitable proceedings on a simple contract  could become superior to the rights of the transferee.(2) A transfer of real property shall be deemed to be made or suffered  when it becomes so far perfected that no subsequent bona fide purchaser  from the company could obtain rights superior to the rights of the transferee.(3) A transfer that creates an equitable lien shall not be deemed to be  perfected if there are available means by which a legal lien could be created.(4) A transfer not perfected before the filing of a complaint shall  be deemed to be made immediately before the filing of the complaint.(5) The provisions of this subsection apply whether or not there are or  were creditors who might have obtained liens or persons who might have  become bona fide purchasers.(c) For purposes of this Section:(1) A lien obtainable by legal or equitable     proceedings upon a simple contract is one arising in the ordinary course of the proceedings upon the entry or docketing of a judgment or decree, or upon attachment, garnishment, execution, or like process, whether before, upon, or after judgment or decree and whether before or upon levy.  It does not include liens that, under applicable law, are given a special priority over other liens that are prior in time.(2) A lien obtainable by legal or equitable     proceedings could become superior to the rights of a transferee, or a purchaser could obtain rights superior to the rights of a transferee within the meaning of subsection (b) of this Section, if such consequences would follow only from the lien or purchase itself, or from the lien or purchase followed by any step wholly within the control of the respective lienholder or purchaser, with or without the aid of ministerial action by public officials.  A lien could not, however, become superior and a purchase could not create superior rights for the purpose of subsection (b) of this Section through any acts subsequent to an obtaining of the lien or subsequent to a purchase that requires the agreement or concurrence of any third party or that requires any further judicial action or ruling.(d) A transfer of property for or on account of a new and  contemporaneous consideration which is deemed under subsection (b) of this  Section to be made or suffered after the transfer because of delay in  perfecting it does not thereby become a transfer for or on account of an  antecedent debt if any acts required by the applicable law to be performed  in order to perfect the transfer as against liens or bona fide purchasers'  rights are performed within 21 days or any period expressly allowed  by the law, whichever is less.  A transfer to secure a future loan, if the  loan is actually made, or a transfer that becomes security for a future  loan, shall have the same effect as a transfer for or on account of a new  and contemporaneous consideration.(e) If any lien deemed voidable under part (2) of subsection  (a) of this Section has been dissolved by the furnishing of a bond or other  obligation, the surety on which has been indemnified directly or indirectly  by the transfer of or the creation of a lien upon any property of a company  before the filing of a complaint under this Article, the indemnifying  transfer or lien shall also be deemed voidable.(f) The property affected by any lien deemed voidable under subsections  (a) and (e) of this Section shall be discharged from the lien, and that  property and any of the indemnifying property transferred to or for the  benefit of a surety shall pass to the Director as rehabilitator or  liquidator, except that the court may, on due notice, order any such lien to  be preserved for the benefit of the estate and the court may direct that  such conveyance be executed as may be proper  or adequate to  evidence the title of the Director as  rehabilitator or liquidator.(g) The court shall have summary jurisdiction over any proceeding by the  Director as rehabilitator, liquidator, or conservator to hear and determine  the rights of any parties under this Section. Reasonable notice of any  hearings in the proceeding shall be given to all parties in interest,  including the obligee of a releasing bond or other life obligation. Where an  order is entered for the recovery of indemnifying property in kind  or for the avoidance of  an indemnifying lien, the court, upon application of any party in interest,  shall in the same proceeding ascertain the value of the property or lien,  and if the value is less than the amount for which the property is  indemnity or than the amount of the lien, the transferee or lienholder may  elect to retain the property or lien upon payment of its value, as  ascertained by the court, to the Director as rehabilitator, liquidator, or  conservator, within such reasonable times as the court shall fix.(h) The liability of the surety under the releasing bond or other similar  obligation shall be discharged to the extent of the value of the  indemnifying property recovered or the indemnifying lien nullified and  avoided by the Director as  rehabilitator, liquidator, or conservator.  Where the property is retained  under subsection (g) of this Section, the liability shall be discharged to  the extent of the amount paid to the  Director as rehabilitator, liquidator, or conservator.(i) If a creditor has been preferred and thereafter in good faith gives  the company further credit without security of any kind, for property which  becomes a part of the company's estate, the amount of the new credit  remaining unpaid at the time of the petition may be set off against the  preference which would otherwise be recoverable from the creditor.(j) If a company shall, directly or indirectly, within 4 months  before the filing of a complaint under this Article, or at any time in  contemplation of such a proceeding, pay money or transfer property to any  attorney for services rendered or to be rendered, the transactions may be  examined by the court on its own motion or shall be examined by the court  on petition of the  Director as rehabilitator, liquidator, or conservator and shall be held  valid only to the extent of a reasonable amount to be determined by the  court, and the excess may be recovered by the Director as rehabilitator,  liquidator, or conservator for the benefit of the estate provided that where  the attorney is in a position of influence in the company or an affiliate  thereof payment of any money or the transfer of any property to the  attorney for services rendered or to be rendered shall be governed by  item (B) of part (2) of subsection (a) of this Section.(k)(1) An officer, director, manager, employee,  shareholder,  member, subscriber,  attorney, or other person acting on behalf of the company who  knowingly  participates in giving any preference when that officer, director, manager,  employee,  shareholder, member, subscriber, attorney, or other person has reasonable  cause to believe the company is or is about to become insolvent at the time  of the preference shall be personally liable to the Director as  rehabilitator, liquidator, or conservator for the amount of the preference.  There is a reasonable cause to so believe  if the transfer was made within 4 months before the date of filing of the  complaint.(2) A person receiving any property from the company or the  benefit  thereof as a preference voidable under subsection (a) of this Section  shall be personally liable therefor and shall be bound to account to the  Director as rehabilitator, liquidator, or conservator.(3) Nothing in this Section shall prejudice any other claim by the  Director as rehabilitator, liquidator, or conservator against any person.(l) For purposes of this Section, the company is presumed to have been  insolvent on and during the 4 month period immediately preceding the date  of the filing of the complaint.(m) The Director as rehabilitator, liquidator, or conservator may not  avoid a transfer under this Section to the extent that the transfer was:(A) Intended by the company and the creditor to or     for whose benefit the transfer was made to be a contemporaneous exchange for new value given to the company, and was in fact a substantially contemporaneous exchange; or(B) In payment of a debt incurred by the company in     the ordinary course of business or financial affairs of the company and the transferee; made in the ordinary course of business or financial affairs of the company and the transferee; and made according to ordinary business terms;(C) In the case of a transfer by a company where the     Director has determined that an event described in Section 35A-25 or 35A-30 has occurred, specifically approved by the Director in writing pursuant to this subsection, whether or not the company is in receivership under this Article.  Upon approval by the Director, such a transfer cannot later be found to  constitute a prohibited or voidable transfer based solely upon a deviation from the statutory payment priorities established by law for any subsequent receivership; or(D)      Of money or other property arising under or     in connection with any Federal Home Loan Bank security agreement or any pledge, security, collateral or guarantee agreement, or any other similar arrangement or credit enhancement relating to a Federal Home Loan Bank security agreement.(n) The Director as rehabilitator, liquidator, or conservator may avoid  any transfer of or lien upon the property of a company that the estate of the  company or a policyholder, creditor, member, or stockholder of the company  may have avoided, and the Director as rehabilitator, liquidator, or conservator  may recover and collect the property so transferred or its value from the  person to whom it was transferred unless the property was transferred to a  bona fide holder for value before the filing of the complaint.  The Director  as rehabilitator, liquidator, or conservator shall be deemed a creditor for  purposes of pursuing claims under the Uniform Fraudulent Transfer Act.(o)     Notwithstanding any provision of this Article to the contrary, a Federal Home Loan Bank shall not be stayed, enjoined, or prohibited from exercising or enforcing any right or cause of action regarding collateral pledged under any security agreement or any pledge, security, collateral or guarantee agreement, or any other similar arrangement or credit enhancement relating to a Federal Home Loan Bank security agreement. (Source: P.A. 100-89, eff. 8-11-17.)