CHAPTER 3.1. LIQUIDATION OF FINANCIAL INSTITUTIONS
IC 28-1-3.1
Chapter 3.1. Liquidation of Financial Institutions
IC 28-1-3.1-1
Definitions
Sec. 1. (a) The definitions set forth in this section applythroughout this chapter.
(b) "Federal deposit insurance agency" means an agency orinstrumentality of the United States that insures to any extent thedeposits of a financial institution, including the Federal DepositInsurance Corporation or the National Credit Union Administration.
(c) "Insolvent" means a financial institution that:
(1) is incapable of meeting the demands of creditors ordepositors on a timely basis; or
(2) has liabilities in excess of the total value of its assets asdetermined by the department.
(d) "Receiver" means a:
(1) federal deposit insurance agency;
(2) private deposit insurer of credit unions; or
(3) designated agent of the department.
(e) "Receivership court" means the court that the department hasfiled the notice of possession with, under this chapter.
As added by P.L.141-1984, SEC.2. Amended by P.L.8-1991, SEC.10;P.L.262-1995, SEC.3.
IC 28-1-3.1-2
Authority of department to take possession of business andproperty; conditions; duties of department
Sec. 2. (a) The department may take possession of the businessand property of any financial institution except a consumer financeinstitution licensed to make supervised or regulated loans underIC 24-4.5, whenever it appears to the department that the financialinstitution:
(1) is insolvent or in imminent danger of insolvency;
(2) is in an unsafe or unsound condition;
(3) has refused to pay its deposits or obligations in accordancewith the terms under which those deposits or obligations wereincurred;
(4) has refused to submit its records and affairs for inspectionor examination by the department or federal authorities;
(5) has violated any court order, statute, rule, or regulation ofthe department or its articles of incorporation and thatcontinued control of its own affairs threatens injury to thepublic, the financial community, its depositors, or othercreditors;
(6) requests through its board of directors that the departmenttake possession for the benefit of depositors, other creditors,shareholders, or other persons;
(7) has an impairment of its capital (the capital of a bank ortrust company shall, for the purpose of this subdivision, be
considered to be unimpaired so long as the sound value of itsassets over and above its liabilities, exclusive of liabilities forcapital notes, debentures, and capital stock, as determined bythe department, equals or exceeds the minimum capital orcapital stock required by the department for a bank or trustcompany);
(8) has neglected or refused, for a period of thirty (30) days, tocomply with the terms of a duly issued order of the department,essential to preserve the solvency of the financial institution;
(9) has failed to pay the fees charged by the department underIC 28-11-3-5 after due notice of the amount of the fee has beengiven;
(10) has breached a fiduciary duty under IC 30-4-3-6; or
(11) has violated IC 30-4-3-7 in a way that has caused or maycause harm to fiduciary accounts.
(b) When the department makes a determination to takepossession of the business and property of a financial institutionunder subsection (a), the department shall:
(1) make a finding to that effect and enter that finding on therecords of the proceedings of the department; and
(2) cause a certified copy of the finding to be served on thepresident or other executive officer actively in charge of thefinancial institution and demand possession of the business,property, and records of the financial institution from theofficer. The financial institution shall immediately surrender thepossession to the department.
(c) The department or its receiver is not required to become theowner of any property to fulfill the liquidation requirements of thischapter.
As added by P.L.141-1984, SEC.2. Amended by P.L.33-1991, SEC.9;P.L.262-1995, SEC.4.
IC 28-1-3.1-3
Holding business and property until liquidation of affairs
Sec. 3. (a) When the department has taken possession of thebusiness and property of a financial institution under the provisionsof section 2 of this chapter, the department shall hold possession ofthe business and property until the affairs of the institution have beenfinally liquidated as provided in this chapter, unless the financialinstitution has undertaken the voluntary liquidation of its affairsunder IC 28-1-9.
(b) If a corporate fiduciary is to be liquidated, the department mayappoint an agent from within or outside the department totemporarily conduct the affairs of the corporate fiduciary until areceiver is appointed. The agent may be required to give bond andshall be paid reasonable compensation by the corporate fiduciarybeing liquidated.
As added by P.L.141-1984, SEC.2. Amended by P.L.262-1995,SEC.5.
IC 28-1-3.1-4
Notice; entry of cause; hearing; record; rights and liabilities ofpersons interested; Federal Deposit Insurance Corporation asreceiver
Sec. 4. (a) Immediately upon the taking possession of the businessand property of any financial institution under section 2 of thischapter, the department shall give notice by:
(1) posting the notice at the main entrance of the principaloffice of the financial institution;
(2) causing the notice to be served upon the president or otherexecutive officer actively in charge of the business of thefinancial institution; and
(3) filing the notice in the office of the circuit court in thecounty where the principal office of the financial institution islocated.
(b) Upon the filing of the notice under subsection (a), the clerkshall:
(1) note the filing of the notice upon the records of thereceivership court; and
(2) enter the cause as a civil action upon the dockets of thecourt under the name and style of "In the matter of theliquidation of ___________" (inserting the name of thefinancial institution).
(c) The receivership court may hear and determine all issues andmatters pertaining to or connected with the liquidation of thefinancial institution, including:
(1) the amount of the compensation and necessary expenses ofany special representative, assistant, accountant, agent, orattorney employed by the department, or the receiver appointedby the department, as set forth in this chapter; and
(2) all papers and pleadings pertaining to the liquidationproceedings.
(d) All entries, orders, judgments, and decrees of the receivershipcourt in connection with the liquidation proceedings shall be filedand entered of record in the cause of action.
(e) The rights and liabilities of a financial institution and of itscreditors, depositors, shareholders, and all other persons interestedin its estate shall, unless otherwise directed by the court, be fixed asof the date of the filing of the notice of possession with thereceivership court. In the case of mutual debts or mutual credits ofequal priority between the financial institution and another person,the credits and debts shall be set off and the balance only shall beallowed or paid. The right to set off shall be determined as of thedate of the filing of the notice of possession of the financialinstitution under subsection (a).
(f) Notwithstanding this section, if the Federal Deposit InsuranceCorporation is appointed receiver of a financial institution,subsections (a)(3), (b), (c), and (d) do not apply, and applicablefederal law governs the receivership.
As added by P.L.141-1984, SEC.2. Amended by P.L.35-2010,
SEC.99.
IC 28-1-3.1-5
Receiver; appointment; vesting of title to all assets and right toterminate affairs of institution; liens or claims against property
Sec. 5. (a) The department may appoint the receiver of the closedfinancial institution. Unless the receiver is the Federal DepositInsurance Corporation, the department, upon acceptance of theappointment of a receiver, shall make immediate application to thereceivership court for confirmation of the receiver. The receivershipcourt shall approve the department's application if it finds that to doso would be in the public interest. The application may be acted onby the receivership court without any notice except that provided insection 4 of this chapter. The receiver shall give a bond the directorconsiders appropriate. However, a federal deposit insurance agencyshall not be required to post any bond. If the receiver is not a federaldeposit insurance agency, the director may agree to reasonablecompensation for the receiver.
(b) Upon appointment as receiver, title to all assets of thefinancial institution vest in the receiver without the execution of anyinstruments of conveyance, assignment, transfer, or endorsement. Ifno other receiver is appointed as provided in this chapter, thedepartment shall act as receiver and has all of the powers and dutiesof a receiver as provided in this chapter.
(c) Except as otherwise provided, the sole and exclusive right toliquidate and terminate the affairs of any financial institution isvested in the receiver appointed under this section, and except asotherwise provided by law, no other receiver, assignee, trustee, orliquidating agent shall be appointed by any court or any other person.
(d) After the department has taken possession of the business andproperty for any financial institution, no suit, action, or otherproceeding at law or in equity shall be commenced or prosecutedagainst the financial institution upon any debt, obligation, claim, ordemand.
(e) No person, firm, limited liability company, corporation, orother entity holding any of the property or credits of the financialinstitution shall have any lien or charge against the property orcredits for any payment, advance, or clearance made after thedepartment has taken possession. A lien shall not attach to any of theassets or property of the financial institution by reason of the entryof any judgment recovered against the institution after thedepartment has taken possession of its business and property andwhile the possession continues.
(f) A receiver appointed to liquidate a corporate fiduciary musthave sufficient experience in fiduciary matters.
As added by P.L.141-1984, SEC.2. Amended by P.L.8-1993,SEC.438; P.L.262-1995, SEC.6; P.L.35-2010, SEC.100.
IC 28-1-3.1-6
Receiver; authority Sec. 6. The receiver of a closed financial institution may do thefollowing:
(1) Take possession of all books, records, and assets of thefinancial institution.
(2) Collect all debts, claims, and judgments belonging to thefinancial institution and do such other acts as are necessary topreserve and liquidate its assets.
(3) Execute in the name of the financial institution anyinstrument necessary or proper to effectuate its powers orperform its duties as receiver.
(4) Initiate, pursue, and defend litigation involving any right,claim, interest, or liability of the financial institution.
(5) Exercise any and all fiduciary functions of the financialinstitution as of the date of appointment as receiver.
(6) Borrow money as necessary in the liquidation of thefinancial institution and secure the borrowings by the pledge ormortgage of assets.
(7) Abandon or convey title to any holder of a mortgage,security deed, security interest, or lien against property in whichthe financial institution has an interest whenever the receiverdetermines that to continue to claim that interest is burdensomeand of no advantage to the financial institution, its depositors,creditors, or shareholders.
(8) Subject to the approval of the receivership court:
(A) sell any and all real and personal property tocompromise any debt, claim, or judgment due to thefinancial institution and discontinue any action or otherproceeding pending; or
(B) pay off all mortgages, securities deeds, securityagreements, and liens upon any real or personal propertybelonging to the financial institution and purchase at ajudicial sale or at a sale authorized by court order, any realor personal property in order to protect the financialinstitution's equity in that property.
(9) If, at the time of liquidation, a closed financial institutionholds property in trust for an individual or a corporation underor by virtue of a trust instrument, the administration of theproperty must be handled in the manner set forth in IC 28-1-9-7.
Notwithstanding this section, when the Federal Deposit InsuranceCorporation is appointed receiver of a financial institution,subdivision (8) does not apply.
As added by P.L.141-1984, SEC.2. Amended by P.L.42-1993,SEC.23; P.L.262-1995, SEC.7; P.L.35-2010, SEC.101.
IC 28-1-3.1-7
Receiver's authority to sell assets; borrowing of money for depositliabilities
Sec. 7. The receiver may, with ex parte approval of thereceivership court, sell all or any part of the financial institution'sassets to another state or federally chartered financial institution or
to a federal deposit insurance agency acting in its corporate capacity.The Federal Deposit Insurance Corporation is not required to seek exparte approval of the receivership court. The receiver may alsoborrow from a federal deposit insurance agency any amountnecessary to facilitate the assumption of deposit liabilities by a newlychartered or existing state or federally chartered financial institution,assigning any part or all of the assets of the financial institution assecurity for the loan.
As added by P.L.141-1984, SEC.2. Amended by P.L.35-2010,SEC.102.
IC 28-1-3.1-8
Claims; presentation; notice; rejection
Sec. 8. (a) All parties having claims against the closed financialinstitution shall present their claims supported by proof to thereceiver within one hundred eighty (180) days after the departmenthas taken possession.
(b) The receiver shall cause notice of the claims procedureprescribed by this section to be:
(1) published once a week for twelve (12) consecutive weeks ina newspaper of general circulation published in the county inwhich the receivership court is located; and
(2) mailed to each person whose name appears as a creditorupon books of the financial institution at the person's lastaddress of record.
(c) Within one hundred eighty (180) days following receipt ofclaim, the receiver shall notify in writing any claimant whose claimhas been rejected. Notice is effective when mailed. Any claimantwhose claim has been rejected by the receiver may petition thereceivership court for a hearing on the claim within sixty (60) daysfrom the date the claim is rejected.
(d) If the Federal Deposit Insurance Corporation is the receiver,compliance with this section is not required.
As added by P.L.141-1984, SEC.2. Amended by P.L.35-2010,SEC.103.
IC 28-1-3.1-9
Late claims
Sec. 9. Any claims filed after the one hundred eighty (180) dayclaim period prescribed by section 8 of this chapter and subsequentlyaccepted by the receiver or allowed by the receivership court shall beentitled to share in the distribution of assets only to the extent of theundistributed assets in the hands of the receiver on the date theclaims are accepted or allowed. If the Federal Deposit InsuranceCorporation is the receiver, compliance with this section is notrequired.
As added by P.L.141-1984, SEC.2. Amended by P.L.35-2010,SEC.104.
IC 28-1-3.1-10
Repealed
(Repealed by P.L.42-1993, SEC.103.)
IC 28-1-3.1-10.1
Payment of claims; order
Sec. 10.1. (a) All claims against the financial institution that areproved to the satisfaction of the receiver or approved by thereceivership court shall be paid in the following order:
(1) Claims of persons referred to in IC 28-1-12-6 as havingpreference and priority.
(2) Administration expenses of the liquidation, including thefollowing:
(A) Court costs.
(B) Compensation and actual expenses incurred by thedepartment or the receiver in order to facilitate theliquidation.
(C) Compensation of each regular officer or employee of thereceiver for the time actually devoted by the officer oremployee to the liquidation of the financial institution at anamount not to exceed the compensation paid to the officer oremployee for the performance of the regular duties of theofficer or employee.
(D) Actual expenses of each regular officer or employee ofthe receiver that are necessarily incurred in the performanceof the duties of the officer or employee in the liquidation.
(E) Compensation and expenses of any specialrepresentative, assistant, accountant, agent, or attorneyemployed by the receiver.
(F) The reasonable general overhead expenses that areincurred by the department or the receiver in the liquidationof the affairs of the financial institution.
(3) Claims given priority under other provisions of state orfederal law.
(4) Deposit obligations.
(5) Other general liabilities.
(6) Debt subordinated to the claims of general creditors.
(7) Equity capital securities.
(b) Interest may not be paid on any claim until the full principalamount of every claim within the same class has been paid.
(c) If the Federal Deposit Insurance Corporation is the receiver,compliance with this section is not required.
As added by P.L.262-1995, SEC.8. Amended by P.L.35-2010,SEC.105.
IC 28-1-3.1-11
Rejection of executory contracts and leases
Sec. 11. (a) Within one hundred eighty (180) days of the date thatthe department has taken possession, the receiver may, at hiselection, reject: (1) any executory contract to which the closed financialinstitution is a party without any further liability to the closedfinancial institution or the receiver; or
(2) any obligation of the financial institution as a lessee of realor personal property.
The receiver's election to reject a lease shall create no claim for rentother than rent accrued to the date of termination or for actualdamages, if any, for the termination not to exceed the equivalent ofpayment of rent for six (6) months.
(b) If the Federal Deposit Insurance Corporation is the receiver,compliance with this section is not required.
As added by P.L.141-1984, SEC.2. Amended by P.L.35-2010,SEC.106.
IC 28-1-3.1-12
Federal deposit insurance; payments of deposit liabilities;subrogation
Sec. 12. Whenever a federal deposit insurance agency pays ormakes available for payment the insured deposit liabilities of aclosed financial institution, the federal deposit insurance agency,whether or not it acts as receiver, shall be subrogated by operation oflaw to all rights against the closed financial institutions of eachowner of a claim for deposit so paid by the federal deposit insuranceagency to the extent necessary to enable the federal deposit insuranceagency, under federal law, to make insurance payments available todepositors of closed financial institutions.
As added by P.L.141-1984, SEC.2.
IC 28-1-3.1-13
Successor to closed financial institution's fiduciary duties;appointment; powers and duties; notice of appointment tointerested parties
Sec. 13. (a) The receiver, with the approval of the receivershipcourt, may appoint a successor to all rights, obligations, assets,deposits, agreements, and trusts held by the closed financialinstitution as trustee, administrator, executor, guardian, agent, and allother fiduciary or representative capacities. The successor's dutiesand obligations begin upon appointment to the same extent bindingupon the closed financial institution and as though the successor hadoriginally assumed the duties and obligations. Specifically, thesuccessor shall succeed to and be entitled to administer alltrusteeships, administrations, executorships, guardianships, agencies,and all other fiduciary or representative proceedings to which theclosed financial institution is named or appointed in wills, wheneverprobated, or to which it is appointed by any other instrument, courtorder, or by operation of law.
(b) This section shall not impair any right of the grantor orbeneficiaries of trust assets to secure the appointment of a substitutedtrustee or manager.
(c) Within thirty (30) days after appointment, the successor shall
give written notice, insofar as practical, to all interested partiesnamed in:
(1) the books and records of the closed financial institution; or
(2) trust documents held by it;
that the successor has been appointed in accordance with applicablelaw.
(d) If the Federal Deposit Insurance Corporation is the receiver,compliance with this section is not required.
As added by P.L.141-1984, SEC.2. Amended by P.L.35-2010,SEC.107.
IC 28-1-3.1-14
Personal property left in possession of closed financial institution;appearances, claims, and disposition
Sec. 14. (a) The receiver shall cause notice to be mailed to:
(1) the owners of any personal property left in the possession ofa closed financial institution for safekeeping or as bailee ordepository for hire;
(2) all lessees; and
(3) other persons in possession of any safe deposit box, vault,or locker;
requiring those persons to appear and assert their claims to theproperty within sixty (60) days from the date of the notice. Withinthat time, the owner or owners of the property may appear and asserttheir claims to the property. Subject to approval of the receivershipcourt, the receiver shall make the agreements or arrangements as maybe necessary for the disposition of the property and the contents ofthe safe deposit boxes, vaults, or lockers and the termination of anyleases or other contracts relating to the property.
(b) If the Federal Deposit Insurance Corporation is the receiver,compliance with this section is not required.
As added by P.L.141-1984, SEC.2. Amended by P.L.35-2010,SEC.108.
IC 28-1-3.1-15
Actions to enforce rights, demands, or claims vested in financialinstitution, shareholders, or creditors
Sec. 15. The receiver may, within ten (10) years after any causeof action has accrued against any of the directors, trustees, officers,owners, or employees of any closed financial institution, institute andmaintain, in the name of the receiver, any action or proceeding forthe enforcement of any right, demand, or claim that is vested in thefinancial institution or in the shareholders or creditors of thefinancial institution.
As added by P.L.141-1984, SEC.2.
IC 28-1-3.1-16
Articles of dissolution; contents; Federal Deposit InsuranceCorporation as receiver; authority of department to act
Sec. 16. (a) When the proceedings described in this chapter have
been completed, the receiver shall execute and file, in the mannerprovided in this section, articles of dissolution, setting forth thefollowing information:
(1) The name of the financial institution.
(2) The place where its principal office is located.
(3) The names and addresses of the directors and officers of thefinancial institution at the time when the liquidationproceedings were begun.
(4) A brief summary of the aggregate amount of general claimsfinally allowed against the financial institution, the aggregateamount of claims allowed as preferred, and the aggregateamount of all other claims against the financial institution,together with a statement of the aggregate payments made oneach of the groups of claims and with a reference to:
(A) the orders of the receiver or the receivership courtauthorizing those payments; and
(B) the current reports wherein a report of the payments soordered is made;
as of the date of the taking possession of the financialinstitution by the department.
(5) A brief summary of the aggregate amount of payments madeto the shareholders of the financial institution, whether ofmoney or other property, and a reference to the orders of thereceiver or the receivership court authorizing the payments andto the current reports wherein the report of the payment ismade.
(b) If the Federal Deposit Insurance Corporation is the receiver,the following apply:
(1) Compliance with this section is not required.
(2) The department:
(A) may file the articles of dissolution; and
(B) may take all actions necessary to complete thedissolution of the financial institution.
As added by P.L.141-1984, SEC.2. Amended by P.L.35-2010,SEC.109.
IC 28-1-3.1-17
Articles of dissolution; execution; presentation; fee
Sec. 17. The articles of dissolution shall be executed in triplicateand shall be presented in triplicate to the secretary of state at hisoffice (as provided in section 18 of this chapter) accompanied by thefees prescribed by law.
As added by P.L.141-1984, SEC.2.
IC 28-1-3.1-18
Articles of dissolution; duties of secretary of state
Sec. 18. Upon presentation of the articles of dissolution asprovided in section 17 of this chapter, the secretary of state shall:
(1) endorse his approval upon each of the triplicate copies ofthe articles if he finds that they conform to law; (2) when all fees have been paid as required by law:
(A) file one (1) copy of the articles in his office;
(B) issue a certificate of dissolution to the department; and
(C) return the certificate of dissolution to the department,together with two (2) copies of the articles of dissolutionbearing the endorsement of his approval.
As added by P.L.141-1984, SEC.2.
IC 28-1-3.1-19
Articles of dissolution; filing with county recorder
Sec. 19. The department shall file for record with the countyrecorder of the county where the principal office of the financialinstitution is located one (1) of the triplicate copies of the articles ofdissolution bearing the endorsement of the approval of the secretaryof state as provided in section 18 of this chapter.
As added by P.L.141-1984, SEC.2.
IC 28-1-3.1-20
Dissolution and cessation of existence
Sec. 20. Upon the issuance of the certificate of dissolution and therecording of the articles of dissolution, as provided in section 19 ofthis chapter, the financial institution shall be dissolved and itsexistence shall cease.
As added by P.L.141-1984, SEC.2.
IC 28-1-3.1-21
Troubled or insolvent financial institutions; federal supervisoryagencies; department's authority to approve transactions
Sec. 21. Whenever a federal supervisory agency is bidding,consolidating, merging, selling, or otherwise resolving or disposingof a troubled, an insolvent, or an imminently insolvent financialinstitution, the director of the department may approve anytransaction, including the purchase of assets, the assumption ofliabilities, a merger, or the formation of a new financial institution,if the transaction requires the approval of the department.
As added by P.L.42-1993, SEC.24. Amended by P.L.11-1998, SEC.1;P.L.35-2010, SEC.110.