Indiana § 27-1-7-19 - Mutual or stock companies; borrowing for surplus funds

§ 27-1-7-19. Mutual or stock companies; borrowing for surplus funds

Sec. 19. (a) A mutual or stock company organized under this article may borrow or assume a liability for the repayment of a sum of money to provide itself with surplus funds with the prior approval of the department. The rate of interest on any loan or advance may not exceed the following:

(1) The corporate base rate in effect on the first business day of the month in which the loan document is executed, as reported by the bank or branch with the greatest amount of assets in Indiana, plus three percent (3%) per annum.

(2) A variable rate determined by a formula that:

(A) is specified in the loan document;

(B) is based on objective data or information that is reasonably related to commercial lending rates;

(C) provides an initial rate that is not more than the corporate base rate in effect on the first business day of the month in which the loan document is executed, as reported by the bank or branch with the greatest amount of assets in Indiana, plus two percent (2%) per annum; and

(D) is approved by the department as reasonable and appropriate in relation to the company's financial condition.

The company shall elect and state in the written agreement whether the interest rate is to be fixed or floating for the term of the agreement. The agreement shall be submitted to and approved by the department before the agreement's execution.

(b) The loan or advance, with interest at a rate not exceeding the maximum rate of interest as defined in subsection (a), shall be repaid only out of the surplus of the company. Repayment of principal or payment of interest may be made only when approved by the department whenever in its judgment the financial condition of the company shall warrant. However, the department may not withhold approval if:

(1) the company has and submits to the department satisfactory evidence that a surplus that is equal to or greater than the surplus existing immediately after the issuance of the loan or advance will exist after the repayment; and

(2) the surplus that will exist immediately after repayment of principal or payment of interest is:

(A) reasonable in relation to the company's outstanding liabilities; and

(B) adequate to the company's financial needs;

in light of the factors set forth in IC 27-1-23-4(f).

(c) A loan or advance made under this section, or interest accruing on the loan or advance, may not form a part of the legal liabilities of the company until authorized for payment by the department. However, until a loan or an advance is repaid, all statements published by the company or filed with the department must show the amount of the loan or advance then remaining unpaid, including any accrued and unpaid interest charges.

Formerly: Acts 1935, c.162, s.97. As amended by P.L.138-1984, SEC.1; P.L.253-1985, SEC.1; P.L.184-1996, SEC.1; P.L.111-2000, SEC.1.