15 U.S.C. § 77kkk — Preferential collection of claims against

Page 188 TITLE 15—COMMERCE AND TRADE § 77kkk Any resignation of an indenture trustee shall become effective only upon the appointment of a successor trustee and such successor’s accept- ance of such an appointment. (May 27, 1933, ch. 38, title III, § 310, as added Aug. 3, 1939, ch. 411, 53 Stat. 1157; amended Pub. L. 101–550, title IV, §§ 406–408, Nov. 15, 1990, 104 Stat. 2723, 2724; Pub. L. 111–203, title IX, § 986(b)(3), July 21, 2010, 124 Stat. 1936.) Editorial Notes AMENDMENTS 2010—Subsec. (c). Pub. L. 111–203 struck out subsec. (c). Text read as follows: ‘‘The Public Utility Holding Company Act of 1935 shall not be held to establish or authorize the establishment of any standards regarding the eligibility and qualifications of any trustee or pro- spective trustee under an indenture to be qualified under this subchapter, or regarding the provisions to be included in any such indenture with respect to the eli- gibility and qualifications of the trustee thereunder, other than those established by the provisions of this section.’’ 1990—Subsec. (a)(1). Pub. L. 101–550, § 406(1)–(4), sub- stituted ‘‘There shall’’ for ‘‘The indenture to be quali- fied shall require that there shall’’, and ‘‘under every indenture qualified or to be qualified pursuant to this subchapter’’ for ‘‘thereunder’’, inserted ‘‘or a corpora- tion or other person permitted to act as trustee by the Commission’’ before ‘‘(referred to’’, and inserted at end ‘‘The Commission may, pursuant to such rules and reg- ulations as it may prescribe, or by order on application, permit a corporation or other person organized and doing business under the laws of a foreign government to act as sole trustee under an indenture qualified or to be qualified pursuant to this subchapter, if such cor- poration or other person (i) is authorized under such laws to exercise corporate trust powers, and (ii) is sub- ject to supervision or examination by authority of such foreign government or a political subdivision thereof substantially equivalent to supervision or examination applicable to United States institutional trustees. In prescribing such rules and regulations or making such order, the Commission shall consider whether under such laws, a United States institutional trustee is eligi- ble to act as sole trustee under an indenture relating to securities sold within the jurisdiction of such foreign government.’’ Subsec. (a)(2). Pub. L. 101–550, § 406(5), which directed the substitution of ‘‘Such institution’’ for ‘‘The inden- ture to be qualified shall require that such institu- tion’’, was executed by making the substitution for ‘‘The indenture to be qualified shall require that such institutional’’, as the probable intent of Congress. Subsec. (a)(3). Pub. L. 101–550, § 406(6), struck out ‘‘such indenture shall provide that’’ before ‘‘the rights’’. Subsec. (a)(4). Pub. L. 101–550, § 406(7), (8), struck out ‘‘the indenture to be qualified shall require that’’ be- fore ‘‘the indenture’’ and inserted ‘‘shall’’ after ‘‘trust- ee or trustees’’. Subsec. (a)(5). Pub. L. 101–550, § 407, added par. (5). Subsec. (b). Pub. L. 101–550, § 408, amended subsec. (b) generally. Statutory Notes and Related Subsidiaries EFFECTIVE DATE OF 2010 AMENDMENT Amendment by Pub. L. 111–203 effective 1 day after July 21, 2010, except as otherwise provided, see section 4 of Pub. L. 111–203, set out as an Effective Date note under section 5301 of Title 12, Banks and Banking. Executive Documents TRANSFER OF FUNCTIONS For transfer of functions of Securities and Exchange Commission, with certain exceptions, to Chairman of such Commission, see Reorg. Plan No. 10 of 1950, §§ 1, 2, eff. May 24, 1950, 15 F.R. 3175, 64 Stat. 1265, set out under section 78d of this title. § 77kkk. Preferential collection of claims against obligor (a) Trustee as creditor of obligor Subject to the provisions of subsection (b) of this section, if the indenture trustee shall be, or shall become, a creditor, directly or indirectly, secured or unsecured, of an obligor upon the in- denture securities, within three months prior to a default as defined in the last paragraph of this subsection, or subsequent to such a default, then, unless and until such default shall be cured, such trustee shall set apart and hold in a special account for the benefit of the trustee in- dividually and the indenture security holders— (1) an amount equal to any and all reduc- tions in the amount due and owing upon any claim as such creditor in respect of principal or interest, effected after the beginning of such three months’ period and valid as against such obligor and its other creditors, except any such reduction resulting from the receipt or disposition of any property described in paragraph (2) of this subsection, or from the exercise of any right of setoff which the trust- ee could have exercised if a petition in bank- ruptcy had been filed by or against such obli- gor upon the date of such default; and (2) all property received in respect of any claim as such creditor, either as security therefor, or in satisfaction or composition thereof, or otherwise, after the beginning of such three months’ period, or an amount equal to the proceeds of any such property, if dis- posed of, subject, however, to the rights, if any, of such obligor and its other creditors in such property or such proceeds. Nothing herein contained shall affect the right of the indenture trustee— (A) to retain for its own account (i) pay- ments made on account of any such claim by any person (other than such obligor) who is liable thereon, and (ii) the proceeds of the bona fide sale of any such claim by the trustee to a third person, and (iii) distributions made in cash, securities, or other property in re- spect of claims filed against such obligor in bankruptcy or receivership or in proceedings for reorganization pursuant to the Bankruptcy Act or applicable State law; (B) to realize, for its own account, upon any property held by it as security for any such claim, if such property was so held prior to the beginning of such three months’ period; (C) to realize, for its own account, but only to the extent of the claim hereinafter men- tioned, upon any property held by it as secu- rity for any such claim, if such claim was cre- ated after the beginning of such three months’ period and such property was received as secu- rity therefor simultaneously with the creation thereof, and if the trustee shall sustain the burden of proving that at the time such prop- erty was so received the trustee had no reason- able cause to believe that a default as defined in the last paragraph of this subsection would occur within three months; or Page 189 TITLE 15—COMMERCE AND TRADE § 77kkk (D) to receive payment on any claim referred to in paragraph (B) or (C) of this subsection, against the release of any property held as se- curity for such claim as provided in said para- graph (B) or (C), as the case may be, to the ex- tent of the fair value of such property. For the purposes of paragraphs (B), (C), and (D) of this subsection, property substituted after the beginning of such three months’ period for prop- erty held as security at the time of such substi- tution shall, to the extent of the fair value of the property released, have the same status as the property released, and, to the extent that any claim referred to in any of such paragraphs is created in renewal of or in substitution for or for the purpose of repaying or refunding any pre- existing claim of the indenture trustee as such creditor, such claim shall have the same status as such preexisting claim. If the trustee shall be required to account, the funds and property held in such special account and the proceeds thereof shall be apportioned between the trustee and the indenture security holders in such manner that the trustee and the indenture security holders realize, as a result of payments from such special account and pay- ments of dividends on claims filed against such obligor in bankruptcy or receivership or in pro- ceedings for reorganization pursuant to the Bankruptcy Act or applicable State law, the same percentage of their respective claims, fig- ured before crediting to the claim of the trustee anything on account of the receipt by it from such obligor of the funds and property in such special account and before crediting to the re- spective claims of the trustee and the indenture security holders dividends on claims filed against such obligor in bankruptcy or receiver- ship or in proceedings for reorganization pursu- ant to the Bankruptcy Act or applicable State law, but after crediting thereon receipts on ac- count of the indebtedness represented by their respective claims from all sources other than from such dividends and from the funds and property so held in such special account. As used in this paragraph, with respect to any claim, the term ‘‘dividends’’ shall include any distribution with respect to such claim, in bankruptcy or re- ceivership or in proceedings for reorganization pursuant to the Bankruptcy Act or applicable State law, whether such distribution is made in cash, securities, or other property, but shall not include any such distribution with respect to the secured portion, if any, of such claim. The court in which such bankruptcy, receivership, or proceeding for reorganization is pending shall have jurisdiction (i) to apportion between the indenture trustee and the indenture security holders, in accordance with the provisions of this paragraph, the funds and property held in such special account and the proceeds thereof, or (ii) in lieu of such apportionment, in whole or in part, to give to the provisions of this para- graph due consideration in determining the fair- ness of the distributions to be made to the in- denture trustee and the indenture security hold- ers with respect to their respective claims, in which event it shall not be necessary to liq- uidate or to appraise the value of any securities or other property held in such special account or as security for any such claim, or to make a spe- cific allocation of such distributions as between the secured and unsecured portions of such claims, or otherwise to apply the provisions of this paragraph as a mathematical formula. Any indenture trustee who has resigned or been removed after the beginning of such three months’ period shall be subject to the provisions of this subsection as though such resignation or removal had not occurred. Any indenture trust- ee who has resigned or been removed prior to the beginning of such three months’ period shall be subject to the provisions of this subsection if and only if the following conditions exist— (i) the receipt of property or reduction of claim which would have given rise to the obli- gation to account, if such indenture trustee had continued as trustee, occurred after the beginning of such three months’ period; and (ii) such receipt of property or reduction of claim occurred within three months after such resignation or removal. As used in this subsection, the term ‘‘default’’ means any failure to make payment in full of principal or interest, when and as the same be- comes due and payable, under any indenture which has been qualified under this subchapter, and under which the indenture trustee is trustee and the person of whom the indenture trustee is directly or indirectly a creditor is an obligor; and the term ‘‘indenture security holder’’ means all holders of securities outstanding under any such indenture under which any such default ex- ists. In any case commenced under the Bank- ruptcy Act of July 1, 1898, or any amendment thereto enacted prior to November 6, 1978, all references to periods of three months shall be deemed to be references to periods of four months. (b) Exclusion of creditor relationship arising from specified classes The indenture to be qualified shall automati- cally be deemed (unless it is expressly provided therein that any such provision is excluded) to contain provisions excluding from the operation of subsection (a) of this section a creditor rela- tionship arising from— (1) the ownership or acquisition of securities issued under any indenture, or any security or securities having a maturity of one year or more at the time of acquisition by the inden- ture trustee; (2) advances authorized by a receivership or bankruptcy court of competent jurisdiction, or by the indenture, for the purpose of pre- serving the property subject to the lien of the indenture or of discharging tax liens or other prior liens or encumbrances on the trust es- tate, if notice of such advance and of the cir- cumstances surrounding the making thereof is given to the indenture security holders, at the time and in the manner provided in the inden- ture; (3) disbursements made in the ordinary course of business in the capacity of trustee under an indenture, transfer agent, registrar, custodian, paying agent, fiscal agent or depos- itary, or other similar capacity; (4) an indebtedness created as a result of services rendered or premises rented; or an in- debtedness created as a result of goods or se- Page 190 TITLE 15—COMMERCE AND TRADE § 77lll 1 See References in Text note below. curities sold in a cash transaction as defined in the indenture; (5) the ownership of stock or of other securi- ties of a corporation organized under the pro- visions of section 25(a) 1 of the Federal Reserve Act, as amended [12 U.S.C. 611 et seq.], which is directly or indirectly a creditor of an obli- gor upon the indenture securities; or (6) the acquisition, ownership, acceptance, or negotiation of any drafts, bills of exchange, acceptances, or obligations which fall within the classification of self-liquidating paper as defined in the indenture. (May 27, 1933, ch. 38, title III, § 311, as added Aug. 3, 1939, ch. 411, 53 Stat. 1161; amended Pub. L. 101–550, title IV, § 409, Nov. 15, 1990, 104 Stat. 2728; Pub. L. 111–203, title IX, § 986(b)(4), July 21, 2010, 124 Stat. 1936.) Editorial Notes REFERENCES IN TEXT Section 25(a) of the Federal Reserve Act, as amended, referred to in subsec. (b)(5), which is classified to sub- chapter II (§ 611 et seq.) of chapter 6 of Title 12, Banks and Banking, was renumbered section 25A of that act by Pub. L. 102–242, title I, § 142(e)(2), Dec. 19, 1991, 105 Stat. 2281. AMENDMENTS 2010—Subsec. (c). Pub. L. 111–203 struck out subsec. (c) which related to issue or sale of securities by a reg- istered holding company. 1990—Subsec. (a). Pub. L. 101–550, § 409(1)–(4), struck out ‘‘the indenture to be qualified shall provide that’’ before ‘‘if’’ in first par., substituted ‘‘If’’ for ‘‘The in- denture to be qualified shall provide that, if’’ in third par., substituted ‘‘three months’’ for ‘‘four months’’ and ‘‘three months’ ’’ for ‘‘four months’ ’’ wherever ap- pearing, and inserted at end ‘‘In any case commenced under the Bankruptcy Act of July 1, 1898, or any amendment thereto enacted prior to November 6, 1978, all references to periods of three months shall be deemed to be references to periods of four months.’’ Subsec. (b). Pub. L. 101–550, § 409(5), substituted ‘‘shall automatically be deemed (unless it is expressly pro- vided therein that any such provision is excluded) to’’ for ‘‘may’’. Statutory Notes and Related Subsidiaries EFFECTIVE DATE OF 2010 AMENDMENT Amendment by Pub. L. 111–203 effective 1 day after July 21, 2010, except as otherwise provided, see section 4 of Pub. L. 111–203, set out as an Effective Date note under section 5301 of Title 12, Banks and Banking. Executive Documents TRANSFER OF FUNCTIONS For transfer of functions of Securities and Exchange Commission, with certain exceptions, to Chairman of such Commission, see Reorg. Plan No. 10 of 1950, §§ 1, 2, eff. May 24, 1950, 15 F.R. 3175, 64 Stat. 1265, set out under section 78d of this title. § 77lll. Bondholders’ lists (a) Periodic filing of information by obligor with trustee Each obligor upon the indenture securities shall furnish or cause to be furnished to the in- stitutional trustee thereunder at stated inter- vals of not more than six months, and at such other times as such trustee may request in writ- ing, all information in the possession or control of such obligor, or of any of its paying agents, as to the names and addresses of the indenture se- curity holders, and requiring such trustee to preserve, in as current a form as is reasonably practicable, all such information so furnished to it or received by it in the capacity of paying agent. (b) Access of information to security holders Within five business days after the receipt by the institutional trustee of a written applica- tion by any three or more indenture security holders stating that the applicants desire to communicate with other indenture security holders with respect to their rights under such indenture or under the indenture securities, and accompanied by a copy of the form of proxy or other communication which such applicants propose to transmit, and by reasonable proof that each such applicant has owned an indenture security for a period of at least six months pre- ceding the date of such application, such insti- tutional trustee shall, at its election, either— (1) afford to such applicants access to all in- formation so furnished to or received by such trustee; or (2) inform such applicants as to the approxi- mate number of indenture security holders ac- cording to the most recent information so fur- nished to or received by such trustee, and as to the approximate cost of mailing to such in- denture security holders the form of proxy or other communication, if any, specified in such application. If such trustee shall elect not to afford to such applicants access to such information, such trustee shall, upon the written request of such applicants, mail to all such indenture security holders copies of the form of proxy or other communication which is specified in such re- quest, with reasonable promptness after a ten- der to such trustee of the material to be mailed and of payment, or provision for the payment, of the reasonable expenses of such mailing, unless within five days after such tender, such trustee shall mail to such applicants, and file with the Commission together with a copy of the mate- rial to be mailed, a written statement to the ef- fect that, in the opinion of such trustee, such mailing would be contrary to the best interests of the indenture security holders or would be in violation of applicable law. Such written state- ment shall specify the basis of such opinion. After opportunity for hearing upon the objec- tions specified in the written statement so filed, the Commission may, and if demanded by such trustee or by such applicants shall, enter an order either sustaining one or more of such ob- jections or refusing to sustain any of them. If the Commission shall enter an order refusing to sustain any of such objections, or if, after the entry of an order sustaining one or more of such objections, the Commission shall find, after no- tice and opportunity for hearing, that all objec- tions so sustained have been met, and shall enter an order so declaring, such trustee shall mail copies of such material to all such inden-