Section 101(31) of the Bankruptcy Code, the provision of the code that defines those who are “insiders” of a debtor, continues to generate litigation almost 30 years after its enactment. Last week the 8th U.S. Circuit Court of Appeals, in Rupp v. United Security Bank (In re Kunz), dealt with a matter of first impression involving �101(31) (A). That issue was whether a “director emeritus” is per se an insider.

The debtor, Kunz, was involved in the initial organization of United Security Bank. Kunz served as a member of United’s board for many years, finally resigning in 1990. Upon resigning, he took the title of director emeritus, a title he held during the one-year period prior to his bankruptcy filing. According to the court, although a director in name, Kunz did not attend meetings of the United board; had no decision-making powers, office or staff; and was not entitled to “attend any meeting on United’s business.” Compensation for Kunz (and others with the same title) was set at $400 per month.

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