Full Text of SB2513 099th General Assembly
SB2513 99TH GENERAL ASSEMBLY |
| | 99TH GENERAL ASSEMBLY
State of Illinois
2015 and 2016 SB2513 Introduced 2/9/2016, by Sen. William R. Haine SYNOPSIS AS INTRODUCED: |
| |
Amends the Illinois Insurance Code. Replaces provisions relating to conversion of a mutual property and casualty insurance company to a stock insurance company. Includes provisions governing: the adoption of a plan of conversion; requirements, options, and alternatives of a plan of conversion; rights of members whose policies precede the conversion; conflicts of interest; rules; notice requirements; and limitation on actions. Effective January 1, 2017.
|
| |
| | A BILL FOR |
|
| | | SB2513 | | LRB099 17058 EGJ 41416 b |
|
| 1 | | AN ACT concerning regulation.
| 2 | | Be it enacted by the People of the State of Illinois,
| 3 | | represented in the General Assembly:
| 4 | | Section 5. The Illinois Insurance Code is amended by | 5 | | changing Section 59.1 as follows:
| 6 | | (215 ILCS 5/59.1)
| 7 | | (Section scheduled to be repealed on January 1, 2017)
| 8 | | Sec. 59.1. Conversion to stock company.
| 9 | | (1) Definitions. For the purposes of this Section, the | 10 | | following terms shall
have the meanings indicated:
| 11 | | "Capital stock" means common or preferred stock or any | 12 | | hybrid security or other equity security issued by a converted | 13 | | stock company or other company or entity pursuant to the | 14 | | exercise of subscription rights granted pursuant to the | 15 | | provisions of subparagraph (iii) of paragraph (a) of subsection | 16 | | (3). | 17 | | "Converted stock company" means an Illinois-domiciled | 18 | | stock company that converted from an Illinois-domiciled mutual | 19 | | company under this Section. | 20 | | "Converting mutual company" means a mutual company that has | 21 | | adopted a plan of conversion under this Section.
| 22 | | (a) "Eligible member" means is a member as of the
date
the | 23 | | mutual company's board of directors adopts a plan of |
| | | SB2513 | - 2 - | LRB099 17058 EGJ 41416 b |
|
| 1 | | conversion. A person
insured under a group policy is not an | 2 | | eligible member, unless:
| 3 | | (i) the person is insured or covered under a group | 4 | | life policy or group
annuity contract under which funds are | 5 | | accumulated and allocated to the
respective covered | 6 | | persons;
| 7 | | (ii) the person has the right to direct the | 8 | | application of the funds so
allocated;
| 9 | | (iii) the group policyholder makes no contribution | 10 | | to the premiums or
deposits for the policy or contract; and
| 11 | | (iv) the mutual company has the names and addresses | 12 | | of the persons
covered under the group life policy or group | 13 | | annuity contract.
| 14 | | A person whose policy is issued after the board of | 15 | | directors adopts the
plan but before the plan's effective date | 16 | | is not an eligible member but shall
have those rights set forth | 17 | | in subsection (7) (10) of this Section.
| 18 | | "Mutual company" means an Illinois-domiciled mutual | 19 | | property and casualty insurance company. | 20 | | "Participating policy" means a policy that grants a holder | 21 | | the right to receive dividends if, as, and when declared by the | 22 | | mutual company.
| 23 | | (b) "Converted stock company" is an Illinois domiciled | 24 | | stock company that
converted from an Illinois domiciled | 25 | | mutual company under this Section.
| 26 | | (c) "Plan of conversion" or "plan" is a plan adopted by an |
| | | SB2513 | - 3 - | LRB099 17058 EGJ 41416 b |
|
| 1 | | Illinois
domestic mutual company's board of directors under | 2 | | this Section to convert the
mutual company into an Illinois | 3 | | domiciled stock company.
| 4 | | (d) "Policy" includes an annuity contract.
| 5 | | "Standby investor" means any person that has agreed in | 6 | | writing to purchase all or a portion of the capital stock to be | 7 | | sold in a conversion which is not subscribed by eligible | 8 | | members. | 9 | | "Subscription right" means the nontransferable right to | 10 | | purchase, for a period of not less than 45 days, the stock of | 11 | | the converted stock company or an unaffiliated stock insurance | 12 | | company or other corporation or entity that will acquire the | 13 | | stock of the converted stock company. | 14 | | "Voting member" means a member who is an eligible member | 15 | | and is also a member of the converting mutual company as of a | 16 | | date not more than 90 days before the date of the meeting at | 17 | | which the plan of conversion must be voted upon by members.
| 18 | | (e) "Member" means a person who, on the records of the | 19 | | mutual company
and pursuant to its articles of incorporation or | 20 | | bylaws, is deemed to be a
holder of a membership interest in | 21 | | the mutual company.
| 22 | | (2) Adoption of the plan of conversion by the board of | 23 | | directors .
| 24 | |
(a) A plan of conversion does not become effective | 25 | | unless the converting mutual company seeking to become a | 26 | | converted stock company adopted, by the affirmative vote of |
| | | SB2513 | - 4 - | LRB099 17058 EGJ 41416 b |
|
| 1 | | not less than two-thirds of its governing body, a plan of | 2 | | conversion consistent with the requirements of subsections | 3 | | (3) and (4) of this Section, or the requirements of | 4 | | subsection (5) of this Section. At any time before approval | 5 | | of a plan of conversion by the Director, the converting | 6 | | mutual company, by the affirmative vote of not less than | 7 | | two-thirds of its governing body, may amend or withdraw the | 8 | | plan. A mutual company seeking to convert to a stock | 9 | | company shall, by the
affirmative vote of two-thirds of its | 10 | | board of directors, adopt a plan of
conversion consistent | 11 | | with the requirements of subsection (6) of this Section.
| 12 | | (b) Before the eligible members of a converting mutual | 13 | | company may vote on approval of a plan of conversion, a | 14 | | converting mutual company whose governing body has adopted | 15 | | a plan shall file all of the following documents with the | 16 | | Director within 90 days after adoption of the plan of | 17 | | conversion together with the application fee: At any time | 18 | | before approval of a plan by the Director, the mutual
| 19 | | company by the affirmative vote of two-thirds of its board | 20 | | of directors, may
amend or withdraw the plan.
| 21 | | (i) the plan of conversion, including the | 22 | | independent evaluation required by paragraph (d) of | 23 | | subsection (3); | 24 | | (ii) the form of notice and proxy required by | 25 | | paragraph (g) of this subsection (2); | 26 | | (iii) the form of notice required by subsection (7) |
| | | SB2513 | - 5 - | LRB099 17058 EGJ 41416 b |
|
| 1 | | to persons whose policies are issued after adoption of | 2 | | the plan of conversion but before the plan of | 3 | | conversion's effective date; | 4 | | (iv) the proposed certificate of incorporation and | 5 | | bylaws of the converted stock company; | 6 | | (v) the acquisition of control statement, as | 7 | | required by subsection (3); | 8 | | (vi) the application fee, equal to the greater of | 9 | | $10,000 or an amount equal to one-tenth of 1% of the | 10 | | estimated pro forma market value of the converted stock | 11 | | company as determined in accordance with paragraph (d) | 12 | | of subsection (3); if such value is expressed as a | 13 | | range of values, the application fee must be based upon | 14 | | the midpoint of the range; the application fee is in | 15 | | addition to other direct costs incurred by the Director | 16 | | in reviewing the proposed plan of conversion; for good | 17 | | cause shown, the Director may waive the application | 18 | | fee, in whole or in part, or permit a portion of the | 19 | | application fee to be deferred until completion of the | 20 | | conversion; and | 21 | | (vii) other information as the Director may | 22 | | request. | 23 | | (c) Upon filing with the Director the documents | 24 | | required under paragraph (b) of this subsection (2), the | 25 | | converting mutual company shall send to eligible members a | 26 | | notice advising eligible members of the adoption and filing |
| | | SB2513 | - 6 - | LRB099 17058 EGJ 41416 b |
|
| 1 | | of the plan of conversion, the ability of the eligible | 2 | | members to provide the Director and the converting mutual | 3 | | company with comments on the plan of conversion within 30 | 4 | | days after the date of such notice, and the procedure of | 5 | | providing such comments. | 6 | | (d) The Director shall approve the plan if the Director | 7 | | finds: | 8 | | (i) the plan complies with this Section; | 9 | | (ii) the plan is fair and equitable to the | 10 | | converting mutual company, the members of the | 11 | | converting mutual company, and the eligible members of | 12 | | the converting mutual company; | 13 | | (iii) the plan's method of allocating subscription | 14 | | rights is fair and equitable; | 15 | | (iv) the plan will not otherwise prejudice the | 16 | | interests of the members; and | 17 | | (v) the converted stock company will have the | 18 | | amount of capital and surplus deemed by the Director to | 19 | | be reasonable for its future solvency. | 20 | | (e) At the expense of the converting mutual company, | 21 | | the Director may retain any qualified expert not otherwise | 22 | | a part of the Director's staff, including counsel and | 23 | | financial advisors, to assist in reviewing the plan of | 24 | | conversion and the independent valuation required under | 25 | | paragraph (d) of subsection (3). | 26 | | (f) The Director shall order a hearing on whether the |
| | | SB2513 | - 7 - | LRB099 17058 EGJ 41416 b |
|
| 1 | | terms of the plan of conversion comply with this Section | 2 | | after giving written notice by mail or publication to the | 3 | | converting mutual company and other interested persons, | 4 | | all of whom have the right to appear at the hearing. | 5 | | (g) The Director shall give written notice of any | 6 | | decision to the converting mutual company and, in the event | 7 | | of disapproval, a detailed statement of the reasons for the | 8 | | decision. | 9 | | (h) All voting members must be sent notice of the | 10 | | members' meeting to vote on the plan of conversion no later | 11 | | than 45 days before the meeting. The notice must describe | 12 | | the proposed plan of conversion, must inform the member how | 13 | | the proposed plan of conversion will affect the member's | 14 | | membership rights, must inform the voting member of the | 15 | | voting member's right to vote upon the plan of conversion, | 16 | | and must be sent to each voting member's last-known | 17 | | address, as shown on the records of the converting mutual | 18 | | company. The notice must provide instructions on how the | 19 | | member can obtain, either by mail or electronically, a full | 20 | | copy of the proposed plan of conversion. If the meeting to | 21 | | vote upon the plan of conversion is held during the annual | 22 | | meeting of policyholders, only a combined notice of meeting | 23 | | is required. | 24 | | (i) The plan of conversion must be voted upon by voting | 25 | | members and must be adopted upon receiving the affirmative | 26 | | vote of at least two-thirds of the votes cast by voting |
| | | SB2513 | - 8 - | LRB099 17058 EGJ 41416 b |
|
| 1 | | members at the meeting. Voting members entitled to vote | 2 | | upon the proposed plan of conversion may vote in person or | 3 | | by proxy. The number of votes each voting member may cast | 4 | | must be determined by the bylaws of the converting mutual | 5 | | company. If the bylaws are silent, each voting member may | 6 | | cast one vote. | 7 | | (j) The certificate of incorporation of the converted | 8 | | stock company must be considered at the meeting of the | 9 | | voting members called for the purpose of adopting the plan | 10 | | of conversion and must require for adoption the affirmative | 11 | | vote of at least two-thirds of the votes cast by voting | 12 | | members. | 13 | | (k) Within 30 days after the voting members have | 14 | | approved the plan of conversion in accordance with the | 15 | | requirements of this subsection, the converted stock | 16 | | company shall file with the Director: | 17 | | (i) the minutes of the meeting of the voting | 18 | | members at which the plan of conversion was approved, | 19 | | which must include the record of total votes cast in | 20 | | favor of the plan; and | 21 | | (ii) the certificate of incorporation and bylaws | 22 | | of the converted stock company. | 23 | | (3) Required provisions of the plan of conversion. Approval | 24 | | of the plan of conversion by the Director of Insurance.
| 25 | | (a) The following provisions must be included in the | 26 | | plan of conversion Required findings. After adoption by the |
| | | SB2513 | - 9 - | LRB099 17058 EGJ 41416 b |
|
| 1 | | mutual company's board of
directors, the plan shall be | 2 | | submitted to the Director for review and approval.
The | 3 | | Director shall approve the plan upon finding that :
| 4 | | (i) the reasons for proposed conversion. the | 5 | | provisions of this Section have been complied with;
| 6 | | (ii) the effect of conversion on existing | 7 | | policies, including all of the following: the plan will | 8 | | not prejudice the interests of the members; and
| 9 | | (A) a provision that all policies in force on | 10 | | the effective date of conversion continue to | 11 | | remain in force under the terms of the policies, | 12 | | except that the following rights, to the extent the | 13 | | rights existed in the converting mutual company, | 14 | | must be extinguished on the effective date of the | 15 | | conversion: | 16 | | (1) any voting rights of the policyholders | 17 | | provided under the policies. | 18 | | (2) except as provided under item (B) of | 19 | | this subparagraph (ii), any right to share in | 20 | | the surplus of the converting mutual company, | 21 | | unless such right is expressly provided for | 22 | | under the provisions of the existing policy. | 23 | | (3) any assessment provisions provided for | 24 | | under certain types of policies. | 25 | | (B) a provision that holders of participating | 26 | | policies in effect on the date of conversion |
| | | SB2513 | - 10 - | LRB099 17058 EGJ 41416 b |
|
| 1 | | continue to have a right to receive dividends as | 2 | | provided in the participating policies, if any.
| 3 | | (iii) the grant of subscription rights to eligible | 4 | | members. the plan's method of allocating subscription | 5 | | rights is fair and
equitable.
| 6 | | (A) for purposes of any plan, the transfer of | 7 | | subscription rights from any of the following may | 8 | | not be deemed an unpermitted transfer for purposes | 9 | | of this Section: | 10 | | (1) an individual to such individual and | 11 | | the individual's spouse or children or to a | 12 | | trust or other estate or wealth planning entity | 13 | | established for the benefit of such individual | 14 | | or the individual's spouse or children; | 15 | | (2) an individual to such individual's | 16 | | individual or joint individual retirement | 17 | | account or other tax-qualified retirement | 18 | | plan; | 19 | | (3) an entity to the shareholders, | 20 | | partners, or members of such entity; or | 21 | | (4) the holder of such rights back to the | 22 | | converting mutual company or an unaffiliated | 23 | | corporation or entity that will purchase the | 24 | | stock of the converted stock company as | 25 | | provided in subitem (c) of item (1) of | 26 | | subdivision (B) of this subparagraph (iii). |
| | | SB2513 | - 11 - | LRB099 17058 EGJ 41416 b |
|
| 1 | | (B) the grant of subscription rights to | 2 | | eligible members must include: | 3 | | (1) a provision that each eligible member | 4 | | is to receive, without payment, | 5 | | nontransferable subscription rights to | 6 | | purchase the capital stock of the converted | 7 | | stock company and that, in the aggregate, all | 8 | | eligible members have the right, before the | 9 | | right of any other party, to purchase 100% of | 10 | | the capital stock of the converted stock | 11 | | company, exclusive of any shares of capital | 12 | | stock required to be sold or distributed to the | 13 | | holders of surplus notes, if any, and any | 14 | | capital stock purchased by the company's | 15 | | tax-qualified employee stock benefit plan | 16 | | which is in excess of the pro-forma market | 17 | | value of the capital stock established under | 18 | | paragraph (d) of this subsection (3). As an | 19 | | alternative to subscription rights in the | 20 | | converting mutual company, the plan of | 21 | | conversion may provide that each eligible | 22 | | member is to receive, without payment, | 23 | | nontransferable subscription rights to | 24 | | purchase a portion of the capital stock of one | 25 | | of the following: | 26 | | (a) a corporation or entity organized |
| | | SB2513 | - 12 - | LRB099 17058 EGJ 41416 b |
|
| 1 | | for the purpose of becoming a holding | 2 | | company for the converted stock company; | 3 | | (b) a stock insurance company owned by | 4 | | the mutual company into which the mutual | 5 | | company will be merged; or | 6 | | (c) an unaffiliated stock insurer or | 7 | | other corporation or entity that will | 8 | | purchase the stock of the converted stock | 9 | | company. | 10 | | (2) a provision that subscription rights | 11 | | must be allocated in whole shares among the | 12 | | eligible members using a fair and equitable | 13 | | formula. The formula need not allocate | 14 | | subscription rights to eligible members on a | 15 | | pro rata basis based on premium payments or | 16 | | contributions to surplus, but may take into | 17 | | account how the different classes of policies | 18 | | of the eligible members contributed to the | 19 | | surplus of the mutual company or any other | 20 | | factors that may be fair or equitable. | 21 | | Allocation of subscription rights on a per | 22 | | capita basis are entitled to a presumption that | 23 | | such method is fair, subject to a rebuttal of | 24 | | fairness by clear and convincing evidence. In | 25 | | accordance with paragraph (e) of subsection | 26 | | (2), the Director may retain an independent |
| | | SB2513 | - 13 - | LRB099 17058 EGJ 41416 b |
|
| 1 | | consultant to assist in the determination that | 2 | | the allocation of subscription rights is fair | 3 | | and equitable.
| 4 | | (b) The plan must provide a fair and equitable means | 5 | | for allocating shares of capital stock in the event of an | 6 | | oversubscription to shares by eligible members exercising | 7 | | subscription rights received under subparagraph (iii) of | 8 | | paragraph (a) of this subsection (3). Documents to be | 9 | | filed.
| 10 | | (i) Prior to the members' approval of the plan, a | 11 | | mutual company seeking
the Director's approval of a | 12 | | plan shall file the following documents with the
| 13 | | Director for review and approval:
| 14 | | (A) the plan of conversion, including the | 15 | | independent evaluation of
pro forma market value | 16 | | required by item (f) of subsection (6) of this | 17 | | Section;
| 18 | | (B) the form of notice required by item (b) of | 19 | | subsection (4) of this
Section for eligible | 20 | | members of the meeting to vote on the plan;
| 21 | | (C) any proxies to be solicited from eligible | 22 | | members pursuant to
subitem (ii) of item (c) of | 23 | | subsection (4) of this Section;
| 24 | | (D) the form of notice required by item (a) of | 25 | | subsection (10) of this
Section for persons whose | 26 | | policies are issued after adoption of the plan but
|
| | | SB2513 | - 14 - | LRB099 17058 EGJ 41416 b |
|
| 1 | | before its effective date; and
| 2 | | (E) the proposed articles of incorporation and | 3 | | bylaws of the converted
stock company.
| 4 | | Once filed, these documents shall be approved or | 5 | | disapproved by the
Director within a reasonable time.
| 6 | | (ii) After the members have approved the plan, the | 7 | | converted stock
company shall file the following | 8 | | documents with the Director:
| 9 | | (A) the minutes of the meeting of the members | 10 | | at which the plan was
voted upon; and
| 11 | | (B) the revised articles of incorporation and | 12 | | bylaws of the converted
stock company.
| 13 | | (c) The plan must provide any shares of capital stock | 14 | | not subscribed to by eligible members exercising | 15 | | subscription rights received under subparagraph (iii) of | 16 | | paragraph (a) of this subsection (3) or any other | 17 | | individuals or entities granted subscription rights | 18 | | pursuant to subsection (4) must be sold: Consultant. The | 19 | | Director may retain, at the mutual company's expense,
any | 20 | | qualified expert not otherwise a part of the Director's | 21 | | staff to assist in
reviewing the plan and the independent | 22 | | evaluation of the pro forma market value
which is required | 23 | | by item (f) of subsection (6) of this Section.
| 24 | | (i) in a public offering; however, if the number of | 25 | | shares of capital stock not subscribed by eligible | 26 | | members is so small in number or other factors exist |
| | | SB2513 | - 15 - | LRB099 17058 EGJ 41416 b |
|
| 1 | | that do not warrant the time or expense of a public | 2 | | offering, the plan of conversion may provide for sale | 3 | | of the unsubscribed shares through a private placement | 4 | | or other alternative method approved by the Director | 5 | | which is fair and equitable to eligible members; or | 6 | | (ii) to a standby investor or to another | 7 | | corporation or entity that is participating in the plan | 8 | | of conversion, as provided in subdivision (B) of | 9 | | subparagraph (iii) of paragraph (a) of this subsection | 10 | | (3). | 11 | | (d) The plan must provide for the preparation of a | 12 | | valuation by a qualified independent expert which establishes | 13 | | the dollar value of the capital stock for which subscription | 14 | | rights must be granted pursuant to subparagraph (iii) of | 15 | | paragraph (a) of this subsection (3) which must be equal to the | 16 | | estimated pro forma market value of the converted stock | 17 | | company. The qualified independent expert may, to the extent | 18 | | feasible, determine the pro forma market value by reference to | 19 | | a peer group of stock companies and the application of | 20 | | generally accepted valuation techniques; state the pro forma | 21 | | market value of the converted stock company as a range of | 22 | | value; and establish the value as the value estimated to be | 23 | | necessary to attract full subscription for the shares. | 24 | | (e) The dollar value of a subscription right based upon the | 25 | | application of the Black-Scholes option pricing model or | 26 | | another generally accepted option pricing model. In connection |
| | | SB2513 | - 16 - | LRB099 17058 EGJ 41416 b |
|
| 1 | | with the determination of stock price volatility or other | 2 | | valuation inputs used in option pricing models, the qualified | 3 | | independent expert may assume that the attributes of the | 4 | | converted stock company will be substantially similar to the | 5 | | attributes of the stock of the peer companies used to determine | 6 | | the estimated pro forma market value of the converted stock | 7 | | company. The term of a subscription right is a minimum of 90 | 8 | | days for the sole purpose of determining the value of a | 9 | | subscription right. | 10 | | (f) The plan must provide that each eligible member has the | 11 | | right to require the mutual company to redeem such subscription | 12 | | rights, in lieu of exercising the subscription rights allocated | 13 | | to each eligible member, at a price equal to the number of | 14 | | subscription rights allocated to each eligible member | 15 | | multiplied by the dollar value of the subscription right as | 16 | | determined by the qualified independent expert pursuant to | 17 | | paragraph (d) of this subsection (3). The obligation of the | 18 | | mutual company to redeem subscription rights arises only upon | 19 | | the effective date of the plan. The redemption price payable to | 20 | | each eligible member must be paid to the member within 30 days | 21 | | after the effective date of the plan. Alternatively, the | 22 | | converted stock company may offer each eligible member the | 23 | | option of receiving the redemption amount in cash or having the | 24 | | redemption amount credited against future premium payments. An | 25 | | eligible member that does not exercise the member's | 26 | | subscription rights, and which also fails to affirmatively |
| | | SB2513 | - 17 - | LRB099 17058 EGJ 41416 b |
|
| 1 | | request redemption of the member's subscription rights before | 2 | | the expiration of the subscription offering, nevertheless is | 3 | | deemed to have requested redemption of the member's | 4 | | subscription rights and shall receive the redemption amount in | 5 | | cash in the manner otherwise provided in this paragraph. | 6 | | (g) The plan must set the purchase price per share of | 7 | | capital stock equal to any reasonable amount. However, the | 8 | | minimum subscription amount required of any eligible member may | 9 | | not exceed $500, but the plan may provide that the minimum | 10 | | number of shares any person may purchase pursuant to the plan | 11 | | is 25 shares. The purchase price per share at which capital | 12 | | stock is offered to persons that are not eligible members may | 13 | | be greater than but not less than the purchase price per share | 14 | | at which capital stock is offered to eligible members. | 15 | | (h) The plan must provide that any person or group of | 16 | | persons acting in concert may not acquire, in the public | 17 | | offering or pursuant to the exercise of subscription rights, | 18 | | more than 5% of the capital stock of the converted stock | 19 | | company or the stock of another corporation that is | 20 | | participating in the plan of conversion, as provided in subitem | 21 | | (c) of item (1) of subdivision (B) of subparagraph (iii) of | 22 | | paragraph (a), except with the approval of the Director. This | 23 | | limitation does not apply to any entity that is to purchase | 24 | | 100% of the capital stock of the converted stock company as | 25 | | part of the plan of conversion approved by the Director or to | 26 | | any person that acts as a standby investor for the capital |
| | | SB2513 | - 18 - | LRB099 17058 EGJ 41416 b |
|
| 1 | | stock of the converted stock company for an amount equal to 10% | 2 | | or more of the capital stock of the converted stock company, if | 3 | | in each case such purchase is approved by the Director in | 4 | | accordance with the provisions of Illinois law following the | 5 | | filing of an acquisition of control statement under subsection | 6 | | (3). | 7 | | (i) The plan must provide that a director or officer or | 8 | | person acting in concert with a director or officer of the | 9 | | mutual company may not acquire any capital stock of the | 10 | | converted stock company or the stock of another corporation | 11 | | that is participating in the plan of conversion, as provided in | 12 | | subitem (c) of item (1) of subdivision (B) of subparagraph | 13 | | (iii) of paragraph (a), for 3 years after the effective date of | 14 | | the plan of conversion, except through a broker-dealer, without | 15 | | the permission of the Director. This provision does not | 16 | | prohibit the directors and officers from: | 17 | | (i) making block purchases of 1% or more of the | 18 | | outstanding common stock other than through a | 19 | | broker-dealer if approved in writing by the Department; | 20 | | (ii) exercising subscription rights received under the | 21 | | plan; or | 22 | | (iii) participating in a stock benefit plan approved by | 23 | | shareholders pursuant to paragraph (b) of subsection (9). | 24 | | (j) The plan must provide that a director or officer may | 25 | | not sell stock purchased pursuant to this subsection or | 26 | | paragraph (a) of subsection (4) within one year after the |
| | | SB2513 | - 19 - | LRB099 17058 EGJ 41416 b |
|
| 1 | | effective date of the conversion, except that nothing contained | 2 | | in this Section may be deemed to restrict a transfer of stock | 3 | | by such director or officer if the stock is the stock of an | 4 | | unaffiliated corporation that is participating in the plan of | 5 | | conversion as provided in subitem (c) of item (1) of | 6 | | subdivision (B) of subparagraph (iii) of paragraph (a) and has | 7 | | a class of stock registered under the federal Securities | 8 | | Exchange Act of 1934 (15 U.S.C. 78a et seq.), or if the | 9 | | transfer is to the spouse or minor children of such director or | 10 | | officer, or to a trust or other estate or wealth planning | 11 | | entity established for the benefit of such director or officer, | 12 | | or the spouse or minor children of such director or officer. | 13 | | (k) The plan of conversion must provide the rights, if any, | 14 | | of a holder of a surplus note to participate in the conversion | 15 | | are governed by the terms of the surplus note. | 16 | | (l) The plan of conversion must provide that without the | 17 | | prior approval of the Director, for a period of 2 years from | 18 | | the date of the completion of the conversion, a converted stock | 19 | | company or any corporation participating in the plan of | 20 | | conversion pursuant to subitem (a) or (b) of item (1) of | 21 | | subdivision (B) of subparagraph (iii) of paragraph (a), may not | 22 | | repurchase any of its capital stock from any person. However, | 23 | | this restriction does not apply to a: | 24 | | (i) repurchase on a pro rata basis pursuant to an offer | 25 | | made to all shareholders of the converted stock company or | 26 | | any corporation participating in the plan of conversion |
| | | SB2513 | - 20 - | LRB099 17058 EGJ 41416 b |
|
| 1 | | pursuant to, or subitem (a) or (b) of item (1) of | 2 | | subdivision (B) of subparagraph (iii) of paragraph (a); or | 3 | | (ii) purchase in the open market by a tax-qualified or | 4 | | nontax-qualified employee stock benefit plan in an amount | 5 | | reasonable and appropriate to fund the plan. | 6 | | (4) Optional provisions of the plan of conversion. Approval | 7 | | of the plan by the members.
| 8 | | (a) The plan of conversion may allocate to a | 9 | | tax-qualified employee benefit plan nontransferable | 10 | | subscription rights to purchase up to 10% of the capital | 11 | | stock of the converting mutual company or the stock of | 12 | | another corporation that is participating in the plan of | 13 | | conversion, as provided in subitem (c) of item (1) of | 14 | | subdivision (B) of subparagraph (iii) of paragraph (a) of | 15 | | subsection (3). A tax-qualified employee benefit plan may | 16 | | exercise subscription rights granted under this subsection | 17 | | regardless of the total number of shares purchased by | 18 | | eligible members. If eligible members purchase shares | 19 | | sufficient to yield gross proceeds equal to the maximum of | 20 | | the valuation range established by paragraph (d) of | 21 | | subsection (3), then the tax-qualified employee benefit | 22 | | plan may purchase additional shares of capital stock of the | 23 | | converting mutual company or the stock of another | 24 | | corporation that is participating in the plan of | 25 | | conversion, as provided in subitem (c) of item (1) of | 26 | | subdivision (B) of subparagraph (iii) of paragraph (a) of |
| | | SB2513 | - 21 - | LRB099 17058 EGJ 41416 b |
|
| 1 | | subsection (3) in an amount sufficient to equal 10% of the | 2 | | total shares of capital stock of the converted stock | 3 | | company outstanding. Members entitled to notice of and to | 4 | | vote on the plan. All eligible
members shall be given | 5 | | notice of and an opportunity to vote upon the plan.
| 6 | | (b) The plan may provide that other classes of | 7 | | subscribers approved by the Director shall receive | 8 | | nontransferable subscription rights to purchase capital | 9 | | stock of the converting stock company or the stock of | 10 | | another corporation that is participating in the plan of | 11 | | conversion, as provided in subitem (c) of item (1) of | 12 | | subdivision (B) of subparagraph (iii) of paragraph (a) of | 13 | | subsection (3) provided that such subscription rights are | 14 | | subordinate to the subscription rights of eligible | 15 | | members. Other classes of subscribers that may be approved | 16 | | by the Director include: Notice required. All eligible | 17 | | members shall be given notice of the
members' meeting to | 18 | | vote upon the plan. A copy of the plan or a summary of the
| 19 | | plan shall accompany the notice. The notice shall be mailed | 20 | | to each member's
last known address, as shown on the mutual | 21 | | company's records, within 45 days of
the Director's | 22 | | approval of the plan. The meeting to vote upon the plan | 23 | | shall
not be set for a date less than 30 days after the | 24 | | date when the notice of the
meeting is mailed by the mutual | 25 | | company. If the meeting to vote upon the plan
is held | 26 | | coincident with the mutual company's annual meeting of |
| | | SB2513 | - 22 - | LRB099 17058 EGJ 41416 b |
|
| 1 | | policyholders,
only one combined notice of meeting is | 2 | | required.
| 3 | | (i) members of the converting mutual company which | 4 | | became members after the date fixed for establishing | 5 | | eligible members; | 6 | | (ii) the shareholders of another corporation that | 7 | | is participating in the plan of conversion, as provided | 8 | | in subitem (c) of item (1) of subdivision (B) of | 9 | | subparagraph (iii) of paragraph (a) of subsection (3); | 10 | | or | 11 | | (iii) the shareholders of another corporation that | 12 | | is a party to an acquisition, merger, consolidation, or | 13 | | other similar transaction with the converting mutual | 14 | | company.
| 15 | | (c) Vote required for approval.
| 16 | | (i) After approval by the Director, the plan shall | 17 | | be adopted upon
receiving the affirmative vote of at | 18 | | least two-thirds of the votes cast by
eligible members.
| 19 | | (ii) Members entitled to vote upon the proposed | 20 | | plan may vote in person
or by proxy. Any proxies to be | 21 | | solicited from eligible members shall be filed
with and | 22 | | approved by the Director.
| 23 | | (iii) The number of votes each eligible member may | 24 | | cast shall be
determined by the mutual company's | 25 | | bylaws. If the bylaws are silent, each
eligible member | 26 | | may cast one vote.
|
| | | SB2513 | - 23 - | LRB099 17058 EGJ 41416 b |
|
| 1 | | (5) Alternative plan of conversion. The governing body of | 2 | | the converting mutual company may adopt a plan of conversion | 3 | | that does not rely in whole or in part upon issuing | 4 | | nontransferable subscription rights to members to purchase | 5 | | stock of the converting stock company if the Director finds the | 6 | | plan of conversion does not prejudice the interests of the | 7 | | members, is fair and equitable, and is not inconsistent with | 8 | | the purpose and intent of this Section. Subject to a finding of | 9 | | the Director that an alternative plan of conversion is fair and | 10 | | equitable and is not inconsistent with the purpose and intent | 11 | | of this Section, an alternative plan of conversion may: | 12 | | (a) include the merger of a domestic mutual | 13 | | insurance company into a domestic or foreign stock | 14 | | insurance company; | 15 | | (b) provide for the issuance of transferable or | 16 | | redeemable subscription rights; | 17 | | (c) provide for issuing stock, cash, policyholder | 18 | | credits, or other consideration, or any combination of | 19 | | the foregoing, to policyholders instead of | 20 | | subscription rights; | 21 | | (d) set forth another plan of conversion | 22 | | containing any other provisions approved by the | 23 | | Director. | 24 | | Adoption of revised articles of incorporation. Adoption of the | 25 | | revised
articles of incorporation of the converted stock | 26 | | company is necessary to
implement the plan and shall be |
| | | SB2513 | - 24 - | LRB099 17058 EGJ 41416 b |
|
| 1 | | governed by the applicable provisions of
Section 57 of this | 2 | | Code. For a Class 1 mutual company, the members may adopt
the | 3 | | revised articles of incorporation at the same meeting at which | 4 | | the members
approve the plan. For a Class 2 or 3 mutual | 5 | | company, the revised articles of
incorporation may be adopted | 6 | | solely by the board of directors or trustees, as
provided in | 7 | | Section 57 of this Code.
| 8 | | (5.5) Prior to the completion of a plan of conversion filed | 9 | | by a mutual
company with the Director, no person shall | 10 | | knowingly acquire, make any offer,
or make any announcement of | 11 | | an offer for any security issued or to be issued by
the | 12 | | converting mutual company in connection with its plan of | 13 | | conversion or for
any security issued or to be issued by any | 14 | | other company authorized in
item(c)(i) of subsection (6) of | 15 | | this Section and organized for purposes of
effecting the | 16 | | conversion, except in compliance with the maximum purchase
| 17 | | limitations imposed by item (i) of subsection (6) of this | 18 | | Section or the terms
of the plan of conversion as approved by | 19 | | the Director.
| 20 | | (6) Effective date of the plan of conversion. A plan of | 21 | | conversion is effective when the Director has approved the plan | 22 | | of conversion, the voting members have approved the plan of | 23 | | conversion and adopted the certificate of incorporation of the | 24 | | converted stock company, and the certificate of incorporation | 25 | | is filed with the Illinois Secretary of State. Required | 26 | | provisions in a plan of conversion. The following provisions
|
| | | SB2513 | - 25 - | LRB099 17058 EGJ 41416 b |
|
| 1 | | shall be included in the plan:
| 2 | | (a) Reasons for conversion. The plan shall set forth | 3 | | the reasons for the
proposed conversion.
| 4 | | (b) Effect of conversion on existing policies.
| 5 | | (i) The plan shall provide that all policies in | 6 | | force on the effective
date of conversion shall | 7 | | continue to remain in force under the terms of those
| 8 | | policies, except that any voting rights of the | 9 | | policyholders provided for under
the policies or under | 10 | | this Code and any contingent liability policy | 11 | | provisions
of the type described in Section 55 of this | 12 | | Code shall be extinguished on the
effective date of the | 13 | | conversion.
| 14 | | (ii) The plan shall further provide that holders of | 15 | | participating
policies in effect on the date of | 16 | | conversion shall continue to have the right
to receive | 17 | | dividends as provided in the participating policies, | 18 | | if any.
| 19 | | (iii) Except for a mutual company's participating | 20 | | life policies,
guaranteed renewable
accident and | 21 | | health policies, and non-cancelable accident and | 22 | | health policies,
the converted stock company may issue | 23 | | the insured a nonparticipating policy as
a substitute | 24 | | for the participating policy upon the renewal date of a
| 25 | | participating policy.
| 26 | | (c) Subscription rights to eligible members.
|
| | | SB2513 | - 26 - | LRB099 17058 EGJ 41416 b |
|
| 1 | | (i) The plan shall provide that each eligible | 2 | | member is to receive,
without payment, nontransferable | 3 | | subscription rights to purchase a portion of
the | 4 | | capital stock of the converted stock company. As an | 5 | | alternative to
subscription rights in the converted | 6 | | stock company, the plan may provide that
each eligible | 7 | | member is to receive, without payment, nontransferable
| 8 | | subscription rights to purchase a portion of the | 9 | | capital stock of: (A) a
corporation organized and owned | 10 | | by the mutual company for the purpose of
acquiring or | 11 | | holding all the stock of the converted
stock company; | 12 | | or (B) a
stock insurance company owned by the mutual | 13 | | company into which the mutual
company will be merged.
| 14 | | (ii) The subscription rights shall be allocated in | 15 | | whole shares among
the eligible members using a fair | 16 | | and equitable formula. This formula may but
need not | 17 | | take into account how the different classes of policies | 18 | | of the
eligible members contributed to the surplus of | 19 | | the mutual company.
| 20 | | (d) Oversubscription. The plan shall provide a fair and | 21 | | equitable means
for the allocation of shares of capital | 22 | | stock in the event of an
oversubscription to shares by | 23 | | eligible members exercising subscription rights
received | 24 | | pursuant to item (c) of subsection (6) of this Section.
| 25 | | (e) Undersubscription. The plan shall provide that any | 26 | | shares of capital
stock not subscribed to by eligible |
| | | SB2513 | - 27 - | LRB099 17058 EGJ 41416 b |
|
| 1 | | members exercising subscription rights
received under item | 2 | | (c) of subsection (6) of this Section shall be sold in a
| 3 | | public offering through an underwriter. If the number of | 4 | | shares of capital
stock not
subscribed by eligible members | 5 | | is so small
or the additional time or expense required for | 6 | | a public offering of those
shares would be otherwise | 7 | | unwarranted under the circumstances, the plan of | 8 | | conversion may provide for the
purchase of the unsubscribed | 9 | | shares by a private placement or other alternative
method | 10 | | approved by the Director that is fair and equitable to the | 11 | | eligible
members.
| 12 | | (f) Total price of stock. The plan shall set the total | 13 | | price of the
capital stock equal to the estimated pro forma | 14 | | market value of the converted
stock company based upon an | 15 | | independent evaluation by a qualified person. The
pro forma | 16 | | market value may be the value that is estimated to be | 17 | | necessary to
attract full subscription for the shares as | 18 | | indicated by the independent
evaluation.
| 19 | | (g) Purchase price of each share. The plan shall set | 20 | | the purchase price of
each share of capital stock equal to | 21 | | any reasonable amount that will not
inhibit the purchase of | 22 | | shares by members. The purchase price of each share
shall | 23 | | be uniform for all purchasers except the price may be | 24 | | modified by the
Director by reason of his consideration of | 25 | | a plan for the purchase of
unsubscribed stock pursuant to | 26 | | item (e) of subsection (6) of this Section.
|
| | | SB2513 | - 28 - | LRB099 17058 EGJ 41416 b |
|
| 1 | | (h) Closed block of business for participating life | 2 | | policies of a Class 1
mutual company.
| 3 | | (i) The plan shall provide that a Class 1 mutual | 4 | | company's participating
life policies in force on the | 5 | | effective date of the conversion shall be
operated by | 6 | | the converted stock company for dividend purposes as a | 7 | | closed block
of participating business except that any | 8 | | or all classes of group participating
policies may be | 9 | | excluded from the closed block.
| 10 | | (ii) The plan shall establish one or more | 11 | | segregated accounts for the
benefit of the closed block | 12 | | of business and shall allocate to those segregated
| 13 | | accounts enough assets of the mutual company so that | 14 | | the assets together with
the revenue from the closed | 15 | | block of business are sufficient to support the
closed | 16 | | block including, but not limited to, the payment of | 17 | | claims, expenses,
taxes, and any dividends that are | 18 | | provided for under the terms of the
participating | 19 | | policies with appropriate adjustments in the dividends | 20 | | for
experience changes. The plan shall be accompanied | 21 | | by an opinion of a qualified
actuary or an appointed | 22 | | actuary who meets the standards set forth in the
| 23 | | insurance laws or regulations for the submission of | 24 | | actuarial opinions as to
the adequacy of reserves or | 25 | | assets. The opinion shall relate to the adequacy
of the | 26 | | assets allocated to the segregated accounts in support |
| | | SB2513 | - 29 - | LRB099 17058 EGJ 41416 b |
|
| 1 | | of the closed
block of business. The actuarial opinion | 2 | | shall be based on methods of analysis
deemed | 3 | | appropriate for those purposes by the Actuarial | 4 | | Standards Board.
| 5 | | (iii) The amount of assets allocated to the | 6 | | segregated accounts of the
closed block shall be based | 7 | | upon the mutual company's last annual statement
that is | 8 | | updated to the effective date of the conversion.
| 9 | | (iv) The converted stock company shall keep a | 10 | | separate accounting for
the closed block and shall make | 11 | | and include in the annual statement to be filed
with | 12 | | the Director each year a separate statement showing the | 13 | | gains, losses, and
expenses properly attributable to | 14 | | the closed block.
| 15 | | (v) Periodically, upon the Director's approval, | 16 | | those assets allocated
to the closed block as provided | 17 | | in subitem (ii) of item (h) of subsection (6)
of this | 18 | | Section that are in excess of the amount of assets | 19 | | necessary to support
the remaining policies in the | 20 | | closed block shall revert to the benefit of the
| 21 | | converted stock company.
| 22 | | (vi) The Director may waive the requirement for the | 23 | | establishment of a
closed block of business if the | 24 | | Director deems it to be in the best interests
of the | 25 | | participating policyholders of the mutual insurer to | 26 | | do so.
|
| | | SB2513 | - 30 - | LRB099 17058 EGJ 41416 b |
|
| 1 | | (i) Limitations on acquisition of control. The plan | 2 | | shall provide that any
one person or group of persons | 3 | | acting in concert may not acquire, through
public offering | 4 | | or subscription rights, more than 5% of the capital stock | 5 | | of
the converted stock company for a period of 5 years from | 6 | | the effective date of
the plan except with the approval of | 7 | | the Director. This limitation does not
apply to any entity | 8 | | that is to purchase 100% of the capital stock of the
| 9 | | converted company as part of the plan of conversion | 10 | | approved by the Director or
to a purchase of stock by a | 11 | | tax-qualified employee benefit plan pursuant to
| 12 | | subscription grants granted to that plan as authorized | 13 | | under item (b) of
subsection (7) of this Section and to a | 14 | | purchase of unsubscribed stock pursuant
to item (e) of | 15 | | subsection (6) of this Section.
| 16 | | (7) Rights of members whose policies are issued after | 17 | | adoption of the plan of conversion and before effective date. | 18 | | Optional provisions in a plan of conversion. The following | 19 | | provisions
may be included in the plan:
| 20 | | (a) All members whose policies are issued after the | 21 | | proposed plan of conversion has been adopted by the | 22 | | governing body and before the effective date of the plan of | 23 | | conversion must be sent a written notice regarding the plan | 24 | | of conversion upon issuance of such policy. | 25 | | (b) Except as provided in paragraph (c) of this | 26 | | subsection (7), each member of a property or casualty |
| | | SB2513 | - 31 - | LRB099 17058 EGJ 41416 b |
|
| 1 | | insurance company entitled to receive the notice provided | 2 | | for in paragraph (a) of this subsection (7) must be advised | 3 | | of the member's right of cancellation and to a pro rata | 4 | | refund of unearned premiums. | 5 | | (c) A member of a property or casualty insurance | 6 | | company who has made or filed a claim under such member's | 7 | | insurance policy is not entitled to any right to receive | 8 | | any refund under paragraph (b) of this subsection (7). A | 9 | | person that has exercised the rights provided by paragraph | 10 | | (b) of this subsection (7) is not entitled to make or file | 11 | | any claim under such person's insurance policy.
| 12 | | (a) Directors and officers subscription rights.
| 13 | | (i) The plan may provide that the directors and | 14 | | officers of the mutual
company shall receive, without | 15 | | payment, nontransferable subscription rights to
| 16 | | purchase capital stock of the converted stock company | 17 | | or the stock of another
corporation that is | 18 | | participating in the conversion plan as provided in | 19 | | subitem
(i) of item (c) of subsection (6) of this | 20 | | Section. Those subscription rights
shall be allocated | 21 | | among the directors and officers by a fair and | 22 | | equitable
formula.
| 23 | | (ii) The total number of shares that may be | 24 | | purchased under subitem (i)
of item (a) of subsection | 25 | | (7) of this Section may not exceed 35% of the total
| 26 | | number of shares to be issued in the case of a mutual |
| | | SB2513 | - 32 - | LRB099 17058 EGJ 41416 b |
|
| 1 | | company with total assets
of less than $50 million or | 2 | | 25% of the total shares to be issued in the case of
a | 3 | | mutual company with total assets of more than $500 | 4 | | million. For mutual
companies with total assets | 5 | | between $50 million and $500 million, the total
number | 6 | | of shares that may be purchased shall be interpolated.
| 7 | | (iii) Stock purchased by a director or officer | 8 | | under subitem (i) of item
(a) of subsection (7) of this | 9 | | Section may not be sold within one year following
the | 10 | | effective date of the conversion.
| 11 | | (iv) The plan may also provide that a director or | 12 | | officer or person
acting in concert with a director or | 13 | | officer of the mutual company may not
acquire any | 14 | | capital stock of the converted stock company for 3 | 15 | | years after the
effective date of the plan, except | 16 | | through a broker or dealer, without the
permission of | 17 | | the Director. That provision may not apply to prohibit | 18 | | the
directors and officers from purchasing stock | 19 | | through subscription rights
received in the plan under | 20 | | subitem (i) of item (a) of subsection (7) of this
| 21 | | Section.
| 22 | | (b) Tax-qualified employee stock benefit plan. The | 23 | | plan may allocate to a
tax-qualified employee benefit plan | 24 | | nontransferable subscription rights to
purchase up to 10% | 25 | | of the capital stock of the converted stock company or the
| 26 | | stock of another corporation that is participating in the |
| | | SB2513 | - 33 - | LRB099 17058 EGJ 41416 b |
|
| 1 | | conversion plan as
provided in subitem (i) of item (c) of | 2 | | subsection (6) of this Section. That
employee benefit plan | 3 | | shall be entitled to exercise its subscription rights
| 4 | | regardless of the amount of shares purchased by other | 5 | | persons.
| 6 | | (8) Corporate existence. Alternative plan of conversion. | 7 | | The board of directors may adopt a plan
of conversion that does | 8 | | not rely in whole or in part upon the issuance to
members of | 9 | | non-transferable subscription rights to purchase stock of the
| 10 | | converted stock company if the Director finds that the plan | 11 | | does not prejudice
the interests of the members, is fair and | 12 | | equitable, and is based upon an
independent appraisal of the | 13 | | market value of the mutual company by a qualified
person and a | 14 | | fair and equitable allocation of any consideration to be given
| 15 | | eligible members. The Director may retain, at the mutual | 16 | | company's expense,
any qualified expert not otherwise a part of | 17 | | the Director's staff to assist in
reviewing whether the plan | 18 | | may be approved by the Director.
| 19 | | (a) On the effective date of the conversion, the | 20 | | corporate existence of the converting mutual company | 21 | | continues in the converted stock company. On the effective | 22 | | date of the conversion, all the assets, rights, franchises, | 23 | | and interests of the converting mutual company in and to | 24 | | every species of property, real, personal, and mixed, and | 25 | | any accompanying things in action, are vested in the | 26 | | converted stock company without any deed or transfer and |
| | | SB2513 | - 34 - | LRB099 17058 EGJ 41416 b |
|
| 1 | | the converted stock company assumes all the obligations and | 2 | | liabilities of the converting mutual company. | 3 | | (b) Unless otherwise specified in the plan of | 4 | | conversion, the individuals who are directors and officers | 5 | | of the converting mutual company on the effective date of | 6 | | the conversion shall serve as directors and officers of the | 7 | | converted stock company until new directors and officers of | 8 | | the converted stock company are elected pursuant to the | 9 | | certificate of incorporation and bylaws of the converted | 10 | | stock company. | 11 | | (9) Conflict of interest. Effective date of the plan. A | 12 | | plan shall become effective when the
Director has approved the | 13 | | plan, the members have approved the plan, and the
revised | 14 | | articles of incorporation have been adopted.
| 15 | | (a) A director, officer, agent, or employee of the | 16 | | converting mutual company may not receive any fee, | 17 | | commission, or other valuable consideration, other than | 18 | | such person's usual regular salary or compensation, for | 19 | | aiding, promoting, or assisting in a conversion under this | 20 | | Section. This provision does not prohibit the payment of | 21 | | reasonable fees and compensation to attorneys, | 22 | | accountants, financial advisors, and actuaries for | 23 | | services performed in the independent practice of their | 24 | | professions, even if the attorney, accountant, financial | 25 | | advisor, or actuary is also a director or officer of the | 26 | | converting mutual company. |
| | | SB2513 | - 35 - | LRB099 17058 EGJ 41416 b |
|
| 1 | | (b) For a period of 2 years after the effective date of | 2 | | the conversion, a converted stock company may not implement | 3 | | any nontax-qualified stock benefit plan unless the plan is | 4 | | approved by a majority of votes cast at a duly convened | 5 | | meeting of shareholders held not less than 6 months after | 6 | | the effective date of the conversion. | 7 | | (c) All the costs and expenses connected with a plan of | 8 | | conversion must be paid for or reimbursed by the converting | 9 | | mutual company or the converted stock company. However, if | 10 | | the plan of conversion provides for participation by | 11 | | another entity in the plan pursuant to item (1) of | 12 | | subdivision (B) of subparagraph (iii) of paragraph (a) of | 13 | | subsection (3), such entity may pay for or reimburse all or | 14 | | a portion of the costs and expenses connected with the plan | 15 | | of conversion. | 16 | | (10) Failure to give notice. If the converting mutual | 17 | | company complies substantially and in good faith with the | 18 | | notice requirements of this Section, the failure of the | 19 | | converting mutual company to send a member the required notice | 20 | | does not impair the validity of any action taken under this | 21 | | Section. Rights of members whose policies are issued after | 22 | | adoption of the plan
and before its effective date.
| 23 | | (a) Notice. All members whose policies are issued after | 24 | | the proposed plan
has been adopted by the board of | 25 | | directors and before the effective date of the
plan shall | 26 | | be given written notice of the plan of conversion. The |
| | | SB2513 | - 36 - | LRB099 17058 EGJ 41416 b |
|
| 1 | | notice shall
specify the member's right to rescind that | 2 | | policy as provided in item (b) of
subsection (10) of this | 3 | | Section within 45 days after the effective date of the
| 4 | | plan. A copy of the plan or a summary of the plan shall | 5 | | accompany the notice.
The form of the notice shall be filed | 6 | | with and approved by the Director.
| 7 | | (b) Option to rescind. Any member entitled to receive | 8 | | the notice described
in item (a) of subsection (10) of this | 9 | | Section shall be entitled to rescind his
or her policy and | 10 | | receive a full refund of any amounts paid for the policy or
| 11 | | contract within 10 days after the receipt of the notice.
| 12 | | (11) Limitation on actions. Any action challenging the | 13 | | validity of or arising out of acts taken or proposed to be | 14 | | taken under this Section must be commenced on or before the | 15 | | later of: Corporate existence.
| 16 | | (a) Sixty days after the approval of the plan of | 17 | | conversion by the Director; or Upon the conversion of a | 18 | | mutual company to a converted stock company
according to | 19 | | the provisions of this Section, the corporate existence of | 20 | | the
mutual company shall be continued in the converted | 21 | | stock company. All the
rights, franchises, and interests of | 22 | | the mutual company in and to every type of
property, real, | 23 | | personal, and mixed, and things in action thereunto | 24 | | belonging,
is deemed transferred to and vested in the | 25 | | converted stock company without any
deed or transfer. | 26 | | Simultaneously, the converted stock company is deemed to
|
| | | SB2513 | - 37 - | LRB099 17058 EGJ 41416 b |
|
| 1 | | have assumed all the obligations and liabilities of the | 2 | | mutual company.
| 3 | | (b) Thirty days after notice of the meeting of voting | 4 | | members to approve the plan of conversion is first mailed | 5 | | or delivered to voting members or posted on the website of | 6 | | the converting mutual company. The directors and officers | 7 | | of the mutual company, unless otherwise
specified in the | 8 | | plan of conversion, shall serve as directors and officers | 9 | | of
the converted stock company until new directors and | 10 | | officers of the converted
stock company are duly elected | 11 | | pursuant to the articles of incorporation and
bylaws of the | 12 | | converted stock company.
| 13 | | (12) Converting mutual company insolvent or in hazardous | 14 | | financial condition. Conflict of interest. No director, | 15 | | officer, agent, or employee of the
mutual company or any other | 16 | | person shall receive any fee, commission, or other
valuable | 17 | | consideration, other than his or her usual regular salary and
| 18 | | compensation, for in any manner aiding, promoting, or assisting | 19 | | in the
conversion except as set forth in the plan approved by | 20 | | the Director. This
provision does not prohibit the payment of | 21 | | reasonable fees and compensation to
attorneys, accountants, | 22 | | and actuaries for services performed in the independent
| 23 | | practice of their professions, even if the attorney, | 24 | | accountant, or actuary is
also a Director of the mutual | 25 | | company.
| 26 | | (a) If a converting mutual company seeking to convert |
| | | SB2513 | - 38 - | LRB099 17058 EGJ 41416 b |
|
| 1 | | under this Section is insolvent or is in hazardous | 2 | | financial condition according to information supplied in | 3 | | the mutual company's most recent annual or quarterly | 4 | | statement filed with the Department or as determined by a | 5 | | financial examination performed by the Department, the | 6 | | requirements of this Section, including notice to and | 7 | | policyholder approval of the plan of conversion, may be | 8 | | waived at the discretion of the Director. If a waiver under | 9 | | this Section is ordered by the Director, the converting | 10 | | mutual company shall specify in the mutual company's plan | 11 | | of conversion: | 12 | | (i) the method and basis for the issuance of the | 13 | | converted stock company's shares of its capital stock | 14 | | to an independent party in connection with an | 15 | | investment by the independent party in an amount | 16 | | sufficient to restore the converted stock company to a | 17 | | sound financial condition. | 18 | | (ii) that the conversion must be accomplished | 19 | | without granting subscription rights or other | 20 | | consideration to policyholders. | 21 | | (b) This subsection (12) does not alter or limit the | 22 | | authority of the Director under any other provisions of | 23 | | law, including receivership and liquidation provisions | 24 | | applicable to insurance companies. | 25 | | (13) Rules.
The Director may adopt rules to administer and | 26 | | enforce this Section. Costs and expenses. All the costs and |
| | | SB2513 | - 39 - | LRB099 17058 EGJ 41416 b |
|
| 1 | | expenses connected with a plan of
conversion shall be paid for | 2 | | or reimbursed by the mutual company or the
converted stock | 3 | | company except where the plan provides either for a holding
| 4 | | company to acquire the stock of the converted stock company or | 5 | | for the merger
of the mutual company into a stock insurance | 6 | | company as provided in subitem (i)
of item (c) of subsection | 7 | | (6) of this Section. In those cases, the acquiring
holding | 8 | | company or the stock insurance company shall pay for or | 9 | | reimburse all
the costs and expenses connected with the plan.
| 10 | | (14) Laws applicable to converted stock company. Failure to | 11 | | give notice. If the mutual company complies substantially
and | 12 | | in good faith with the notice requirements of this Section, the | 13 | | mutual
company's failure to give any member or members any | 14 | | required notice does not
impair the validity of any action | 15 | | taken under this Section.
| 16 | | (a) A converting mutual company is not permitted to | 17 | | convert under this Section if, as a direct result of the | 18 | | conversion, any person or any affiliate thereof acquires | 19 | | control of the converted stock company, unless that person | 20 | | and such person's affiliates comply with the provisions of | 21 | | state law regarding the acquisition of control of an | 22 | | insurance company. | 23 | | (b) Except as otherwise specified in this Section, a | 24 | | converted stock company has and may exercise all the rights | 25 | | and privileges and is subject to all of the requirements | 26 | | and regulations imposed on stock insurance companies under |
| | | SB2513 | - 40 - | LRB099 17058 EGJ 41416 b |
|
| 1 | | state law relating to the regulation and supervision of | 2 | | insurance companies, but the converting stock company may | 3 | | not exercise rights or privileges that other stock | 4 | | insurance companies may not exercise. | 5 | | (15) Commencement of business as a stock insurance company.
| 6 | | A converting mutual company may not engage in the business of | 7 | | insurance as a stock company until the converting stock company | 8 | | complies with all provisions of this Section. Limitation of | 9 | | actions. Any action challenging the validity of or
arising out | 10 | | of acts taken or proposed to be taken under this Section
shall | 11 | | be commenced within 30 days after the effective date of the | 12 | | plan.
| 13 | | (16) Amendment of policies.
A mutual company, by | 14 | | endorsement or rider approved by the Director and sent to the | 15 | | policyholder, may simultaneously with or at any time after the | 16 | | effective date of the conversion amend any outstanding | 17 | | insurance policy for the purpose of extinguishing the | 18 | | membership rights of such policyholder. | 19 | | (17) Prohibition on acquisitions of control.
Except as | 20 | | otherwise specifically provided in subsection (3), from the | 21 | | date a plan of conversion is adopted by the governing body of a | 22 | | converting mutual company until 3 years after the effective | 23 | | date of the plan of conversion, a person may not directly or | 24 | | indirectly offer to acquire, make any announcement to acquire, | 25 | | or acquire in any manner, including making a filing with the | 26 | | Department for such acquisition under a statute or regulation |
| | | SB2513 | - 41 - | LRB099 17058 EGJ 41416 b |
|
| 1 | | of this state, the beneficial ownership of 10% or more of a | 2 | | class of a voting security of the converted stock company or of | 3 | | a person that controls the voting securities of the converted | 4 | | stock company, unless the converted stock company or a person | 5 | | that controls the voting securities of the converted stock | 6 | | company consents to such acquisition and such acquisition is | 7 | | otherwise approved by the Director. | 8 | | (Source: P.A. 98-755, eff. 7-16-14.)
| 9 | | Section 99. Effective date. This Act takes effect January | 10 | | 1, 2017.
|
|