By Brimer H.B. No. 2842
Substitute the following for H.B. No. 2842:
By Averitt C.S.H.B. No. 2842
A BILL TO BE ENTITLED
1-1 AN ACT
1-2 relating to the conversion of mutual insurance companies to stock
1-3 insurance companies.
1-4 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
1-5 SECTION 1. Chapter 15, Insurance Code, is amended by adding
1-6 Article 15.22 to read as follows:
1-7 Art. 15.22. CONVERSION TO STOCK INSURANCE COMPANY
1-8 Sec. 1. DEFINITIONS. In this article:
1-9 (1) "Conversion plan" means the plan adopted under
1-10 this article by the board of directors of a mutual insurance
1-11 company to convert the mutual insurance company into a stock
1-12 company.
1-13 (2) "Converted stock company" means a domestic stock
1-14 insurance company that converts under this article from a domestic
1-15 mutual insurance company.
1-16 (3) "Eligible member" means a member of a mutual
1-17 insurance company whose policy is in force on the date that the
1-18 mutual insurance company's board of directors adopts a conversion
1-19 plan. The term does not include a person:
1-20 (A) insured under a group policy; or
1-21 (B) whose policy becomes effective after the
1-22 date that the board of directors adopts the conversion plan but
1-23 before the conversion plan's effective date.
1-24 (4) "Mutual insurance company" means a domestic
2-1 mutual insurance company.
2-2 (5) "Participating policy" means a policy that grants
2-3 a holder the right to receive dividends if, as, and when declared
2-4 by the mutual insurance company.
2-5 (6) "Stock company" means a stock insurance company
2-6 that meets all of the requirements for admission to do business as
2-7 a domestic insurer in this state.
2-8 Sec. 2. ADOPTION OF CONVERSION PLAN. (a) A mutual
2-9 insurance company that seeks to convert to a stock company must
2-10 adopt, by the affirmative vote of not less than two-thirds of the
2-11 members of its board of directors, a conversion plan consistent
2-12 with the requirements of this article. A mutual insurance company
2-13 may not engage in the business of insurance as a stock company
2-14 until it complies with the requirements of this article.
2-15 (b) Before the eligible members of a mutual insurance
2-16 company may vote on approval of a conversion plan, the mutual
2-17 insurance company must comply with Section 3 of this article.
2-18 Sec. 3. PLAN INFORMATION FILED WITH COMMISSIONER;
2-19 COMMISSIONER POWERS AND DUTIES. (a) Not later than the 90th day
2-20 after the date on which a mutual insurance company's board of
2-21 directors adopts a conversion plan, the company shall file with the
2-22 commissioner:
2-23 (1) a copy of the documents relating to the conversion
2-24 plan, including the independent evaluation of pro forma market
2-25 value required by Section 10(b) of this article;
2-26 (2) the form of notice required by Section 5 of this
2-27 article;
3-1 (3) the form of proxy to be solicited from eligible
3-2 members under Section 6(b) of this article;
3-3 (4) the form of notice required by Section 16 of this
3-4 article to persons whose policies are issued after adoption of the
3-5 conversion plan but before the effective date of the conversion
3-6 plan;
3-7 (5) the proposed amended or restated articles of
3-8 incorporation of the converted stock company;
3-9 (6) a statement regarding acquisition of control, if
3-10 applicable, as required by article 21.49-1, Insurance Code; and
3-11 (7) any other information requested by the
3-12 commissioner.
3-13 (b) Except as otherwise provided by this subsection, the
3-14 commissioner shall approve or disapprove a conversion plan not
3-15 later than the 60th day after the first day on which all the
3-16 documents required under Subsection (a) of this section are filed
3-17 with the commissioner. The commissioner may extend the time for
3-18 approval or disapproval by an additional 30 days on written notice
3-19 to the mutual insurance company. The commissioner may not extend
3-20 the time for approval or disapproval beyond this time period unless
3-21 he finds it necessary to retain a qualified expert pursuant to
3-22 subsection (d) of this section, in which case he may extend the
3-23 time for review for an additional 60 days beyond the initial 60 day
3-24 period. The commissioner shall immediately give written notice to
3-25 the mutual insurance company of the commissioner's decision and, in
3-26 the event of disapproval, a detailed statement of the reasons for
3-27 the adverse decision.
4-1 (c) The commissioner shall approve a conversion plan if the
4-2 commissioner finds that:
4-3 (1) the conversion plan complies with this article;
4-4 (2) the conversion plan's method of allocating
4-5 subscription rights or other value is fair and equitable; and
4-6 (3) the converted stock company would satisfy the
4-7 current requirements applicable to a domestic stock company for a
4-8 certificate of authority.
4-9 (d) The commissioner may retain, at the mutual insurance
4-10 company's expense, a qualified expert not otherwise a part of the
4-11 commissioner's staff to assist the commissioner in reviewing the
4-12 conversion plan and the independent evaluation of the pro forma
4-13 market value required under Section 10(b) of this article.
4-14 (e) The commissioner may hold a hearing on whether the terms
4-15 of the conversion plan comply with this article after giving
4-16 written notice to the mutual insurance company and other interested
4-17 persons, all of whom have the right to appear at the hearing.
4-18 Notice to interested persons who have not filed an appearance in
4-19 the matter may be made through publication in the "Texas
4-20 Register."
4-21 Sec. 4. AMENDMENTS; WITHDRAWAL OF PLAN. At any time before
4-22 the conversion plan becomes effective, the mutual insurance
4-23 company, by the affirmative vote of not less than two-thirds of the
4-24 members of its board of directors, may amend or withdraw the
4-25 conversion plan.
4-26 Sec. 5. NOTICE TO ELIGIBLE MEMBERS; COMMENTS. (a) Within
4-27 10 business days of filing of the documents required under Section
5-1 3(a) of this article with the commissioner, the mutual insurance
5-2 company shall send to each eligible member a notice advising the
5-3 eligible member of the adoption and filing of the conversion plan
5-4 and of the member's right to provide to the commissioner and the
5-5 mutual insurance company comments on the plan. The notice must
5-6 include a description of the procedure to be used in making
5-7 comments.
5-8 (b) An eligible member who elects to make comments must make
5-9 the comments in writing not later than the 30th day after the date
5-10 on which the notice is sent.
5-11 (c) Within 60 days of the commissioner's approval of the
5-12 plan, the mutual insurance company also shall send to each eligible
5-13 member notice of the members meeting to vote on the conversion
5-14 plan. The notice must be sent to the member's last known address,
5-15 as shown on the mutual insurance company's records, before the 30th
5-16 day preceding the date set for the meeting. The notice must:
5-17 (1) briefly but fairly describe the proposed
5-18 conversion plan; and
5-19 (2) inform the member of the member's right to vote on
5-20 the conversion plan.
5-21 (d) If the meeting to vote on the conversion plan is held
5-22 during the mutual insurance company's annual meeting of
5-23 policyholders, only a combined meeting notice is required.
5-24 Sec. 6. ELECTION; ADOPTION OF PLAN. (a) A conversion plan
5-25 is adopted upon receiving the affirmative vote of at least
5-26 two-thirds of the votes cast by eligible members at a duly convened
5-27 meeting to consider the plan of conversion.
6-1 (b) Members entitled to vote on the proposed conversion plan
6-2 may vote in person or by proxy. The number of votes each eligible
6-3 member may cast shall be determined by the mutual insurance
6-4 company's bylaws. If the bylaws are silent, each eligible member
6-5 may cast one vote.
6-6 (c) At the meeting held to vote on the conversion plan, the
6-7 members shall also consider the adoption of amended or restated
6-8 articles of incorporation. Adoption of the amended articles
6-9 requires the affirmative vote of at least two-thirds of the votes
6-10 cast by eligible members.
6-11 Sec. 7. FILING BY CONVERTED STOCK COMPANY. Not later than
6-12 the 30th day after the date on which the eligible members adopt the
6-13 conversion plan at a duly convened meeting, the converted stock
6-14 company shall file with the commissioner:
6-15 (1) the minutes of the meeting of the eligible members
6-16 at which the conversion plan was adopted; and
6-17 (2) the amended or restated articles of incorporation
6-18 and of bylaws of the converted stock company.
6-19 Sec. 8. REQUIRED PROVISIONS IN GENERAL. (a) Each
6-20 conversion plan must include the provisions required by this
6-21 article.
6-22 (b) Each policy in effect on the effective date of the
6-23 conversion remains in effect under the terms of that policy, except
6-24 that the following rights, to the extent they existed in the mutual
6-25 insurance company, are extinguished on the effective date of the
6-26 conversion:
6-27 (1) any voting rights of policyholders provided under
7-1 the policy;
7-2 (2) except as provided in subsection (c) of this
7-3 section, a right to share in the surplus or profits of the mutual
7-4 insurance company; and
7-5 (3) any assessment provisions provided under the
7-6 policy.
7-7 (c) The holder of a participating policy in effect on the
7-8 date of the conversion continues to have a right to receive
7-9 dividends as provided by the participating policy.
7-10 (d) Except for the mutual insurance company's guaranteed
7-11 renewable accident and health policies and guaranteed renewable,
7-12 noncancelable accident and health policies, on the renewal date of
7-13 a participating policy, the converted stock company may issue the
7-14 insured a nonparticipating policy as a substitute for the
7-15 participating policy.
7-16 Sec. 9. SUBSCRIPTION RIGHTS. (a) Except for an alternative
7-17 plan under Section 14, each conversion plan must specify the
7-18 subscription rights of eligible members.
7-19 (b) The plan must include a provision that:
7-20 (1) each eligible member is to receive, without
7-21 payment by the member, nontransferable subscription rights to
7-22 purchase a portion of the capital stock of the converted stock
7-23 company; and
7-24 (2) in the aggregate, all eligible members have the
7-25 right, before the right of any other party, to purchase 100 percent
7-26 of the capital stock of the converted company, after provision for:
7-27 (A) capital stock required to be sold or
8-1 distributed to the holders of surplus notes, if any;
8-2 (B) capital stock purchased by the company's
8-3 tax-qualified employee stock benefit plan as permitted by Section
8-4 13(c) of this article; and
8-5 (C) capital stock acquired by the mutual
8-6 insurance company's directors and officers, as permitted by section
8-7 13(a) of this article.
8-8 (c) As an alternative to subscription rights in the
8-9 converted stock company, the conversion plan may provide that each
8-10 eligible member is to receive, without payment by the member,
8-11 nontransferable subscription rights to purchase a portion of the
8-12 capital stock of one of the following:
8-13 (1) a corporation organized for the purpose of
8-14 purchasing and holding all the stock of the converted stock
8-15 company;
8-16 (2) a stock insurance company owned by the mutual
8-17 insurance company into which the mutual insurance company is to be
8-18 merged; or
8-19 (3) an unaffiliated stock insurance company or other
8-20 corporation that is to purchase all the stock of the converted
8-21 stock company.
8-22 (d) The conversion plan must provide that the subscription
8-23 rights are allocated in whole shares among the eligible members
8-24 using a fair and equitable formula. The formula may consider, but
8-25 is not required to consider, how the different classes of policies
8-26 of the eligible members contributed to the surplus of the mutual
8-27 insurance company or any other factors that may be fair or
9-1 equitable as determined by the board of directors.
9-2 (e) The conversion plan must provide a fair and equitable
9-3 means for allocating shares of capital stock in the event of an
9-4 oversubscription to shares by eligible members exercising
9-5 subscription rights under this section.
9-6 Sec. 10. SALE OF CAPITAL STOCK. (a) The conversion plan
9-7 must provide that any shares of capital stock not sold or
9-8 distributed to holders of surplus notes, subscribed to by a tax
9-9 qualified employee benefit plan, as permitted under section 13(c),
9-10 subscribed to by directors and officers, as permitted under section
9-11 13(a), or subscribed to by eligible members exercising subscription
9-12 rights under Section 9 of this article shall be sold in a private
9-13 placement, public offering, or other alternative method approved by
9-14 the Commissioner.
9-15 (b) The conversion plan must set the total price of the
9-16 capital stock in an amount equal to the estimated pro forma market
9-17 value of the converted stock company based on an independent
9-18 valuation by a qualified expert giving consideration to the amount
9-19 of capital deemed necessary by the board of directors to be raised
9-20 by the company. The pro forma market value may be the value
9-21 estimated to be necessary to attract full subscription for the
9-22 shares, as indicated by the independent valuation, and may be
9-23 stated as a range of values.
9-24 (c) The conversion plan shall set the purchase price per
9-25 share of capital stock at any reasonable amount. The purchase
9-26 price per share need not be the same for each class of purchaser;
9-27 provided, however, that eligible members purchasing stock pursuant
10-1 to subscription rights received under Section 9 hereof shall have
10-2 the right to purchase shares at the lowest available purchase price
10-3 under the plan.
10-4 (d) The conversion plan must provide that a person or group
10-5 of persons acting in concert may not acquire, in the public or
10-6 private offering or through the exercise of subscription rights,
10-7 more than ten percent of the capital stock of the converted stock
10-8 company except with the approval of the commissioner. This
10-9 limitation does not apply to an entity that purchases 100 percent
10-10 of the capital stock of the converted company as part of the
10-11 conversion plan approved by the commissioner.
10-12 (e) Except as otherwise provided in this article, the
10-13 conversion plan must provide that a director or officer of the
10-14 mutual insurance company, or a person acting in concert with a
10-15 director or officer, may not acquire without the permission of the
10-16 commissioner, any capital stock of the converted stock company or
10-17 the stock of another corporation that is participating in the
10-18 conversion plan before the third anniversary of the effective date
10-19 of the conversion, except through a broker-dealer. This subsection
10-20 does not prohibit a director or officer from:
10-21 (1) making purchases through the exercise of
10-22 subscription rights received under the conversion plan; or
10-23 (2) participating in a stock benefit plan permitted by
10-24 Section 13(c) of this article or approved by the eligible members
10-25 pursuant to Section 6.
10-26 Sec. 11. LIMITATION ON RESALE. The conversion plan must
10-27 provide that a director or officer may not sell stock purchased
11-1 pursuant to the conversion plan before the first anniversary of the
11-2 effective date of the conversion; provided however, the conversion
11-3 plan may provide for the purchase or redemption of stock in the
11-4 event that a director or officer is no longer associated with the
11-5 converted stock company during such period.
11-6 Sec. 12. HOLDER OF SURPLUS NOTE. The conversion plan must
11-7 provide that the rights of a holder of a surplus note to
11-8 participate in the conversion, if any, are governed by the terms of
11-9 the surplus note.
11-10 Sec. 13. OPTIONAL PROVISIONS. (a) The conversion plan may
11-11 provide that the directors and officers of the mutual insurance
11-12 company may receive, without payment, nontransferable subscription
11-13 rights to purchase capital stock of the converted stock company or
11-14 the stock of another corporation that is participating in the
11-15 conversion plan.
11-16 (b) The aggregate number of shares that may be purchased by
11-17 directors and officers of the mutual insurance company in their
11-18 capacity under Subsection (a) of this section may not exceed 35
11-19 percent of the total number of shares to be issued for the company
11-20 if total assets of the mutual insurance company are less than $50
11-21 million or 25 percent of the total number of shares to be issued
11-22 for the company if total assets of the mutual insurance company are
11-23 more than $500 million. For mutual insurance companies with total
11-24 assets of or between $50 million and $500 million, the maximum
11-25 percentage of the total number of shares that may be purchased
11-26 shall be interpolated.
11-27 (c) The conversion plan may allocate to a tax-qualified
12-1 employee benefit plan nontransferable subscription rights to
12-2 purchase not more than 10 percent of the capital stock of the
12-3 converted stock company.
12-4 (d) The conversion plan may provide for the creation of a
12-5 liquidation account for the benefit of members in the event of
12-6 voluntary liquidation after conversion in an amount equal to the
12-7 surplus of the mutual insurance company, exclusive of the principal
12-8 amount of any surplus note, on the last day of the quarter
12-9 immediately preceding the date of adoption of the conversion plan.
12-10 Sec. 14. ALTERNATIVE CONVERSION PLAN. (a) The board of
12-11 directors may adopt a conversion plan that does not rely wholly or
12-12 partially on issuing nontransferable subscription rights to members
12-13 to purchase stock of the converted stock company if the
12-14 commissioner finds that the alternative conversion plan:
12-15 (1) complies with this article;
12-16 (2) is fair and equitable; and
12-17 (3) permits the converted stock company to satisfy the
12-18 current requirements applicable to a domestic stock company for a
12-19 certificate of authority.
12-20 (b) An alternative conversion plan may:
12-21 (1) include the merger of a domestic mutual insurance
12-22 company into a domestic or foreign stock insurance company;
12-23 (2) provide for issuing stock, cash, or other
12-24 consideration to members instead of subscription rights;
12-25 (3) provide for the formation of a mutual holding
12-26 company pursuant to Section 24; or
12-27 (4) set forth another plan containing any other
13-1 provisions approved by the commissioner.
13-2 (c) The commissioner may retain, at the mutual insurance
13-3 company's expense, a qualified expert not otherwise a part of the
13-4 commissioner's staff to assist in reviewing whether the alternative
13-5 conversion plan may be approved by the commissioner.
13-6 Sec. 15. EFFECTIVE DATE OF CONVERSION. (a) For a
13-7 conversion plan to take effect:
13-8 (1) the commissioner must approve the conversion plan;
13-9 and
13-10 (2) the eligible members must approve the conversion
13-11 plan and adopt the amended or restated articles of incorporation.
13-12 (b) A conversion plan takes effect when the amended or
13-13 restated articles of incorporation are filed with the Commissioner.
13-14 Sec. 16. RIGHTS OF MEMBERS WHOSE POLICIES ARE ISSUED AFTER
13-15 ADOPTION OF CONVERSION PLAN AND BEFORE EFFECTIVE DATE. (a) On
13-16 issuance of a policy after a conversion plan has been adopted by
13-17 the board of directors but before the effective date of the
13-18 conversion plan, the mutual insurance company shall send to the
13-19 member to whom the policy is issued a written notice regarding the
13-20 conversion plan.
13-21 (b) Except as provided by Subsection (d) of this section, a
13-22 member of an accident and health insurance company entitled to
13-23 receive the notice described by Subsection (a) of this section is
13-24 entitled to rescind the member's policy and receive a full refund
13-25 of any amount paid for the policy not later than the 10th day after
13-26 the date on which the member receives the notice.
13-27 (c) Except as provided by Subsection (d) of this section,
14-1 each member who is insured under a property or casualty insurance
14-2 policy is entitled to receive the notice described by Subsection
14-3 (a) of this section shall be advised of the member's right to:
14-4 (1) cancel the policy; and
14-5 (2) receive a pro rata refund of unearned premiums.
14-6 (d) A member who has made or filed a claim under the
14-7 insurance policy is not entitled to a right to receive a refund
14-8 under Subsection (b) or (c) of this section. A person who has
14-9 exercised the rights provided by Subsection (b) or (c) of this
14-10 section is not entitled to make or file a claim under the insurance
14-11 policy.
14-12 Sec. 17. CORPORATE EXISTENCE. (a) On the effective date of
14-13 the conversion:
14-14 (1) the corporate existence of the mutual insurance
14-15 company continues in the converted stock company; and
14-16 (2) all assets, rights, franchises, and interests of
14-17 the mutual insurance company in and to property, real, personal, or
14-18 mixed, and any accompanying things in action, are vested in the
14-19 converted stock company, without a deed or transfer, and the
14-20 converted stock company assumes all the obligations and liabilities
14-21 of the mutual insurance company.
14-22 (b) Unless otherwise specified in the conversion plan, the
14-23 directors and officers of the mutual insurance company serving on
14-24 the effective date of the conversion serve as directors and
14-25 officers of the converted stock company until new directors and
14-26 officers of the converted stock company are elected under the
14-27 articles of incorporation and bylaws of the converted stock
15-1 company.
15-2 Sec. 18. CONFLICT OF INTEREST. (a) A director, officer,
15-3 agent, or employee of the mutual insurance company may not receive
15-4 a fee, commission, or other consideration, other than that person's
15-5 usual salary or compensation, for aiding, promoting, or assisting
15-6 in a conversion under this article except as provided by the
15-7 conversion plan approved by the commissioner. This subsection does
15-8 not prohibit the payment of reasonable fees and compensation to an
15-9 attorney, accountant, or actuary for professional services
15-10 performed by that person, even if the attorney, accountant, or
15-11 actuary is also a director or officer of the mutual insurance
15-12 company.
15-13 (b) All the costs and expenses connected with a conversion
15-14 plan shall be paid for or reimbursed by the mutual insurance
15-15 company or the converted stock company.
15-16 Sec. 19. EFFECT OF FAILURE TO GIVE NOTICE. If the mutual
15-17 insurance company complies substantially and in good faith with the
15-18 notice requirements of this article, the mutual insurance company's
15-19 failure to send a member the required notice does not impair the
15-20 validity of any action taken under this article.
15-21 Sec. 20. LIMITATION ON ACTIONS. An action challenging the
15-22 validity of or arising out of acts taken or proposed to be taken
15-23 regarding a conversion plan under this article must be commenced
15-24 not later than the 30th day after the effective date of that
15-25 conversion plan.
15-26 Sec. 21. INSOLVENT MUTUAL INSURANCE COMPANY. If a mutual
15-27 insurance company is insolvent or, in the judgment of the
16-1 commissioner, is in hazardous financial condition, its board of
16-2 directors, by a majority vote, may request in its petition that the
16-3 commissioner waive the requirements imposing notice to and
16-4 policyholder approval of the planned conversion. The petition must
16-5 specify:
16-6 (1) the method and basis for the issuance of the
16-7 converted stock company's shares of its capital stock to an
16-8 independent party in connection with an investment by the
16-9 independent party in an amount sufficient to restore the converted
16-10 stock company to a sound financial condition; and
16-11 (2) that the conversion is to be accomplished without
16-12 payment of consideration to past, present, or future policyholders,
16-13 if the commissioner finds that the value of the mutual insurance
16-14 company is insufficient to warrant that consideration.
16-15 Sec. 22. LAWS APPLICABLE TO CONVERTED STOCK COMPANY. (a) A
16-16 mutual insurance company may not be permitted to convert under this
16-17 article if, as a direct result of the conversion, any person or any
16-18 affiliate acquires control of the converted stock company, unless
16-19 that person or the affiliate complies with the requirements of
16-20 Section 5, Article 21.49-1 of this code.
16-21 (b) Except as otherwise specified in this article, a stock
16-22 company converted under this article has all of the rights and
16-23 privileges and is subject to all of the requirements and
16-24 regulations imposed on stock companies formed under this code and
16-25 any other laws of this state relating to the regulation and
16-26 supervision of insurance companies, but may not exercise rights or
16-27 privileges that other stock insurance companies may not exercise.
17-1 Sec. 23. AMENDMENT OF POLICIES. A mutual insurance company,
17-2 by endorsement or rider approved by the commissioner and sent to
17-3 the policyholder, may simultaneously with or at any time after the
17-4 adoption of a conversion plan amend any outstanding insurance
17-5 policy to extinguish the right, if any, of the holder of the policy
17-6 to share in the surplus or profits of the mutual insurance company.
17-7 However, such an amendment is void if the conversion plan does not
17-8 take effect.
17-9 Sec. 24. MUTUAL HOLDING COMPANY. (a) (1) Pursuant to this
17-10 section, a mutual insurance company, upon approval of the
17-11 commissioner, may reorganize by forming an insurance holding
17-12 company based upon a mutual plan and continuing the corporate
17-13 existence of the reorganizing insurance company as a stock
17-14 insurance company. The commissioner, if satisfied that the
17-15 requirements of Section 14 are met, shall approve the proposed plan
17-16 of reorganization and may require as a condition of approval such
17-17 modifications of the proposed plan of reorganization as the
17-18 commissioner finds necessary for the protection of the members'
17-19 interests. The commissioner may retain a qualified expert as
17-20 provided in Section 3(d) of this article. The commissioner shall
17-21 retain jurisdiction over a mutual holding company organized
17-22 pursuant to this section to assure that member interests are
17-23 protected.
17-24 (2) All of the initial shares of the capital stock of
17-25 the reorganized insurance company shall be issued to the mutual
17-26 holding company. The membership interests of the policyholders of
17-27 the reorganized insurance company shall become membership interests
18-1 in the mutual holding company. Eligible members of the reorganized
18-2 insurance company shall be members of the mutual holding company in
18-3 accordance with the articles of incorporation and bylaws of the
18-4 mutual holding company. The mutual holding company shall at all
18-5 times own a majority of the voting shares of the capital stock of
18-6 the reorganized insurance company or of an intermediate holding
18-7 company established to hold the voting shares of the reorganized
18-8 insurance company.
18-9 (b) A foreign mutual insurance company may reorganize upon
18-10 the approval of the commissioner and in compliance with the
18-11 requirements of any law or regulation which is applicable to the
18-12 foreign mutual insurance company by transferring its members'
18-13 membership interests into a mutual holding company formed under a
18-14 procedure similar to that described in Subsection (a) and
18-15 continuing the corporate existence of the reorganizing foreign
18-16 mutual insurance company as a foreign stock insurance company
18-17 subsidiary of the mutual holding company. The reorganizing foreign
18-18 mutual insurance company may remain a foreign company and may be
18-19 admitted to do business in this state. A foreign mutual insurance
18-20 company may at the same time redomesticate in this state by
18-21 complying with the applicable requirements of Article 1.38,
18-22 Insurance Code.
18-23 (c) A mutual holding company resulting from the
18-24 reorganization of a domestic mutual insurance company organized
18-25 under Chapter 15, Insurance Code, shall be incorporated pursuant to
18-26 Article 15.02, Insurance Code, and the Texas Non-Profit Corporation
18-27 Act, Article 1396-1.01 et seq., Texas Revised Civil Statutes. The
19-1 articles of incorporation and any amendments to such articles of
19-2 the mutual holding company shall be subject to approval of the
19-3 commissioner in the same manner as those of a mutual insurance
19-4 company.
19-5 (d) A mutual holding company is deemed to be an insurer
19-6 subject to Chapter 15, Insurance Code, and shall automatically be a
19-7 party to any administrative proceeding under the Insurance Code
19-8 involving an insurance company which, as a result of a
19-9 reorganization pursuant to this section, is a subsidiary of the
19-10 mutual holding company. In any proceeding involving the
19-11 reorganized insurance company, the assets of the mutual holding
19-12 company are deemed to be assets of the estate of the reorganized
19-13 insurance company for purposes of satisfying the claims of the
19-14 reorganized insurance company's policyholders. A mutual holding
19-15 company shall not dissolve or liquidate without the approval of the
19-16 commissioner.
19-17 (e) A membership interest in a mutual holding company shall
19-18 not constitute a security as defined in Section 4 of the Securities
19-19 Act of Texas, Article 581-1 et seq., Texas Revised Civil Statutes.
19-20 (f) The majority of the voting shares of the capital stock
19-21 of the reorganized insurance company, which is required by this
19-22 section to be at all times owned by a mutual holding company, shall
19-23 not be conveyed, transferred, assigned, pledged, subjected to a
19-24 security interest or lien, encumbered, or otherwise hypothecated or
19-25 alienated by the mutual holding company or intermediate holding
19-26 company. Any conveyance, transfer, assignment, pledge, security
19-27 interest, lien, encumbrance, or hypothecation or alienation of, in
20-1 or on the majority of the voting shares of the reorganized
20-2 insurance company which is required by this section to be at all
20-3 times owned by a mutual holding company, is in violation of this
20-4 section and shall be void in inverse chronological order of the
20-5 date of such conveyance, transfer, assignment, pledge, security
20-6 interest, lien, encumbrance, or hypothecation or alienation, as to
20-7 the shares necessary to constitute a majority of such voting
20-8 shares.
20-9 (g) As used in this section, "majority of the voting shares
20-10 of the capital stock of the reorganized insurance company" means
20-11 shares of the capital stock of the reorganized insurance company
20-12 which carry the right to cast a majority of the votes entitled to
20-13 be cast by all of the outstanding shares of the capital stock of
20-14 the reorganized insurance company for the election of directors and
20-15 on all other matters submitted to a vote of the shareholders of the
20-16 reorganized insurance company. The ownership of a majority of the
20-17 voting shares of the capital stock of the reorganized insurance
20-18 company which are required by this section to be at all times owned
20-19 by a parent mutual holding company includes indirect ownership
20-20 through one or more intermediate holding companies in a corporate
20-21 structure approved by the commissioner. However, indirect
20-22 ownership through one or more intermediate holding companies shall
20-23 not result in the mutual holding company owning less than the
20-24 equivalent of a majority of the voting shares of the capital stock
20-25 of the reorganized insurance company. As used in this section,
20-26 "intermediate holding company" means a holding company which is a
20-27 subsidiary of a mutual holding company, and which either directly
21-1 or through a subsidiary intermediate holding company owns a
21-2 subsidiary reorganized insurance company of which a majority of the
21-3 voting shares of the capital stock would otherwise have been
21-4 required by this section to be at all times owned by the mutual
21-5 holding company.
21-6 (h) A mutual holding company may convert to a stock holding
21-7 company pursuant to the provisions of this article, as if such
21-8 mutual holding company were a mutual insurance company.
21-9 SECTION 2. Article 15.22, Insurance Code, as added by this
21-10 Act, takes effect September 1, 1997.
21-11 SECTION 3. The importance of this legislation and the
21-12 crowded condition of the calendars in both houses create an
21-13 emergency and an imperative public necessity that the
21-14 constitutional rule requiring bills to be read on three several
21-15 days in each house be suspended, and this rule is hereby suspended.