By: Harris S.B. No. 1447
A BILL TO BE ENTITLED
AN ACT
1-1 relating to the conversion of mutual insurance companies to stock
1-2 insurance companies.
1-3 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
1-4 SECTION 1. Chapter 15, Insurance Code, is amended by adding
1-5 Article 15.22 to read as follows:
1-6 Art. 15.22. CONVERSION TO STOCK INSURANCE COMPANY
1-7 Sec. 1. DEFINITIONS. In this article:
1-8 (1) "Conversion plan" means a plan adopted under this
1-9 article by the board of directors of a mutual insurance company to
1-10 convert the mutual insurance company into a stock company.
1-11 (2) "Converted stock company" means a domestic stock
1-12 insurance company that has converted under this article from a
1-13 domestic mutual insurance company.
1-14 (3) "Eligible member" means a member of a mutual
1-15 insurance company whose policy is in force on the date that the
1-16 mutual insurance company's board of directors adopts a conversion
1-17 plan. The term does not include a person:
1-18 (A) insured under a group policy; or
1-19 (B) whose policy becomes effective after the
1-20 date that the board of directors adopts the conversion plan but
1-21 before the conversion plan's effective date.
1-22 (4) "Mutual insurance company" means a domestic mutual
1-23 insurance company.
2-1 (5) "Participating policy" means a policy that grants
2-2 a holder the right to receive dividends if, as, and when declared
2-3 by the mutual insurance company.
2-4 (6) "Stock company" means a stock insurance company
2-5 that meets all of the requirements for admission to do business as
2-6 a domestic insurer in this state.
2-7 Sec. 2. ADOPTION OF CONVERSION PLAN. (a) A mutual
2-8 insurance company that seeks to convert to a stock company must
2-9 adopt, by the affirmative vote of not less than two-thirds of the
2-10 members of its board of directors, a conversion plan consistent
2-11 with the requirements of this article. A mutual insurance company
2-12 may not engage in the business of insurance as a stock company
2-13 until it complies with the requirements of this article.
2-14 (b) Before the eligible members of a mutual insurance
2-15 company may vote on approval of a conversion plan, the mutual
2-16 insurance company must comply with Section 3 of this article.
2-17 Sec. 3. PLAN INFORMATION FILED WITH COMMISSIONER;
2-18 COMMISSIONER'S POWERS AND DUTIES. (a) Not later than the 90th day
2-19 after the date on which a mutual insurance company's board of
2-20 directors adopts a conversion plan, the company shall file with the
2-21 commissioner:
2-22 (1) a copy of the documents relating to the conversion
2-23 plan, including the independent evaluation of pro forma market
2-24 value required by Section 10(b) of this article;
2-25 (2) the form of notice required by Section 5 of this
3-1 article;
3-2 (3) the form of proxy to be solicited from eligible
3-3 members under Section 6(b) of this article;
3-4 (4) the form of notice required by Section 16 of this
3-5 article to persons whose policies are issued after adoption of the
3-6 conversion plan but before the effective date of the conversion
3-7 plan;
3-8 (5) the proposed amended or restated articles of
3-9 incorporation of the converted stock company;
3-10 (6) a statement regarding acquisition of control, if
3-11 applicable, as required by Article 21.49-1 of this code; and
3-12 (7) any other information requested by the
3-13 commissioner.
3-14 (b) Except as otherwise provided by this subsection, the
3-15 commissioner shall approve or disapprove a conversion plan not
3-16 later than the 60th day after the first day on which all the
3-17 documents required under Subsection (a) of this section are filed
3-18 with the commissioner. The commissioner may extend the time for
3-19 approval or disapproval by an additional 30 days on written notice
3-20 to the mutual insurance company. The commissioner may not extend
3-21 the time for approval or disapproval beyond this time period unless
3-22 he finds it necessary to retain a qualified expert pursuant to
3-23 Subsection (d) of this section, in which case he may extend the
3-24 time for review for an additional 60 days beyond the initial 60-day
3-25 period. The commissioner shall immediately give written notice to
4-1 the mutual insurance company of the commissioner's decision and, in
4-2 the event of disapproval, a detailed statement of the reasons for
4-3 the adverse decision.
4-4 (c) The commissioner shall approve a conversion plan if the
4-5 commissioner finds that:
4-6 (1) the conversion plan complies with this article;
4-7 (2) the conversion plan's method of allocating
4-8 subscription rights or other value is fair and equitable; and
4-9 (3) the converted stock company would satisfy the
4-10 current requirements applicable to a domestic stock company for a
4-11 certificate of authority.
4-12 (d) The commissioner may retain, at the mutual insurance
4-13 company's expense, a qualified expert not otherwise a part of the
4-14 commissioner's staff to assist the commissioner in reviewing the
4-15 conversion plan and the independent evaluation of the pro forma
4-16 market value required under Section 10(b) of this article.
4-17 (e) The commissioner may hold a hearing on whether the terms
4-18 of the conversion plan comply with this article after giving
4-19 written notice to the mutual insurance company and other interested
4-20 persons, all of whom have the right to appear at the hearing.
4-21 Notice to interested persons who have not filed an appearance in
4-22 the matter may be made through publication in the Texas Register.
4-23 Sec. 4. AMENDMENTS; WITHDRAWAL OF PLAN. At any time before
4-24 the conversion plan becomes effective, the mutual insurance
4-25 company, by the affirmative vote of not less than two-thirds of the
5-1 members of its board of directors, may amend or withdraw the
5-2 conversion plan.
5-3 Sec. 5. NOTICE TO ELIGIBLE MEMBERS; COMMENTS. (a) Within
5-4 10 business days after filing the documents required under Section
5-5 3(a) of this article with the commissioner, the mutual insurance
5-6 company shall send to each eligible member a notice advising the
5-7 eligible member of the adoption and filing of the conversion plan
5-8 and of the member's right to provide to the commissioner and the
5-9 mutual insurance company comments on the plan. The notice must
5-10 include a description of the procedure to be used in making
5-11 comments.
5-12 (b) An eligible member who elects to make comments must make
5-13 the comments in writing not later than the 30th day after the date
5-14 on which the notice is sent.
5-15 (c) Within 60 days after the commissioner's approval of the
5-16 plan, the mutual insurance company also shall send to each eligible
5-17 member notice of the members' meeting to vote on the conversion
5-18 plan. The notice must be sent to the member's last known address,
5-19 as shown on the mutual insurance company's records, before the 30th
5-20 day preceding the date set for the meeting. The notice must:
5-21 (1) briefly but fairly describe the proposed
5-22 conversion plan; and
5-23 (2) inform the member of the member's right to vote on
5-24 the conversion plan.
5-25 (d) If the meeting to vote on the conversion plan is held
6-1 during the mutual insurance company's annual meeting of
6-2 policyholders, only a combined meeting notice is required.
6-3 Sec. 6. ELECTION; ADOPTION OF PLAN. (a) A conversion plan
6-4 is adopted on receiving the affirmative vote of at least two-thirds
6-5 of the votes cast by eligible members at a duly convened meeting to
6-6 consider the plan of conversion.
6-7 (b) Members entitled to vote on the proposed conversion plan
6-8 may vote in person or by proxy. The number of votes each eligible
6-9 member may cast shall be determined by the mutual insurance
6-10 company's bylaws. If the bylaws are silent, each eligible member
6-11 may cast one vote.
6-12 (c) At the meeting held to vote on the conversion plan, the
6-13 members shall also consider the adoption of amended or restated
6-14 articles of incorporation. Adoption of the amended articles
6-15 requires the affirmative vote of at least two-thirds of the votes
6-16 cast by eligible members.
6-17 Sec. 7. FILING BY CONVERTED STOCK COMPANY. Not later than
6-18 the 30th day after the date on which the eligible members adopt the
6-19 conversion plan at a duly convened meeting, the converted stock
6-20 company shall file with the commissioner:
6-21 (1) the minutes of the meeting of the eligible members
6-22 at which the conversion plan was adopted; and
6-23 (2) the amended or restated articles of incorporation
6-24 and bylaws of the converted stock company.
6-25 Sec. 8. REQUIRED PROVISIONS IN GENERAL. (a) Each
7-1 conversion plan must include the provisions required by this
7-2 article.
7-3 (b) Each policy in effect on the effective date of the
7-4 conversion remains in effect under the terms of that policy, except
7-5 that the following rights, to the extent they existed in the mutual
7-6 insurance company, are extinguished on the effective date of the
7-7 conversion:
7-8 (1) any voting rights of policyholders provided under
7-9 the policy;
7-10 (2) except as provided in Subsection (c) of this
7-11 section, a right to share in the surplus or profits of the mutual
7-12 insurance company; and
7-13 (3) any assessment provisions provided under the
7-14 policy.
7-15 (c) The holder of a participating policy in effect on the
7-16 date of the conversion continues to have a right to receive
7-17 dividends as provided by the participating policy.
7-18 (d) Except for the mutual insurance company's guaranteed
7-19 renewable accident and health policies and guaranteed renewable,
7-20 noncancelable accident and health policies, on the renewal date of
7-21 a participating policy, the converted stock company may issue the
7-22 insured a nonparticipating policy as a substitute for the
7-23 participating policy.
7-24 Sec. 9. SUBSCRIPTION RIGHTS. (a) Except for an alternative
7-25 plan under Section 14 of this article, each conversion plan must
8-1 specify the subscription rights of eligible members.
8-2 (b) The plan must include a provision that:
8-3 (1) each eligible member is to receive, without
8-4 payment by the member, nontransferable subscription rights to
8-5 purchase a portion of the capital stock of the converted stock
8-6 company; and
8-7 (2) in the aggregate, all eligible members have the
8-8 right, before the right of any other party, to purchase 100 percent
8-9 of the capital stock of the converted company after provision for:
8-10 (A) capital stock required to be sold or
8-11 distributed to the holders of surplus notes, if any;
8-12 (B) capital stock purchased by the company's
8-13 tax-qualified employee stock benefit plan as permitted by Section
8-14 13(c) of this article; and
8-15 (C) capital stock acquired by the mutual
8-16 insurance company's directors and officers, as permitted by Section
8-17 13(a) of this article.
8-18 (c) As an alternative to subscription rights in the
8-19 converted stock company, the conversion plan may provide that each
8-20 eligible member is to receive, without payment by the member,
8-21 nontransferable subscription rights to purchase a portion of the
8-22 capital stock of one of the following:
8-23 (1) a corporation organized for the purpose of
8-24 purchasing and holding all the stock of the converted stock
8-25 company;
9-1 (2) a stock insurance company owned by the mutual
9-2 insurance company into which the mutual insurance company is to be
9-3 merged; or
9-4 (3) an unaffiliated stock insurance company or other
9-5 corporation that is to purchase all the stock of the converted
9-6 stock company.
9-7 (d) The conversion plan must provide that the subscription
9-8 rights are allocated in whole shares among the eligible members
9-9 using a fair and equitable formula. The formula may consider, but
9-10 is not required to consider, how the different classes of policies
9-11 of the eligible members contributed to the surplus of the mutual
9-12 insurance company or any other factors that may be fair or
9-13 equitable as determined by the board of directors.
9-14 (e) The conversion plan must provide a fair and equitable
9-15 means for allocating shares of capital stock in the event of an
9-16 oversubscription to shares by eligible members exercising
9-17 subscription rights under this section.
9-18 Sec. 10. SALE OF CAPITAL STOCK. (a) The conversion plan
9-19 must provide that any shares of capital stock not sold or
9-20 distributed to holders of surplus notes, subscribed to by a
9-21 tax-qualified employee benefit plan, as permitted under Section
9-22 13(c) of this article, subscribed to by directors and officers, as
9-23 permitted under Section 13(a) of this article, or subscribed to by
9-24 eligible members exercising subscription rights under Section 9 of
9-25 this article shall be sold in a private placement, public offering,
10-1 or other alternative method approved by the commissioner.
10-2 (b) The conversion plan must set the total price of the
10-3 capital stock in an amount equal to the estimated pro forma market
10-4 value of the converted stock company based on an independent
10-5 valuation by a qualified expert, giving consideration to the amount
10-6 of capital deemed necessary by the board of directors to be raised
10-7 by the company. The pro forma market value may be the value
10-8 estimated to be necessary to attract full subscription for the
10-9 shares, as indicated by the independent valuation, and may be
10-10 stated as a range of values.
10-11 (c) The conversion plan shall set the purchase price per
10-12 share of capital stock at any reasonable amount. The purchase
10-13 price per share need not be the same for each class of purchaser;
10-14 provided, however, that eligible members purchasing stock pursuant
10-15 to subscription rights received under Section 9 of this article
10-16 shall have the right to purchase shares at the lowest available
10-17 purchase price under the plan.
10-18 (d) The conversion plan must provide that a person or group
10-19 of persons acting in concert may not acquire, in the public or
10-20 private offering or through the exercise of subscription rights,
10-21 more than 10 percent of the capital stock of the converted stock
10-22 company except with the approval of the commissioner. This
10-23 limitation does not apply to an entity that purchases 100 percent
10-24 of the capital stock of the converted company as part of the
10-25 conversion plan approved by the commissioner.
11-1 (e) Except as otherwise provided in this article, the
11-2 conversion plan must provide that a director or officer of the
11-3 mutual insurance company, or a person acting in concert with a
11-4 director or officer, may not acquire, without the permission of the
11-5 commissioner, any capital stock of the converted stock company or
11-6 the stock of another corporation that is participating in the
11-7 conversion plan before the third anniversary of the effective date
11-8 of the conversion, except through a broker-dealer. This subsection
11-9 does not prohibit a director or officer from:
11-10 (1) making purchases through the exercise of
11-11 subscription rights received under the conversion plan; or
11-12 (2) participating in a stock benefit plan permitted by
11-13 Section 13(c) of this article or approved by the eligible members
11-14 pursuant to Section 6 of this article.
11-15 Sec. 11. LIMITATION ON RESALE. The conversion plan must
11-16 provide that a director or officer may not sell stock purchased
11-17 pursuant to the conversion plan before the first anniversary of the
11-18 effective date of the conversion; provided, however, the conversion
11-19 plan may provide for the purchase or redemption of stock in the
11-20 event that a director or officer is no longer associated with the
11-21 converted stock company during such period.
11-22 Sec. 12. HOLDER OF SURPLUS NOTE. The conversion plan must
11-23 provide that the rights of a holder of a surplus note to
11-24 participate in the conversion, if any, are governed by the terms of
11-25 the surplus note.
12-1 Sec. 13. OPTIONAL PROVISIONS. (a) The conversion plan may
12-2 provide that the directors and officers of the mutual insurance
12-3 company may receive, without payment, nontransferable subscription
12-4 rights to purchase capital stock of the converted stock company or
12-5 the stock of another corporation that is participating in the
12-6 conversion plan.
12-7 (b) The aggregate number of shares that may be purchased by
12-8 directors and officers of the mutual insurance company in their
12-9 capacity under Subsection (a) of this section may not exceed 35
12-10 percent of the total number of shares to be issued for the company
12-11 if total assets of the mutual insurance company are less than $50
12-12 million, or 25 percent of the total number of shares to be issued
12-13 for the company if total assets of the mutual insurance company are
12-14 more than $500 million. For mutual insurance companies with total
12-15 assets of or between $50 million and $500 million, the maximum
12-16 percentage of the total number of shares that may be purchased
12-17 shall be interpolated.
12-18 (c) The conversion plan may allocate to a tax-qualified
12-19 employee benefit plan nontransferable subscription rights to
12-20 purchase not more than 10 percent of the capital stock of the
12-21 converted stock company.
12-22 (d) The conversion plan may provide for the creation of a
12-23 liquidation account for the benefit of members in the event of
12-24 voluntary liquidation after conversion in an amount equal to the
12-25 surplus of the mutual insurance company, exclusive of the principal
13-1 amount of any surplus note, on the last day of the quarter
13-2 immediately preceding the date of adoption of the conversion plan.
13-3 Sec. 14. ALTERNATIVE CONVERSION PLAN. (a) The board of
13-4 directors may adopt a conversion plan that does not rely wholly or
13-5 partially on issuing nontransferable subscription rights to members
13-6 to purchase stock of the converted stock company if the
13-7 commissioner finds that the alternative conversion plan:
13-8 (1) complies with this article;
13-9 (2) is fair and equitable; and
13-10 (3) permits the converted stock company to satisfy the
13-11 current requirements applicable to a domestic stock company for a
13-12 certificate of authority.
13-13 (b) An alternative conversion plan may:
13-14 (1) include the merger of a domestic mutual insurance
13-15 company into a domestic or foreign stock insurance company;
13-16 (2) provide for issuing stock, cash, or other
13-17 consideration to members instead of subscription rights;
13-18 (3) provide for the formation of a mutual holding
13-19 company pursuant to Section 24 of this article; or
13-20 (4) set forth another plan containing any other
13-21 provisions approved by the commissioner.
13-22 (c) The commissioner may retain, at the mutual insurance
13-23 company's expense, a qualified expert not otherwise a part of the
13-24 commissioner's staff to assist in reviewing whether the alternative
13-25 conversion plan may be approved by the commissioner.
14-1 Sec. 15. EFFECTIVE DATE OF CONVERSION. (a) For a
14-2 conversion plan to take effect:
14-3 (1) the commissioner must approve the conversion plan;
14-4 and
14-5 (2) the eligible members must approve the conversion
14-6 plan and adopt the amended or restated articles of incorporation.
14-7 (b) A conversion plan takes effect when the amended or
14-8 restated articles of incorporation are filed with the commissioner.
14-9 Sec. 16. RIGHTS OF MEMBERS WHOSE POLICIES ARE ISSUED AFTER
14-10 ADOPTION OF CONVERSION PLAN AND BEFORE EFFECTIVE DATE. (a) On
14-11 issuance of a policy after a conversion plan has been adopted by
14-12 the board of directors but before the effective date of the
14-13 conversion plan, the mutual insurance company shall send to the
14-14 member to whom the policy is issued a written notice regarding the
14-15 conversion plan.
14-16 (b) Except as provided by Subsection (d) of this section, a
14-17 member of an accident and health insurance company entitled to
14-18 receive the notice described by Subsection (a) of this section is
14-19 entitled to rescind the member's policy and receive a full refund
14-20 of any amount paid for the policy not later than the 10th day after
14-21 the date on which the member receives the notice.
14-22 (c) Except as provided by Subsection (d) of this section,
14-23 each member who is insured under a property or casualty insurance
14-24 policy is entitled to receive the notice described by Subsection
14-25 (a) of this section and shall be advised of the member's right to:
15-1 (1) cancel the policy; and
15-2 (2) receive a pro rata refund of unearned premiums.
15-3 (d) A member who has made or filed a claim under the
15-4 insurance policy is not entitled to a right to receive a refund
15-5 under Subsection (b) or (c) of this section. A person who has
15-6 exercised the rights provided by Subsection (b) or (c) of this
15-7 section is not entitled to make or file a claim under the insurance
15-8 policy.
15-9 Sec. 17. CORPORATE EXISTENCE. (a) On the effective date of
15-10 the conversion:
15-11 (1) the corporate existence of the mutual insurance
15-12 company continues in the converted stock company; and
15-13 (2) all assets, rights, franchises, and interests of
15-14 the mutual insurance company in and to property, real, personal, or
15-15 mixed, and any accompanying things in action, are vested in the
15-16 converted stock company, without a deed or transfer, and the
15-17 converted stock company assumes all the obligations and liabilities
15-18 of the mutual insurance company.
15-19 (b) Unless otherwise specified in the conversion plan, the
15-20 directors and officers of the mutual insurance company serving on
15-21 the effective date of the conversion serve as directors and
15-22 officers of the converted stock company until new directors and
15-23 officers of the converted stock company are elected under the
15-24 articles of incorporation and bylaws of the converted stock
15-25 company.
16-1 Sec. 18. CONFLICT OF INTEREST. (a) A director, officer,
16-2 agent, or employee of the mutual insurance company may not receive
16-3 a fee, commission, or other consideration, other than that person's
16-4 usual salary or compensation, for aiding, promoting, or assisting
16-5 in a conversion under this article, except as provided by the
16-6 conversion plan approved by the commissioner. This subsection does
16-7 not prohibit the payment of reasonable fees and compensation to an
16-8 attorney, accountant, or actuary for professional services
16-9 performed by that person, even if the attorney, accountant, or
16-10 actuary is also a director or officer of the mutual insurance
16-11 company.
16-12 (b) All the costs and expenses connected with a conversion
16-13 plan shall be paid for or reimbursed by the mutual insurance
16-14 company or the converted stock company.
16-15 Sec. 19. EFFECT OF FAILURE TO GIVE NOTICE. If the mutual
16-16 insurance company complies substantially and in good faith with the
16-17 notice requirements of this article, the mutual insurance company's
16-18 failure to send a member the required notice does not impair the
16-19 validity of any action taken under this article.
16-20 Sec. 20. LIMITATION ON ACTIONS. An action challenging the
16-21 validity of or arising out of acts taken or proposed to be taken
16-22 regarding a conversion plan under this article must be commenced
16-23 not later than the 30th day after the effective date of that
16-24 conversion plan.
16-25 Sec. 21. INSOLVENT MUTUAL INSURANCE COMPANY. If a mutual
17-1 insurance company is insolvent or, in the judgment of the
17-2 commissioner, is in hazardous financial condition, its board of
17-3 directors, by a majority vote, may request in its petition that the
17-4 commissioner waive the requirements imposing notice to and
17-5 policyholder approval of the planned conversion. The petition must
17-6 specify:
17-7 (1) the method and basis for the issuance of the
17-8 converted stock company's shares of its capital stock to an
17-9 independent party in connection with an investment by the
17-10 independent party in an amount sufficient to restore the converted
17-11 stock company to a sound financial condition; and
17-12 (2) that the conversion is to be accomplished without
17-13 payment of consideration to past, present, or future policyholders,
17-14 if the commissioner finds that the value of the mutual insurance
17-15 company is insufficient to warrant that consideration.
17-16 Sec. 22. LAWS APPLICABLE TO CONVERTED STOCK COMPANY. (a) A
17-17 mutual insurance company may not be permitted to convert under this
17-18 article if, as a direct result of the conversion, any person or any
17-19 affiliate acquires control of the converted stock company, unless
17-20 that person or the affiliate complies with the requirements of
17-21 Section 5, Article 21.49-1 of this code.
17-22 (b) Except as otherwise specified in this article, a stock
17-23 company converted under this article has all of the rights and
17-24 privileges and is subject to all of the requirements and
17-25 regulations imposed on stock companies formed under this code and
18-1 any other laws of this state relating to the regulation and
18-2 supervision of insurance companies but may not exercise rights or
18-3 privileges that other stock insurance companies may not exercise.
18-4 Sec. 23. AMENDMENT OF POLICIES. A mutual insurance company,
18-5 by endorsement or rider approved by the commissioner and sent to
18-6 the policyholder, may simultaneously with or at any time after the
18-7 adoption of a conversion plan amend any outstanding insurance
18-8 policy to extinguish the right, if any, of the holder of the policy
18-9 to share in the surplus or profits of the mutual insurance company.
18-10 However, such an amendment is void if the conversion plan does not
18-11 take effect.
18-12 Sec. 24. MUTUAL HOLDING COMPANY. (a)(1) Pursuant to this
18-13 section, a mutual insurance company, on approval by the
18-14 commissioner, may reorganize by forming an insurance holding
18-15 company based on a mutual plan and continuing the corporate
18-16 existence of the reorganizing insurance company as a stock
18-17 insurance company. The commissioner, if satisfied that the
18-18 requirements of Section 14 of this article are met, shall approve
18-19 the proposed plan of reorganization and may require as a condition
18-20 of approval such modifications of the proposed plan of
18-21 reorganization as the commissioner finds necessary for the
18-22 protection of the members' interests. The commissioner may retain
18-23 a qualified expert as provided in Section 3(d) of this article.
18-24 The commissioner shall retain jurisdiction over a mutual holding
18-25 company organized pursuant to this section to assure that member
19-1 interests are protected.
19-2 (2) All of the initial shares of the capital stock of
19-3 the reorganized insurance company shall be issued to the mutual
19-4 holding company. The membership interests of the policyholders of
19-5 the reorganized insurance company shall become membership interests
19-6 in the mutual holding company. Eligible members of the reorganized
19-7 insurance company shall be members of the mutual holding company in
19-8 accordance with the articles of incorporation and bylaws of the
19-9 mutual holding company. The mutual holding company shall at all
19-10 times own a majority of the voting shares of the capital stock of
19-11 the reorganized insurance company or of an intermediate holding
19-12 company established to hold the voting shares of the reorganized
19-13 insurance company.
19-14 (b) A foreign mutual insurance company may reorganize on
19-15 approval by the commissioner and in compliance with the
19-16 requirements of any law or regulation which is applicable to the
19-17 foreign mutual insurance company by transferring its members'
19-18 membership interests into a mutual holding company formed under a
19-19 procedure similar to that described in Subsection (a) of this
19-20 section and continuing the corporate existence of the reorganizing
19-21 foreign mutual insurance company as a foreign stock insurance
19-22 company subsidiary of the mutual holding company. The reorganizing
19-23 foreign mutual insurance company may remain a foreign company and
19-24 may be admitted to do business in this state. A foreign mutual
19-25 insurance company may at the same time redomesticate in this state
20-1 by complying with the applicable requirements of Article 1.38 of
20-2 this code.
20-3 (c) A mutual holding company resulting from the
20-4 reorganization of a domestic mutual insurance company organized
20-5 under this chapter shall be incorporated pursuant to Article 15.02
20-6 of this code and the Texas Non-Profit Corporation Act (Article
20-7 1396-1.01 et seq., Vernon's Texas Civil Statutes). The articles of
20-8 incorporation, and any amendments to such articles, of the mutual
20-9 holding company shall be subject to approval of the commissioner in
20-10 the same manner as those of a mutual insurance company.
20-11 (d) A mutual holding company is deemed to be an insurer
20-12 subject to this chapter and shall automatically be a party to any
20-13 administrative proceeding under this code involving an insurance
20-14 company which, as a result of a reorganization pursuant to this
20-15 section, is a subsidiary of the mutual holding company. In any
20-16 proceeding involving the reorganized insurance company, the assets
20-17 of the mutual holding company are deemed to be assets of the estate
20-18 of the reorganized insurance company for purposes of satisfying the
20-19 claims of the reorganized insurance company's policyholders. A
20-20 mutual holding company shall not dissolve or liquidate without the
20-21 approval of the commissioner.
20-22 (e) A membership interest in a mutual holding company shall
20-23 not constitute a security as defined in Section 4, The Securities
20-24 Act (Article 581-4, Vernon's Texas Civil Statutes).
20-25 (f) The majority of the voting shares of the capital stock
21-1 of the reorganized insurance company, which is required by this
21-2 section to be at all times owned by a mutual holding company, shall
21-3 not be conveyed, transferred, assigned, pledged, subjected to a
21-4 security interest or lien, encumbered, or otherwise hypothecated or
21-5 alienated by the mutual holding company or intermediate holding
21-6 company. Any conveyance, transfer, assignment, pledge, security
21-7 interest, lien, encumbrance, or hypothecation or alienation of, in,
21-8 or on the majority of the voting shares of the reorganized
21-9 insurance company which is required by this section to be at all
21-10 times owned by a mutual holding company is in violation of this
21-11 section and shall be void in inverse chronological order from the
21-12 date of such conveyance, transfer, assignment, pledge, security
21-13 interest, lien, encumbrance, or hypothecation or alienation as to
21-14 the shares necessary to constitute a majority of such voting
21-15 shares.
21-16 (g) As used in this section, "majority of the voting shares
21-17 of the capital stock of the reorganized insurance company" means
21-18 shares of the capital stock of the reorganized insurance company
21-19 which carry the right to cast a majority of the votes entitled to
21-20 be cast by all of the outstanding shares of the capital stock of
21-21 the reorganized insurance company for the election of directors and
21-22 on all other matters submitted to a vote of the shareholders of the
21-23 reorganized insurance company. The ownership of a majority of the
21-24 voting shares of the capital stock of the reorganized insurance
21-25 company which are required by this section to be at all times owned
22-1 by a parent mutual holding company includes indirect ownership
22-2 through one or more intermediate holding companies in a corporate
22-3 structure approved by the commissioner. However, indirect
22-4 ownership through one or more intermediate holding companies shall
22-5 not result in the mutual holding company owning less than the
22-6 equivalent of a majority of the voting shares of the capital stock
22-7 of the reorganized insurance company. As used in this section,
22-8 "intermediate holding company" means a holding company which is a
22-9 subsidiary of a mutual holding company and which either directly or
22-10 through a subsidiary intermediate holding company owns a subsidiary
22-11 reorganized insurance company of which a majority of the voting
22-12 shares of the capital stock would otherwise have been required by
22-13 this section to be at all times owned by the mutual holding
22-14 company.
22-15 (h) A mutual holding company may convert to a stock holding
22-16 company pursuant to the provisions of this article as if such
22-17 mutual holding company were a mutual insurance company.
22-18 SECTION 2. This Act takes effect September 1, 1997.
22-19 SECTION 3. The importance of this legislation and the
22-20 crowded condition of the calendars in both houses create an
22-21 emergency and an imperative public necessity that the
22-22 constitutional rule requiring bills to be read on three several
22-23 days in each house be suspended, and this rule is hereby suspended.