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