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Article XVII - Fraternal Benefit Societies

 
    (215 ILCS 5/Art. XVII heading)ARTICLE XVII. FRATERNAL BENEFIT SOCIETIES (Article scheduled to be repealed on January 1, 2017)

    (215 ILCS 5/282.1)(from Ch. 73, par. 894.1)
    (Section scheduled to be repealed on January 1, 2017)
    Sec. 282.1. Fraternal Benefit Societies. Any incorporated society, order or supreme lodge without capital stock, including one exempted under the provisions of Section 315.5(a) of this amendatory Act whether incorporated or not, organized solely for the benefit of its members and their beneficiaries and not for profit, operated on a lodge system with ritualistic form of work, having a representative form of government and providing benefits in accordance with this amendatory Act is hereby declared to be a fraternal benefit society.
(Source: P.A. 84‑303.)

    (215 ILCS 5/283.1)(from Ch. 73, par. 895.1)
    (Section scheduled to be repealed on January 1, 2017)
    Sec. 283.1. Lodge System.
    (a) A society is operating on the lodge system if it has a supreme governing body and subordinate lodges into which members are elected, initiated or admitted in accordance with its laws, rules and ritual. Subordinate lodges shall be required by the laws of the society to hold regular meetings at least once in each month in furtherance of the purposes of the society.
    (b) A society may, at its option, organize and operate lodges for children under the minimum age for adult membership. Membership and initiation in local lodges shall not be required of such children nor shall they have a voice or vote in the management of the society.
(Source: P.A. 84‑303.)

    (215 ILCS 5/284.1)(from Ch. 73, par. 896.1)
    (Section scheduled to be repealed on January 1, 2017)
    Sec. 284.1. Representative Form of Government. A society has a representative form of government when:
        (a) It has a supreme governing body constituted in

one of the following ways:

(1) Assembly. The supreme governing body is an

assembly composed of delegates elected directly by the members or at intermediate assemblies of members or their representatives, together with other delegates as may be prescribed in the society's laws. A society may provide for election of delegates by mail. The elected delegates shall constitute a majority in number and shall not have less than 2/3 of the votes and not less than the number of votes required to amend the society's laws. The assembly shall be elected and shall meet at least once every 4 years and shall elect a board of directors to conduct the business of the society between meetings of the assembly. Vacancies on the board of directors between elections may be filled in the manner prescribed by the society's laws; or

(2) Direct Election. The supreme governing body

is a board composed of persons elected by the members, either directly or by their representatives in intermediate assemblies, and any other persons prescribed in the society's laws. A society may provide for election of the board by mail. Each term of a board member may be filled in the manner prescribed by the society's laws. However, those persons elected to the board shall constitute a majority in number and not less than the number of votes required to amend the society's laws. A person filling the unexpired term of an elected board member shall be considered to be an elected member. The board shall meet at least quarterly to conduct the business of the society;

(b) The officers of the society are elected either by

the supreme governing body or by the board of directors;

(c) Only benefit members are eligible for election to

the supreme governing body, the board of directors or any intermediate assembly; and

(d) Each voting member has one vote; no vote may be

cast by proxy.

(Source: P.A. 84‑303.)

    (215 ILCS 5/285.1)(from Ch. 73, par. 897.1)
    (Section scheduled to be repealed on January 1, 2017)
    Sec. 285.1. Definitions. Whenever used in this amendatory Act:
    (a) "Benefit contract" shall mean the agreement for provision of benefits authorized by Section 297.1 of this amendatory Act as that agreement is described in Section 300.1 of this amendatory Act;
    (b) "Benefit member" shall mean an adult member who is designated by the laws or rules of the society to be a benefit member under a benefit contract;
    (c) "Certificate" shall mean the document issued as written evidence of the benefit contract;
    (d) "Premiums" shall mean premiums, rates, dues or other required contributions, by whatever name known, which are payable under the certificate;
    (e) "Laws" shall mean the society's articles of incorporation, constitution and bylaws, however designated;
    (f) "Life insurer" shall mean an insurance company authorized to transact in this State the insurance business classified as Class 1, Clause (a) or (b) in Section 4 of this Code;
    (g) "Rules" shall mean all rules, regulations or resolutions adopted by the supreme governing body or board of directors which are intended to have general application to the members of the society;
    (h) "Society" shall mean fraternal benefit society, unless otherwise indicated; and
    (i) "Lodge" shall mean subordinate member units of the society, known as camps, courts, councils, branches or by any other designation.
(Source: P.A. 84‑303.)

    (215 ILCS 5/286.1)(from Ch. 73, par. 898.1)
    (Section scheduled to be repealed on January 1, 2017)
    Sec. 286.1. Purposes and Powers.
    (a) A society shall operate for the benefit of members and their beneficiaries by:
        (1) Providing benefits as specified in Section 297.1

of this amendatory Act; and

(2) Operating for one or more social, intellectual,

educational, charitable, benevolent, moral, fraternal, patriotic or religious purposes for the benefit of its members, which may also be extended to others. Such purposes may be carried out directly by the society or indirectly through subsidiary corporations or affiliated organizations.

(b) Every society shall have the power to adopt laws and rules for the government of the society, the admission of its members and the management of its affairs. It shall have the power to change, alter, add to or amend such laws and rules and shall have such other powers as are necessary and incidental to carrying into effect the objects and purposes of the society. (Source: P.A. 84‑303.)

    (215 ILCS 5/287.1)(from Ch. 73, par. 899.1)
    (Section scheduled to be repealed on January 1, 2017)
    Sec. 287.1. Qualifications for Membership.
    (a) A society shall specify in its laws or rules:
        (1) Eligibility standards for each and every class of

membership, provided that if benefits are provided on the lives of children, the minimum age for adult membership shall be set at not less than age 15 and not greater than age 21;

(2) The process for admission to membership for each

membership class; and

(3) The rights and privileges of each membership

class, provided that only benefit members shall have the right to vote on the management of the insurance affairs of the society.

(b) A society may also admit social members who shall have no voice or vote in the management of the insurance affairs of the society.     (c) Membership rights in the society are personal to the member and are not assignable. (Source: P.A. 84‑303.)

    (215 ILCS 5/288.1)(from Ch. 73, par. 900.1)
    (Section scheduled to be repealed on January 1, 2017)
    Sec. 288.1. Location of Office, Meetings, Communications to Members, Grievance Procedures.
    (a) The principal office and place of business of any domestic society shall be located in this State. The meetings of its supreme governing body may be held in any state, district, province or territory wherein such society has at least one subordinate lodge, or in such other location as determined by the supreme governing body, and all business transacted at such meeting shall be as valid in all respects as if such meetings were held in this State. The minutes of the proceedings of the supreme governing body and of the board of directors shall be in the English language.
    (b)(1) A society may provide in its laws for an official publication in which any notice, report or statement required by law to be given to members, including notice of election, may be published. Such required reports, notices and statements shall be printed conspicuously in the publication. If the records of a society show that 2 or more members have the same mailing address, an official publication mailed to one member is deemed to be mailed to all members at the same address unless a member requests a separate copy.
    (2) Not later than June 1 of each year, a synopsis of the society's annual statement providing an explanation of the facts concerning the condition of the society thereby disclosed shall be printed and mailed to each benefit member of the society or, in lieu thereof, such synopsis may be published in the society's official publication.
    (c) A society may provide in its laws or rules for grievance or complaint procedures for members.
(Source: P.A. 84‑303.)

    (215 ILCS 5/289.1)(from Ch. 73, par. 901.1)
    (Section scheduled to be repealed on January 1, 2017)
    Sec. 289.1. Personal Liability.
    (a) The officers and members of the supreme governing body or any subordinate body of a society shall not be personally liable for any benefits provided by a society.
    (b) Any person may be indemnified and reimbursed by any society for expenses reasonably incurred by, and liabilities imposed upon, such person in connection with or arising out of any action, suit or proceeding, whether civil, criminal, administrative or investigative, or threat thereof, in which the person may be involved by reason of the fact that he or she is or was a director, officer, employee or agent of the society or of any firm, corporation or organization which he or she served in any capacity at the request of the society. A person shall not be so indemnified or reimbursed (1) in relation to any matter in such action, suit or proceedings as to which he or she shall finally be adjudged to be or have been guilty of breach of a duty as a director, officer, employee or agent of the society; or (2) in relation to any matter in such action, suit or proceeding, or threat thereof, which has been made the subject of a compromise settlement; unless in either such case the person acted in good faith for a purpose the person reasonably believed to be in or not opposed to the best interests of the society and, in a criminal action or proceeding, in addition, had no reasonable cause to believe that his or her conduct was unlawful. The determination whether the conduct of such person met the standard required in order to justify indemnification and reimbursement in relation to any matter described in subpoints (1) or (2) of the preceding sentence may only be made by the supreme governing body or board of directors by a majority vote of a quorum consisting of persons who were not parties to such action, suit or proceeding or by a court of competent jurisdiction. The termination of any action, suit or proceeding by judgment, order, settlement, conviction or upon a plea of no contest as to such person shall not in itself create a conclusive presumption that the person did not meet the standard of conduct required in order to justify indemnification and reimbursement. The foregoing right of indemnification and reimbursement shall not be exclusive of other rights to which such person may be entitled as a matter of law and shall inure to the benefit of his or her heirs, executors and administrators.
    (c) A society shall have power to purchase and maintain insurance on behalf of any person who is or was a director, officer, employee or agent of the society, or who is or was serving at the request of the society as a director, officer, employee or agent of any other firm, corporation or organization against any liability asserted against such person and incurred by him or her in any such capacity or arising out of his or her status as such, whether or not the society would have the power to indemnify the person against such liability under this Section.
(Source: P.A. 84‑303.)

    (215 ILCS 5/290.1)(from Ch. 73, par. 902.1)
    (Section scheduled to be repealed on January 1, 2017)
    Sec. 290.1. Waiver. The laws of the society may provide that no subordinate body, nor any of its subordinate officers or members, shall have the power or authority to waive any of the provisions of the laws of the society. Such provisions shall be binding on the society and every member and beneficiary of a member.
(Source: P.A. 84‑303.)

    (215 ILCS 5/291.1)(from Ch. 73, par. 903.1)
    (Section scheduled to be repealed on January 1, 2017)
    Sec. 291.1. Organization. A domestic society organized on or after the effective date of this amendatory Act shall be formed as follows:
        (a) Seven or more citizens of the United States, a

majority of whom are citizens of this State, who desire to form a fraternal benefit society may make, sign and acknowledge, before some officer competent to take acknowledgement of deeds, articles of incorporation, in which shall be stated:

(1) The proposed corporate name of the society,

which shall not so closely resemble the name of any society or insurance company already authorized to transact business in this State as to be misleading or confusing;

(2) The place where its principal office shall be

located within this State;

(3) The purposes for which it is being formed and

the mode in which its corporate powers are to be exercised. Such purposes shall not include more liberal powers than are granted by this amendatory Act; and

(4) The names and residences of the incorporators

and the names, residences and official titles of all the officers, trustees, directors or other persons who are to have and exercise the general control of the management of the affairs and funds of the society for the first year or until the ensuing election, at which all such officers shall be elected by the supreme governing body, which election shall be held not later than one year from the date of issuance of the permanent certificate of authority;

(b) Duplicate originals of the articles of

incorporation, certified copies of the society's bylaws and rules, copies of all proposed forms of certificates, applicants and rates therefor, and circulars to be issued by the society and a bond conditioned upon the return to applicants of the advanced payments if the organization is not completed within one year shall be filed with the Director, who may require such further information as the Director deems necessary. The bond with sureties approved by the Director shall be in such amount, not less than $300,000 nor more than $1,500,000, as required by the Director. All documents filed are to be in the English language. If the Director finds that the purposes of the society conform to the requirements of this amendatory Act and all provisions of the law have been complied with, the Director shall approve the articles of incorporation and issue the incorporators a preliminary certificate of authority authorizing the society to solicit members as hereinafter provided;

(c) No preliminary certificate of authority issued

under the provisions of this Section shall be valid after one year from its date of issue or after such further period, not exceeding one year, as may be authorized by the Director, upon cause shown, unless the 500 applicants hereinafter required have been secured and the organization has been completed as herein provided. The articles of incorporation and all other proceedings thereunder shall become null and void in one year from the date of the preliminary certificate of authority or at the expiration of the extended period, unless the society shall have completed its organization and received a certificate of authority to do business as hereinafter provided;

(d) Upon receipt of a preliminary certificate of

authority from the Director, the society may solicit members for the purpose of completing its organization, shall collect from each applicant the amount of not less than one regular monthly premium in accordance with its table of rates and shall issue to each such applicant a receipt for the amount so collected. No society shall incur any liability other than for the return of such advance premium nor issue any certificate nor pay, allow or offer or promise to pay or allow any benefit to any person until:

(1) Actual bona fide applications for benefits

have been secured on not less than 500 applicants and any necessary evidence of insurability has been furnished to and approved by the society;

(2) At least 10 subordinate lodges have been

established into which the 500 applicants have been admitted;

(3) There has been submitted to the Director,

under oath of the president or secretary, or corresponding officer of the society, a list of such applicants, giving their names, addresses, date each was admitted, name and number of the subordinate lodge of which each applicant is a member, amount of benefits to be granted and premiums therefor; and

(4) It shall have been shown to the Director, by

sworn statement of the treasurer or corresponding officer of such society, that a least 500 applicants have each paid in cash at least one regular monthly premium as herein provided, which premiums in the aggregate shall amount to at least $150,000. Said advance premiums shall be held in trust during the period of organization, and, if the society has not qualified for a certificate of authority within one year unless extended by the Director, as herein provided, such premiums shall be returned to said applicants;

(e) The Director may make such examination and

require such further information as the Director deems necessary. Upon presentation of satisfactory evidence that the society has complied with all the provisions of law, the Director shall issue to the society a certificate of authority to that effect and that the society is authorized to transact business pursuant to the provisions of this amendatory Act; and

(f) Any incorporated society authorized to transact

business in this State at the time this amendatory Act becomes effective shall not be required to reincorporate.

(Source: P.A. 84‑303.)

    (215 ILCS 5/292.1)(from Ch. 73, par. 904.1)
    (Section scheduled to be repealed on January 1, 2017)
    Sec. 292.1. Amendments to Laws.
    (a) A domestic society may amend its laws in accordance with the provisions thereof by action of its supreme governing body at any regular or special meeting thereof or, if its laws so provide, by referendum. Such referendum may be held in accordance with the provisions of its laws by the vote of the voting members of the society, by the vote of delegates or representatives of voting members or by the vote of local lodges. A society may provide for voting by mail. No amendment submitted for adoption by referendum shall be adopted unless, within 6 months from the date of submission thereof, a majority of the members voting shall have signified their consent to such amendment by one of the methods herein specified.
    (b) No amendment to the laws of any domestic society shall take effect unless approved by the Director, who shall approve such amendment if the Director finds that it has been duly adopted and is not inconsistent with any requirement of the laws of this State or with the character, objects and purposes of the society. Unless the Director shall disapprove any such amendment within 60 days after the filing of same, such amendment shall be considered approved. The approval or disapproval of the Director shall be in writing and mailed to the society. In case the Director disapproves such amendment, the reasons therefor shall be stated in such written notice.
    (c) Within 90 days from the approval thereof by the Director, all such amendments, or a synopsis thereof, shall be furnished to all members of the society either by mail or by publication in full in the official publication of the society. The affidavit of any officer of the society or of anyone authorized by it to mail any amendments or synopsis thereof, stating facts which show that same have been duly addressed and mailed, shall be prima facie evidence that such amendments, or a synopsis thereof, have been furnished the addressee.
    (d) Every foreign or alien society authorized to do business in this State shall file with the Director a certified copy of all amendments of, or additions to, its laws within 90 days after the enactment of same.
    (e) Printed copies of the laws as amended, certified by the secretary or corresponding officer of the society, shall be prima facie evidence of the legal adoption thereof.
(Source: P.A. 84‑303.)

    (215 ILCS 5/293.1)(from Ch. 73, par. 905.1)
    (Section scheduled to be repealed on January 1, 2017)
    Sec. 293.1. Institutions. A society may create, maintain and operate, or may establish organizations to operate, not for profit institutions to further the purposes permitted by Section 286.1 of this amendatory Act. Such institutions may furnish services free or at a reasonable charge. Any real or personal property owned, held or leased by the society for this purpose shall be reported in every annual statement. Admitted asset status of such real or personal property shall be in accordance with Section 302.1 of this amendatory Act.
(Source: P.A. 84‑303.)

    (215 ILCS 5/294.1)(from Ch. 73, par. 906.1)
    (Section scheduled to be repealed on January 1, 2017)
    Sec. 294.1. Reinsurance. A domestic society may enter into reinsurance transactions only in accordance with Article XI of this Code.
(Source: P.A. 84‑303.)

    (215 ILCS 5/295.1)(from Ch. 73, par. 907.1)
    (Section scheduled to be repealed on January 1, 2017)
    Sec. 295.1. Consolidations and Mergers. A domestic society may enter into agreements of consolidation or merger only in accordance with Article X of this Code.
(Source: P.A. 84‑303.)

    (215 ILCS 5/296.1)(from Ch. 73, par. 908.1)
    (Section scheduled to be repealed on January 1, 2017)
    Sec. 296.1. Conversion of Fraternal Benefit Society to Mutual Life Insurance Company.
    (a) Any society subject to the provisions of this amendatory Act possessed of admitted assets in excess of all liabilities at least equal to the minimum surplus required of a new mutual legal reserve life company under Section 43 of this Code transacting the same kind or kinds of business may, at its option, without reincorporation, adopt and become subject to the provisions of Article III of this Code, in lieu of this amendatory Act.
    (b) The board of directors of the society shall approve such proposed amendments to the articles of incorporation, the constitution and bylaws of the society as may be necessary or desirable to make the same conform to the articles of incorporation and bylaws of a mutual legal reserve life company, in accordance with the requirements of Article III of this Code.
    (c) The board of directors of the society shall then submit such proposed amendments to the Director together with: (1) a copy of the notice to be given to members and lodges as herein provided; (2) a current financial statement of the society showing assets, liabilities and surplus valued in accordance with the requirements of Article III; and (3) the proposed plan for transition from a fraternal society to a mutual legal reserve company, including, if pertinent, the following: dissolution of the lodge system; disposition of property held for the benefit of lodges; changes in the amount, calculation and collection of future premiums on policies; the method of selection of officers and board of directors or trustees to manage and control the mutual company until the regular annual meeting of its members; and such other changes as may be necessary to an orderly transition. If the Director finds that: (a) the amendments, notice and plan are in accordance with the provisions of this amendatory Act and not inconsistent with the laws and the Constitutions of this State and the United States; (b) the society has a surplus which, when calculated in accordance with the requirements of Article III of this Code, is at least equal to the original surplus required under Article III of a mutual legal reserve life company transacting the same kind or kinds of business; and (c) no reasonable objection exists to such conversion, the Director shall, within a reasonable time, authorize the sending of notices and further proceedings hereunder.
    (d) After the Director has given such authority, the board of directors of the society shall then submit the proposed amendments and plan of transition, as so approved, to the supreme governing body of such society at any regular or special meeting thereof, provided a copy of such amendments and plan have been included in or enclosed with the notice of such meeting, which notice shall be given as provided in the laws of the society for the convening of such supreme governing body in regular or special session as the case may be. At least 90 days prior to the date of such regular or special meeting, as the case may be, a notice describing the purpose of the proposed amendments, and including therein or enclosing therewith a copy of such amendments and plan of transition, all as approved by the Director, shall be mailed to each lodge or local body of the society qualified to choose a delegate or delegates to said meeting and also to each member of the society; for the purpose of this notice the lodges or local bodies and the members and the addresses of same shall be taken as those shown by the records of the society as of a date not earlier than 120 days prior to the date set for such meeting. The affidavit of any officer, clerk or agent of the company, or of anyone authorized to mail such notices, that the notices required by this Section bearing the required postage have been duly addressed and mailed shall, upon final approval by the Director of the proceedings hereunder, constitute conclusive evidence that such notice has been duly given in accordance herewith.
    (e) The affirmative votes of 2/3 of the members of such supreme governing body present at such meeting shall be necessary for the adoption of amendments and the plan of transition under this Section, provided, however, that 2/3 of the elective members present shall vote in favor thereof; the amendments and plan adopted shall be submitted to the Director for his final approval. If the Director shall find that the amendments and plan and the adoption thereof are in accordance with this Section he shall approve the same, and, not less than 30 days nor more than 60 days after such approval, he shall issue a certificate of authority authorizing the company to do business subject to and entitled to the benefits of Article III of this Code. Upon issuance of such certificate, any right in the society to assess its members shall expire and any provision for an assessment contained in the policies issued by the society shall become thenceforth unenforceable, null and void.
(Source: P.A. 84‑303.)
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