CHAPTER 805. DIRECTORS, OFFICERS, AND OTHER INTERESTED PERSONS
INSURANCE CODE
TITLE 6. ORGANIZATION OF INSURERS AND RELATED ENTITIES
SUBTITLE A. GENERAL PROVISIONS APPLICABLE TO INSURERS AND RELATED
ENTITIES
CHAPTER 805. DIRECTORS, OFFICERS, AND OTHER INTERESTED PERSONS
SUBCHAPTER A. ACTIVITIES OF DIRECTORS, OFFICERS, AND SHAREHOLDERS
Sec. 805.001. DEFINITIONS. In this subchapter:
(1) "Major shareholder" means an individual, corporation,
partnership, association, joint-stock company, business trust, or
unincorporated organization that is directly or indirectly the
beneficial owner of more than 10 percent of any class of an
equity security of an insurer.
(2) "Subsidiary" means a corporation:
(A) of which at least 50 percent of any class of an equity
security is owned by an insurer; or
(B) that is managed, directly or indirectly controlled, or
subject to control by an insurer.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003.
Sec. 805.002. APPLICABILITY OF SUBCHAPTER. (a) This subchapter
applies to any insurer, including a:
(1) capital stock company;
(2) reciprocal or interinsurance exchange;
(3) Lloyd's plan;
(4) fraternal benefit society;
(5) mutual company, including a mutual assessment company;
(6) local mutual aid association;
(7) burial association;
(8) county mutual insurance company;
(9) farm mutual insurance company;
(10) fidelity, guaranty, or surety company;
(11) mutual life insurance company;
(12) mutual insurance company other than a mutual life insurance
company;
(13) stipulated premium company;
(14) title insurance company; and
(15) any other insurance company engaged in the business of
insurance in or organized under the laws of this state or
otherwise regulated under this code.
(b) A provision of this code limiting regulation under this code
does not limit the application of this subchapter.
(c) This subchapter controls if there is ambiguity or a conflict
between this subchapter and another provision of this code.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003.
Sec. 805.003. PROHIBITED ACTIVITIES. (a) A director, officer,
or major shareholder of an insurer may not:
(1) except as provided by this subchapter, directly, indirectly,
or through a substantial interest in another corporation, firm,
or business unit receive money or another thing of value for
negotiating, procuring, recommending, or aiding in a purchase,
sale, or exchange of property or a loan from the insurer or its
subsidiary;
(2) directly, indirectly, or through a substantial interest in
another corporation, firm, or business unit have a pecuniary
interest in a purchase, sale, exchange, or loan described by
Subdivision (1) as a principal, co-principal, agent, or
beneficiary; or
(3) directly or indirectly accept a loan or guarantee described
by Subsection (b).
(b) An insurer may not directly, indirectly, or through its
subsidiary make a loan to or guarantee the financial obligation
of a director, officer, or major shareholder of an insurer.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003.
Sec. 805.004. ACTIVITIES NOT PROHIBITED. This subchapter does
not prohibit:
(1) a director, officer, or major shareholder of an insurer
from:
(A) becoming a policyholder of the insurer and exercising the
usual rights of a policyholder;
(B) participating as beneficiary in a pension plan, deferred
compensation plan, profit-sharing or bonus plan, stock option
plan, or similar plan adopted by the insurer and for which the
director, officer, or major shareholder may be eligible under the
terms of the plan;
(C) receiving a salary, bonus, or other remuneration for a
service rendered to the insurer as an employee of the insurer and
not in violation of another provision of this code; or
(D) entering into an arms-length transaction with the insurer
if:
(i) the transaction is not prohibited by another statute; and
(ii) the commissioner approves the transaction before the
transaction is made;
(2) a director of an insurer from:
(A) performing professional services not required of a director
by law; or
(B) receiving director's fees or reimbursement for an expense
incurred in the performance of a duty as a director;
(3) a transaction within an insurance holding company system by
an insurer with its holding company, subsidiary, or affiliate
that:
(A) is not prohibited by law;
(B) meets the test of being fair and proper; and
(C) is regulated by another statute;
(4) a transaction or arrangement that:
(A) is not prohibited by law; and
(B) meets the test of being fair and proper as prescribed by
rules adopted by the commissioner; or
(5) the approval and payment of lawful dividends to
policyholders and shareholders.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003.
SUBCHAPTER B. CERTAIN PAYMENTS BY DIRECTORS, OFFICERS, AND
TRUSTEES
Sec. 805.021. LIABILITY FOR FEE AND TAX PAYMENTS. (a) In this
section, "fee or tax" includes a license, excise, privilege,
premium, or occupation fee or tax.
(b) A director, officer, or trustee of an insurer is not
personally liable, in complying with the law, for the payment of
or for the determination not to contest the payment of a fee or
tax to a state or a political subdivision of a state that the
board of directors or trustees considers to be in the corporate
interest of the insurer.
(c) Subsection (b) does not apply if, before the payment of the
fee or tax, the state court of final appellate jurisdiction or
the United States Supreme Court expressly holds that the law
imposing the fee or tax is invalid.
(d) This section does not directly or indirectly limit,
minimize, or interpret the rights and powers of an insurer or the
directors, officers, or trustees of an insurer.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003.