CHAPTER 826. CONVERSION OF MUTUAL INSURANCE COMPANY TO STOCK INSURANCE COMPANY
INSURANCE CODE
TITLE 6. ORGANIZATION OF INSURERS AND RELATED ENTITIES
SUBTITLE B. ORGANIZATION OF REGULATED ENTITIES
CHAPTER 826. CONVERSION OF MUTUAL INSURANCE COMPANY TO STOCK
INSURANCE COMPANY
SUBCHAPTER A. GENERAL PROVISIONS
Sec. 826.001. DEFINITIONS. In this chapter:
(1) "Conversion plan" means a plan adopted under this chapter to
convert a mutual insurance company into a stock insurance
company.
(2) "Converting company" means a domestic mutual insurance
company that is converting under this chapter into a domestic
stock insurance company.
(3) "Eligible member" means a member of a converting company
whose policy is in force on the date that the company's board of
directors adopts a conversion plan. The term does not include a
person insured under a group policy.
(4) "Mutual insurance company" means a domestic mutual insurance
company.
(5) "Participating policy" means a policy issued by a mutual
insurance company that grants a holder the right to receive
declared dividends.
(6) "Resulting company" means a domestic stock insurance company
that has converted under this chapter from a domestic mutual
insurance company.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003.
Sec. 826.002. AUTHORITY TO CONVERT TO STOCK INSURANCE COMPANY.
(a) A mutual insurance company may convert to a stock insurance
company.
(b) A converting company may not engage in the business of
insurance as a stock insurance company until it complies with the
requirements of this chapter.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003.
Sec. 826.003. RIGHTS AND PRIVILEGES OF RESULTING COMPANY; LAWS
APPLICABLE. Except as provided by this chapter, a resulting
company:
(1) may exercise only the rights and privileges of a stock
insurance company; and
(2) is subject to:
(A) all of the requirements and rules imposed on stock insurance
companies organized under this code; and
(B) the laws of this state relating to the regulation or
supervision of insurance companies.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003.
Sec. 826.004. CERTAIN CONVERSIONS PROHIBITED. A mutual
insurance company may not convert to a stock insurance company
under this chapter if, as a direct result of the conversion, any
affiliate or other person acquires control of the resulting
company, unless that affiliate or person complies with Section
823.154.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003.
Sec. 826.005. CORPORATE EXISTENCE. (a) On the effective date
of a conversion under this chapter:
(1) the corporate existence of the converting company continues
in the resulting company;
(2) all assets, rights, franchises, and interests of the
converting company in and to property and any accompanying thing
in action are vested in the resulting company without a deed or
transfer; and
(3) the resulting company assumes all the obligations and
liabilities of the converting company.
(b) Except as otherwise specified by the conversion plan, the
directors and officers of the converting company serving on the
effective date of the conversion serve as directors and officers
of the resulting company until new directors and officers are
elected under the articles of incorporation and bylaws of the
resulting company.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003.
SUBCHAPTER B. CONVERSION PLAN ADOPTION AND REQUIREMENTS
Sec. 826.051. PLAN ADOPTION. (a) To convert to a stock
insurance company a mutual insurance company must adopt, by the
affirmative vote of at least two-thirds of the members of its
board of directors, a conversion plan consistent with this
chapter.
(b) For a conversion plan to take effect:
(1) the commissioner must approve the conversion plan; and
(2) the eligible members must approve the conversion plan and
adopt the amended or restated articles of incorporation of the
resulting company.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003.
Sec. 826.052. GENERAL REQUIREMENTS; EFFECT OF CONVERSION ON
POLICIES. (a) Each conversion plan must include the provisions
required by this chapter.
(b) Each policy in effect on the effective date of the
conversion remains in effect under the terms of that policy,
except that the following rights, to the extent they existed in
the converting company, are extinguished on the effective date of
the conversion:
(1) any voting rights of policyholders;
(2) except as provided by Subsection (c), a right to share in
the surplus or profits of the converting company; and
(3) any assessment provisions.
(c) The holder of a participating policy in effect on the
effective date of the conversion continues to have a right to
receive dividends as provided by the participating policy.
(d) On the renewal date of a participating policy, the resulting
company may issue to the insured a nonparticipating policy as a
substitute for the participating policy, unless the participating
policy is:
(1) a guaranteed renewable accident and health policy; or
(2) a guaranteed renewable, noncancellable accident and health
policy.
(e) All the costs and expenses connected with a conversion plan
shall be paid or reimbursed by the converting company or the
resulting company.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003.
Sec. 826.053. SALE OF CAPITAL STOCK. A conversion plan must
provide that shares of capital stock of the resulting company
shall be sold in a private placement, public offering, or an
alternative method approved by the commissioner unless the shares
are:
(1) sold or distributed to a holder of surplus notes of the
converting company; or
(2) subscribed to by:
(A) a tax-qualified employee benefit plan under Section 826.059;
(B) a director or officer under Section 826.056(b); or
(C) an eligible member exercising subscription rights under
Section 826.058.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003.
Sec. 826.054. PURCHASE PRICE OF CAPITAL STOCK. (a) A
conversion plan must set the total price of the capital stock in
an amount equal to the estimated pro forma market value of the
resulting company based on an independent valuation by a
qualified expert, giving consideration to the amount of capital
that the board of directors considers necessary to be raised by
the company. The pro forma market value may be the value
estimated to be necessary to attract full subscription for the
shares, as indicated by the independent valuation, and may be
stated as a range of values.
(b) The conversion plan may set the purchase price for a share
of capital stock at any reasonable amount. The price per share is
not required to be the same for each class of purchaser. However,
eligible members purchasing stock under subscription rights
received under Section 826.058 may purchase shares at the lowest
available price under the plan.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003.
Sec. 826.055. LIMITATION ON ACQUISITION OF CAPITAL STOCK. (a)
The conversion plan must provide that a person or group of
persons acting in concert may not acquire, in the public or
private offering or through the exercise of subscription rights,
more than 10 percent of the capital stock of the resulting
company except with the approval of the commissioner.
(b) This section does not apply to an entity that purchases 100
percent of the capital stock of the resulting company as part of
the conversion plan approved by the commissioner.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003.
Sec. 826.056. DIRECTORS AND OFFICERS. (a) Except as otherwise
provided by this section, the conversion plan must provide that a
director or officer of the converting company, or a person acting
in concert with a director or officer, may not acquire, without
the permission of the commissioner, any capital stock of the
resulting company or the stock of another corporation that is
participating in the conversion plan before the third anniversary
of the effective date of the conversion. This subsection does not
prohibit a director or officer from:
(1) acquiring capital stock through a broker-dealer;
(2) making purchases through the exercise of subscription rights
received under the conversion plan; or
(3) participating in a stock benefit plan permitted by Section
826.059 or approved by the eligible members under Section
826.107.
(b) A conversion plan may provide that the directors and
officers of the converting company may receive, without payment,
nontransferable subscription rights to purchase capital stock of
the resulting company or the stock of another corporation that is
participating in the conversion plan.
(c) The aggregate number of shares that may be purchased by
directors and officers under Subsection (b) may not exceed:
(1) 35 percent of the total number of shares to be issued for
the resulting company if the total assets of the converting
company are less than $50 million; or
(2) 25 percent of the total number of shares to be issued for
the resulting company if the total assets of the converting
company are more than $500 million.
(d) For converting companies with total assets between $50
million and $500 million, inclusive, the maximum percentage of
the total number of shares that may be purchased shall be
interpolated from amounts provided under Subsection (c).
(e) A conversion plan must provide that a director or officer of
the converting company may not sell stock purchased under the
conversion plan before the first anniversary of the effective
date of the conversion.
(f) Notwithstanding Subsection (e), a conversion plan may
provide for the purchase or redemption of stock in the event that
a director or officer is no longer associated with the resulting
company during the period described by Subsection (e).
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003.
Sec. 826.057. RIGHTS OF HOLDER OF SURPLUS NOTES. A conversion
plan must provide that any rights of a holder of a surplus note
to participate in the conversion are governed by the terms of the
surplus note.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003.
Sec. 826.058. SUBSCRIPTION RIGHTS; GENERAL PROVISIONS. (a)
Except for an alternate conversion plan adopted under Section
826.061, each conversion plan must specify the subscription
rights of eligible members.
(b) The conversion plan must provide that:
(1) each eligible member is to receive, without payment by the
member, nontransferable subscription rights to purchase a portion
of the capital stock of the resulting company; and
(2) in the aggregate, all eligible members have the right,
before the right of any other party, to purchase 100 percent of
the capital stock of the resulting company after provision for:
(A) capital stock required to be sold or distributed to the
holders of surplus notes, if any;
(B) capital stock purchased by a stock benefit plan as permitted
by Section 826.059; and
(C) capital stock acquired by the directors and officers, as
permitted by Section 826.056(b).
(c) As an alternative to subscription rights in the resulting
company, the conversion plan may provide that each eligible
member is to receive, without payment by the member,
nontransferable subscription rights to purchase a portion of the
capital stock of:
(1) a corporation organized for the purpose of purchasing and
holding all the stock of the resulting company;
(2) a stock insurance company owned by the converting company
into which the converting company is to be merged; or
(3) an unaffiliated stock insurance company or other corporation
that is to purchase all the stock of the resulting company.
(d) The conversion plan must provide that the subscription
rights are allocated in whole shares among the eligible members
using a fair and equitable formula. The formula may consider that
the different classes of policies of the eligible members
contributed to the surplus of the converting company or any other
factors that may be fair or equitable as determined by the board
of directors.
(e) The conversion plan must provide a fair and equitable method
for allocating shares of capital stock in the event of an
oversubscription to shares by eligible members exercising
subscription rights under this section.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003.
Sec. 826.059. SUBSCRIPTION RIGHTS; TAX-QUALIFIED EMPLOYEE
BENEFIT PLAN. The conversion plan may allocate to a
tax-qualified employee benefit plan nontransferable subscription
rights to purchase not more than 10 percent of the capital stock
of the resulting company.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003.
Sec. 826.060. LIQUIDATION ACCOUNT. (a) The conversion plan may
provide for the creation of a liquidation account for the benefit
of members in the event of a voluntary liquidation after the
conversion.
(b) The liquidation account must be in an amount equal to the
surplus of the converting company, exclusive of the principal
amount of any surplus note, on the last day of the quarter
preceding the date the conversion plan is adopted.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003.
Sec. 826.061. ALTERNATE CONVERSION PLAN. (a) The board of
directors may adopt a conversion plan that does not rely in whole
or in part on the issuance of nontransferable subscription rights
to members to purchase stock of the resulting company if the
commissioner determines that the plan:
(1) complies with this chapter;
(2) is fair and equitable; and
(3) permits the resulting company to satisfy the requirements in
effect on the date of the determination for a certificate of
authority applicable to a domestic stock insurance company.
(b) The conversion plan may:
(1) include the merger of a domestic mutual insurance company
with a domestic or foreign stock insurance company;
(2) provide for issuing stock, cash, or other consideration to
members instead of subscription rights;
(3) provide for the formation of a mutual holding company under
Subchapter E; or
(4) establish another plan containing other provisions approved
by the commissioner.
(c) The commissioner may retain, at the converting company's
expense, a qualified expert who is not a member of the
commissioner's staff to assist in reviewing whether the
conversion plan meets the requirements for approval by the
commissioner.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003.
SUBCHAPTER C. ADOPTION OF CONVERSION PLAN
Sec. 826.101. PLAN INFORMATION FILED WITH COMMISSIONER;
COMMISSIONER POWERS AND DUTIES. Not later than the 90th day
after the date on which a converting company's board of directors
adopts a conversion plan, the company shall file with the
commissioner:
(1) a copy of the documents relating to the conversion plan,
including the valuation required by Section 826.054(a);
(2) the form of notice required by Section 826.104;
(3) the form of proxy to be solicited from eligible members
under Section 826.107(a);
(4) the form of notice required by Section 826.151 to persons
whose policies are issued after adoption of the conversion plan
but before the effective date of the conversion plan;
(5) the proposed amended or restated articles of incorporation
of the resulting company;
(6) a statement regarding acquisition of control, if applicable,
as required by Chapter 823; and
(7) any other information requested by the commissioner.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003.
Sec. 826.102. APPROVAL OF PLAN BY COMMISSIONER. (a) The
commissioner shall approve a conversion plan if the commissioner
determines that:
(1) the plan complies with this chapter;
(2) the plan's method of allocating subscription rights or other
value is fair and equitable; and
(3) the resulting company would satisfy the requirements
applicable to a domestic stock insurance company for a
certificate of authority on the date of the determination.
(b) Except as otherwise provided by this section, the
commissioner shall approve or disapprove a conversion plan not
later than the 60th day after the first day on which all the
documents required under Section 826.101 are filed with the
commissioner.
(c) The commissioner may extend the time for decision by an
additional 30 days on written notice to the converting company.
Except as provided under Subsection (e), the commissioner may not
extend the time for decision beyond that 30-day period.
(d) The commissioner shall immediately give written notice to
the converting company of the commissioner's decision and, if the
commissioner disapproves the plan, a detailed statement of the
reasons for the disapproval.
(e) The commissioner may retain, at the mutual insurance
company's expense, a qualified expert who is not a member of the
commissioner's staff to assist the commissioner in reviewing the
conversion plan and the valuation required under Section
826.054(a). If the commissioner retains a qualified expert under
this subsection, the commissioner may extend the period for
decision by an additional 60 days beyond the initial 60-day
period.
(f) After giving written notice to the converting company and
other interested persons, the commissioner may hold a hearing on
whether the conversion plan complies with this chapter. The
company and any other interested person have the right to appear
at the hearing. Notice to interested persons who have not filed
an appearance in the matter may be made through publication in
the Texas Register.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003.
Sec. 826.103. AMENDMENTS; WITHDRAWAL OF PLAN. Before a
conversion plan takes effect, a converting company may amend or
withdraw the plan by the affirmative vote of at least two-thirds
of the members of its board of directors.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003.
Sec. 826.104. NOTICE TO ELIGIBLE MEMBERS; COMMENTS. (a) Not
later than the 10th business day after the date of filing with
the commissioner the documents required under Section 826.101,
the converting company shall send to each eligible member a
notice advising the member of:
(1) the adoption and filing of the conversion plan; and
(2) the member's right to comment on the plan to the
commissioner and the converting company.
(b) The notice must include a description of the procedure to be
used in making comments. An eligible member who elects to make
comments must make the comments in writing not later than the
30th day after the date on which the notice is sent.
(c) Not later than the 60th day after the date of the
commissioner's approval of the plan, the converting company shall
send to each eligible member notice of the members' meeting to
vote on the conversion plan. The notice must be sent to the
member's last known address, as shown on the converting company's
records, before the 30th day preceding the date set for the
meeting. The notice must:
(1) briefly but fairly describe the proposed conversion plan;
and
(2) inform the member of the member's right to vote on the
conversion plan.
(d) If the meeting to vote on the conversion plan is held during
the converting company's annual meeting of policyholders, a
combined meeting notice satisfies the requirements of this
section.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003.
Sec. 826.105. SUBSTANTIAL COMPLIANCE WITH NOTICE REQUIREMENTS.
If the converting company in good faith substantially complies
with the notice requirements of this chapter, the company's
failure to send a member the required notice does not impair the
validity of an action taken under this chapter.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003.
Sec. 826.106. INSOLVENT CONVERTING COMPANY; NOTICE REQUIREMENTS.
If a converting company is insolvent or, in the judgment of the
commissioner, is in hazardous financial condition, its board of
directors, by a majority vote, may request in its submission to
the commissioner a waiver of the requirements for notice to and
approval of the proposed conversion by eligible members. The
request must specify:
(1) the method and basis for the issuance of the resulting
company's shares of its capital stock to an independent party in
connection with an investment by the independent party in an
amount sufficient to restore the resulting company to a sound
financial condition; and
(2) that the conversion is to be accomplished without payment of
consideration to past, present, or future policyholders if the
commissioner determines that the value of the converting company
is insufficient to justify that payment.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003.
Sec. 826.107. ELECTION; APPROVAL OF PLAN; ADOPTION OF AMENDED OR
RESTATED ARTICLES OF INCORPORATION. (a) At a meeting convened
to consider the conversion plan, an eligible member entitled to
vote on the proposed conversion plan may vote in person or by
proxy. The number of votes each eligible member may cast is
determined by the converting company's bylaws. If the bylaws do
not contain an applicable provision, each member may cast one
vote. Before the eligible members may vote on approval of a
conversion plan, the converting company must comply with Sections
826.101 and 826.102.
(b) At the meeting held to vote on the conversion plan, the
eligible members shall also consider the adoption of amended or
restated articles of incorporation.
(c) Adoption of the conversion plan or adoption of amended
articles of incorporation requires the affirmative vote of at
least two-thirds of the votes cast by eligible members.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003.
Sec. 826.108. FILING OF MINUTES, ARTICLES OF INCORPORATION, AND
BYLAWS; EFFECTIVE DATE OF CONVERSION. (a) Not later than the
30th day after the date on which the eligible members approve the
conversion plan, the converting company shall file with the
commissioner:
(1) the minutes of the meeting at which the plan was approved;
and
(2) the amended or restated articles of incorporation and bylaws
of the resulting company.
(b) A conversion plan takes effect on the date that the amended
or restated articles of incorporation are filed with the
commissioner.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003.
Sec. 826.109. CONFLICT OF INTEREST. (a) Except as provided by
a conversion plan approved by the commissioner or this section, a
director, officer, agent, or employee of a converting company may
not receive a fee, commission, or other consideration, other than
that person's usual salary or compensation, for aiding,
promoting, or assisting in a conversion under this chapter.
(b) This section does not prohibit the payment of reasonable
fees and compensation to an attorney, accountant, or actuary for
professional services performed by that person, even if the
person is also a director or officer of the converting company.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003.
Sec. 826.110. LIMITATION ON ACTIONS. An action challenging the
validity of or arising out of acts taken or proposed to be taken
regarding a conversion plan under this chapter must be commenced
not later than the 30th day after the effective date of the
conversion plan.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003.
SUBCHAPTER D. RIGHTS OF MEMBERS ON CONVERSION
Sec. 826.151. RIGHTS OF MEMBERS WHOSE POLICIES ARE ISSUED AFTER
ADOPTION OF CONVERSION PLAN BUT BEFORE EFFECTIVE DATE. (a) On
issuance of a policy after a conversion plan has been adopted by
the board of directors but before the effective date of the
conversion plan, the converting company shall send to each member
to whom a policy is issued a written notice regarding the
conversion plan.
(b) Except as provided by Subsection (d), a member of an
accident and health insurance company entitled to notice under
Subsection (a) is entitled to rescind the member's policy and
receive a full refund of any amount paid for the policy not later
than the 10th day after the date on which the notice is received.
(c) Except as provided by Subsection (d), each member insured
under a property or casualty insurance policy is entitled to
notice under Subsection (a) and shall be advised of the member's
right to:
(1) cancel the policy; and
(2) receive a pro rata refund of unearned premiums.
(d) A member who has made or filed a claim under the insurance
policy is not entitled to a refund under Subsection (b) or (c). A
member who has exercised a right provided by Subsection (b) or
(c) may not make or file a claim under the insurance policy.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003.
Sec. 826.152. AMENDMENT OF POLICIES. A converting company, by
endorsement or rider approved by the commissioner and sent to the
policyholder, may simultaneously with or at any time after the
adoption of a conversion plan amend an insurance policy in effect
to terminate a right of the holder of the policy to share in the
surplus or profits of the converting company. The amendment is
void if the conversion plan does not take effect.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003.
SUBCHAPTER E. CONVERSION THROUGH MUTUAL HOLDING COMPANY
Sec. 826.201. CONVERSION THROUGH CREATION OF HOLDING COMPANY.
(a) A converting company, on approval by the commissioner, may
reorganize by forming a holding company based on a mutual plan
and continuing the corporate existence of the converting company
as a stock insurance company.
(b) A mutual holding company is considered an insurer subject to
this chapter and Chapter 883. A mutual holding company is
automatically a party to an administrative proceeding under this
code involving an insurance company that, as a result of a
reorganization under this subchapter, is a subsidiary of the
mutual holding company. In any proceeding involving the resulting
company, the assets of the mutual holding company are considered
assets of the resulting company for purposes of satisfying the
claims of the resulting company's policyholders.
(c) A mutual holding company may not dissolve or liquidate
without the approval of the commissioner.
(d) A mutual holding company may convert to a stock holding
company under this chapter as if the mutual holding company were
a mutual insurance company.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003.
Sec. 826.202. COMMISSIONER POWERS AND DUTIES; APPROVAL. (a)
The commissioner shall review the proposed plan of reorganization
as an alternate conversion plan under Section 826.061. The
commissioner may require as a condition of approval modifications
of the proposed plan of reorganization that the commissioner
determines necessary to protect the members' interests.
(b) The commissioner may retain a qualified expert as provided
by Section 826.102(e).
(c) The commissioner has jurisdiction over a mutual holding
company organized under this subchapter to ensure that member
interests are protected.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003.
Sec. 826.203. APPLICABILITY OF CERTAIN LAWS; INCORPORATION. A
mutual holding company that results from the reorganization of a
domestic mutual insurance company organized under Chapter 883
must be organized under Sections 883.051, 883.052, 883.054, and
883.056. The articles of incorporation, and any amendments to
those articles, of the mutual holding company are subject to
approval of the commissioner in the same manner as those of a
mutual insurance company.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003.
Sec. 826.204. MEMBERSHIP INTERESTS. (a) The membership
interests of the policyholders of the resulting company become
membership interests in the mutual holding company. Eligible
members of the converting company become members of the mutual
holding company in accordance with the articles of incorporation
and bylaws of the mutual holding company.
(b) A membership interest in a mutual holding company does not
constitute a security as defined by Section 4, The Securities Act
(Article 581-4, Vernon's Texas Civil Statutes).
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003.
Sec. 826.205. CAPITAL STOCK HELD BY MUTUAL HOLDING COMPANY. (a)
In this section:
(1) "Intermediate holding company" means a holding company that:
(A) is a subsidiary of a mutual holding company formed to
reorganize a mutual insurance company; and
(B) directly or through a subsidiary intermediate holding
company, owns the resulting company.
(2) "Majority of the voting shares of the capital stock" means
shares of the capital stock of a company that carry the right to
cast a majority of the votes entitled to be cast by all of the
outstanding shares of the capital stock of the company on all
matters submitted to a vote of the shareholders of the company.
(b) All of the initial shares of the capital stock of the
resulting company shall be issued to the mutual holding company.
(c) The mutual holding company shall at all times own a majority
of the voting shares of the capital stock of the resulting
company or of an intermediate holding company established to hold
the voting shares of the resulting company. The requirements of
this subsection may be satisfied by indirect ownership through
one or more intermediate holding companies in a corporate
structure approved by the commissioner.
(d) The mutual holding company or intermediate holding company
may not convey, transfer, assign, pledge, subject to a security
interest or lien, encumber, or otherwise hypothecate or alienate
the majority of the voting shares of the capital stock that is
required to be owned under Subsection (c).
(e) A violation of Subsection (d) is void in inverse
chronological order from the date of the conveyance or activity
as to the shares necessary to constitute a majority of the voting
shares of the capital stock.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003.
Sec. 826.206. CONVERSION OF FOREIGN MUTUAL INSURANCE COMPANY.
(a) On the approval of the commissioner, a foreign mutual
insurance company may reorganize in compliance with the
requirements of any law or regulation applicable to the foreign
mutual insurance company by:
(1) transferring its members' membership interests into a mutual
holding company formed under a procedure analogous to that
described by this subchapter; and
(2) continuing the corporate existence of the reorganizing
foreign mutual insurance company as a foreign stock insurance
company subsidiary of the mutual holding company.
(b) The reorganizing foreign mutual insurance company may remain
a foreign company and may be admitted to do business in this
state. A foreign mutual insurance company may also redomesticate
in this state by complying with the applicable requirements of
Chapter 983.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,
2003.