31A-9-503 - Conversion of a fraternal to a mutual.
31A-9-503. Conversion of a fraternal to a mutual.
A domestic fraternal may be converted into a mutual, as follows:
(1) In addition to complying with the requirements of Chapter 16, the board or thesupreme governing body shall adopt a plan of conversion stating:
(a) the reasons for and purposes of the proposed action;
(b) the proposed terms, conditions, and procedures and the estimated expenses ofimplementing the conversion;
(c) the proposed name of the corporation; and
(d) the proposed articles and bylaws.
(2) If the board and the supreme governing body disagree on the conversion plan, thedecision of the supreme governing body prevails.
(3) The plan shall be filed with the commissioner for approval, together with anyinformation under Subsection 31A-5-204(2) the commissioner reasonably requires. Thecommissioner shall approve the plan unless he finds, after a hearing, that it would be contrary tothe law, that the new mutual would not satisfy the requirements for a certificate of authority underSection 31A-5-212, that the plan would be contrary to the interests of members or the public, orthat the applicable requirements of Chapter 16 have not been satisfied.
(4) After being approved by the commissioner, the plan shall be submitted for approval tothe persons who were voting members on the date of the commissioner's approval underSubsection (3). For approval of the plan, at least a majority of the votes cast must be in favor ofthe plan, or a larger number if required by the laws of the fraternal.
(5) The officers and directors of the fraternal shall be the initial officers and directors ofthe mutual.
(6) A copy of the resolution adopted under Subsection (4) shall be filed with thecommissioner, stating the number of members entitled to vote, the number voting, the method ofvoting, and the number of votes cast in favor of the plan, stating separately the votes cast by mailand the votes cast in person.
(7) If the requirements of the law are met, the commissioner shall issue a certificate ofauthority to the new mutual. The fraternal then ceases its legal existence and the corporateexistence of the new mutual begins. However, the new mutual is considered to have beenincorporated as of the date the converted fraternal was incorporated. The new mutual has all theassets and is liable for all of the obligations of the converted fraternal. The commissioner maygrant a period not exceeding one year for adjustment to the requirements of Chapter 5, specifyingthe extent to which particular provisions of Chapter 5 do not apply.
(8) The corporation may not pay compensation other than regular salaries to existingpersonnel in connection with the proposed conversion. With the commissioner's approval,payment may be made at reasonable rates for printing costs and for legal and other professionalfees for services actually rendered in connection with the conversion. All expenses of theconversion, including the expenses incurred by the commissioner and the prorated salaries of anyinsurance office staff members involved, shall be paid by the corporation being converted.
Enacted by Chapter 242, 1985 General Session