31A-37-306 - Conversion or merger.
31A-37-306. Conversion or merger.
(1) An association captive insurance company or industrial insured group formed as astock or mutual corporation may be:
(a) converted to a reciprocal insurer in accordance with a plan and this section; or
(b) merged with and into a reciprocal insurer in accordance with a plan and this section.
(2) A plan for a conversion or merger under this section:
(a) shall be fair and equitable to:
(i) the shareholders, in the case of a stock insurer; or
(ii) the policyholders, in the case of a mutual insurer; and
(b) shall provide for the purchase of:
(i) the shares of any nonconsenting shareholder of a stock insurer in substantially thesame manner and subject to the same rights and conditions as are provided a dissentingshareholder; or
(ii) the policyholder interest of any nonconsenting policyholder of a mutual insurer insubstantially the same manner and subject to the same rights and conditions as are provided adissenting policyholder.
(3) In the case of a conversion authorized under Subsection (1):
(a) the conversion must be accomplished under a reasonable plan and procedure that areapproved by the commissioner;
(b) the commissioner may not approve the plan of conversion under this section unlessthe plan:
(i) satisfies Subsections (2) and (6);
(ii) provides for the conversion of existing stockholder or policyholder interests intosubscriber interests in the resulting reciprocal insurer, proportionate to stockholder orpolicyholder interests in the stock or mutual insurer; and
(iii) is approved:
(A) in the case of a stock insurer, by a majority of the shares entitled to vote representedin person or by proxy at a duly called regular or special meeting at which a quorum is present; or
(B) in the case of a mutual insurer, by a majority of the voting interests of policyholdersrepresented in person or by proxy at a duly called regular or special meeting at which a quorum ispresent;
(c) the commissioner shall approve a plan of conversion if the commissioner finds thatthe conversion will promote the general good of the state in conformity with the standards underSubsection 31A-37-301(4);
(d) if the commissioner approves a plan of conversion, the commissioner shall amend theconverting insurer's certificate of authority to reflect conversion to a reciprocal insurer and issuethe amended certificate of authority to the company's attorney-in-fact;
(e) upon issuance of an amended certificate of authority of a reciprocal insurer by thecommissioner, the conversion is effective; and
(f) upon the effectiveness of the conversion:
(i) the corporate existence of the converting insurer shall cease; and
(ii) the resulting reciprocal insurer shall notify the Division of Corporations andCommercial Code of the conversion.
(4) A merger authorized under Subsection (1) shall be accomplished substantially inaccordance with the procedures set forth in this title except that, solely for purposes of the
merger:
(a) the plan or merger shall satisfy Subsection (2);
(b) the subscribers' advisory committee of a reciprocal insurer shall be equivalent to theboard of directors of a stock or mutual insurance company;
(c) the subscribers of a reciprocal insurer shall be the equivalent of the policyholders of amutual insurance company;
(d) if a subscribers' advisory committee does not have a president or secretary, theofficers of the committee having substantially equivalent duties are the president and secretary ofthe committee;
(e) the commissioner shall approve the articles of merger if the commissioner finds thatthe merger will promote the general good of the state in conformity with the standards underSubsection 31A-37-301(4);
(f) notwithstanding Sections 31A-37-204 and 31A-37-205, the commissioner may permitthe formation, without capital and surplus, of a captive insurance company organized as areciprocal insurer, into which an existing captive insurance company may be merged to facilitatea transaction under this section, if there is no more than one authorized insurance companysurviving the merger; and
(g) an alien insurer may be a party to a merger authorized under Subsection (1) if:
(i) the requirements for the merger between a domestic and a foreign insurer underChapter 16, Insurance Holding Companies, are applied to the merger; and
(ii) the alien insurer is treated as a foreign insurer under Chapter 16, Insurance HoldingCompanies.
(5) If the commissioner approves the articles of merger under this section:
(a) the commissioner shall endorse the commissioner's approval on the articles; and
(b) the surviving insurer shall present the name to the Division of Corporations andCommercial Code.
(6) (a) Except as provided in Subsection (6)(b), a conversion authorized underSubsection (1) must provide for a hearing, of which notice has been given to the insurer, itsdirectors, officers and stockholders, in the case of a stock insurer, or policyholders, in the case ofa mutual insurer, all of whom have the right to appear at the hearing.
(b) Notwithstanding Subsection (6)(a), the commissioner may waive or modify therequirements for the hearing.
(c) If a notice of hearing is required, but no hearing is requested, after notice has beengiven under Subsection (6)(a), the commissioner may cancel the hearing.
Amended by Chapter 312, 2004 General Session