2007 California Insurance Code Article 17. Conversion Of Certain Reciprocal Insurers To Incorporated Stock Insurers

CA Codes (ins:1560-1560.19)

1560.  This article shall apply only to domestic reciprocal insurers
organized after 1974 to provide medical malpractice insurance.



1560.01.  By following the procedure specified in this article, any
domestic reciprocal insurer described in Section 1560 may be
converted into an incorporated stock insurer.  To that end, it may
provide and carry out a plan for the conversion by complying with the
requirements of this article.



1560.02.  The definitions in this section apply to the following
terms when used in this article:
   (a) "Adoption date" means the date the governing body adopts the
plan of conversion.
   (b) "Converted insurer" means the incorporated stock insurer into
which a domestic reciprocal insurer has been converted in accordance
with the provisions of this article.
   (c) "Converting insurer" means, for a plan of conversion under
this article, the domestic reciprocal insurer that is converting
under the plan.
   (d) "Effective date" means the date upon which the conversion of a
domestic reciprocal insurer is effective, as specified in the
amended articles of incorporation of the reciprocal holding company
filed with the Secretary of State, as a result of conversion
proceedings under this article.
   (e) "Eligible subscribers" means the subscribers of the domestic
reciprocal insurer who are of record, fully paid-up, and otherwise in
good standing on the domestic reciprocal insurer's adoption date and
on its effective date, but shall not include those persons covered
solely under a reporting endorsement to a claims-made policy on
either date.
   (f) "Governing body" means the body exercising subscribers' rights
selected pursuant to Section 1308 for the domestic reciprocal
insurer.
   (g) "Independent director" means a member of the governing body of
the reciprocal holding company who does not own shares, options, or
any other equity interests in the stock holding company.
   (h) "Person" means an individual, partnership, firm, association,
corporation, joint-stock company, limited liability company, trust,
government or governmental agency, state or political subdivision of
a state, public or private corporation, board, association, estate,
trustee, or fiduciary, or any similar entity.
   (i) "Plan of conversion" or "plan" means a plan adopted by a
domestic reciprocal insurer in compliance with this article.
   (j) "Policy" means an individual or group policy of insurance
issued by a domestic reciprocal insurer.  If a policy takes a form
other than an individual form but holders of certificates or other
interests under the policy are treated by the domestic reciprocal
insurer as if they were holders of individual policies, the domestic
reciprocal insurer may provide in its plan of conversion under this
article that such a certificate or other interest is deemed to be a
policy and deem the holder of the certificate or other interest to be
an owner of a policy.  Such a provision shall be for the sole
purpose of determining the rights, if any, of policyholders of the
domestic reciprocal insurer to vote upon and receive consideration
under the plan of conversion and shall not affect the other voting
rights and qualifications of members of the domestic reciprocal
insurer.
   (k) "Policyholder" means the holder of a policy other than a
reinsurance contract or a person covered solely under a reporting
endorsement to a claims-made policy.
   (l) "Reciprocal holding company" means a corporation organized
under the laws of this state subject to the General Corporation Law
as set forth in the Corporations Code.  The articles of incorporation
of a reciprocal holding company shall contain provisions stating the
following:
   (1) It is a reciprocal holding company organized under this
article.
   (2) One purpose of the reciprocal holding company is to hold not
less than 51 percent of the voting stock of a stock holding company,
which in turn holds all of the voting stock of a converted insurer.
In addition, the reciprocal holding company shall own not less than
51 percent of the total stockholders' equity of the stock holding
company at all times.
   (3) It is not authorized to issue voting stock.
   (4) Its subscribers have the rights specified in Section 1560.11
and in its articles of incorporation and bylaws.
   (5) Its assets and liabilities are subject to inclusion in the
estate of the converted insurer in any proceedings successfully
prosecuted against the converted insurer under Article 14 (commencing
with Section 1010) or Article 14.3 (commencing with Section 1064.1)
of Chapter 1.
   (m) "Rights in surplus" for a domestic reciprocal insurer, means
rights of subscribers to a return of that portion of the surplus that
has not been apportioned or declared by the governing body for
policyholder dividends.  "Rights in surplus" includes rights of
subscribers to a distribution of surplus in liquidation or
conservation of the insurer under this code, or in a dissolution or
winding up.  "Rights in surplus" does not include any right expressly
conferred solely by the terms of an insurance policy.
   (n) "Stock holding company" means a corporation authorized to
issue one or more classes of capital stock, the corporate purposes of
which include holding all of the voting stock in an insurer that has
been converted from a domestic reciprocal insurer into a stock
insurer in proceedings under this article in which a reciprocal
holding company is formed.
   (o) "Subscriber" means a person who, by the records of the
domestic reciprocal insurer and its rules and regulations, is deemed
to be a holder of a subscriber's interest in the domestic reciprocal
insurer.  On and after the effective date of a plan of conversion,
the term "subscriber" means a member of a reciprocal holding company,
as provided in Section 1560.11.
   (p) "Subscriber interests" mean the interests of subscribers
arising under this code and the rules and regulations of the domestic
reciprocal insurer or otherwise by law.
   (q) "Voting stock" means securities of any class or any ownership
interest having voting power for the election of directors, trustees,
or management of a person, other than securities having voting power
only because of the occurrence of a contingency.  All references to
a specified percentage of voting stock of any person mean securities
having the specified percentage of the voting power in that person
for the election of directors, trustees, or management of that
person, other than securities having voting power only because of the
occurrence of a contingency.



1560.03.  A plan of conversion adopted by a domestic reciprocal
insurer for the establishment of a reciprocal holding company shall
provide that the domestic reciprocal insurer will become a stock
insurer, that the subscribers of the domestic reciprocal insurer will
become subscribers of a reciprocal holding company, that the
reciprocal holding company will acquire at least 51 percent of the
voting stock of the stock holding company, and that the stock holding
company will acquire all of the voting stock of the converted
insurer.  The plan of conversion shall include appropriate
proceedings for amending the domestic reciprocal insurer's rules and
regulations and other charter documents to give effect to the
conversion from a domestic reciprocal insurer into a stock
corporation.  The plan shall be:
   (a) As approved by a resolution of two-thirds of the governing
board.  The resolution shall specify the reasons for and the purposes
of the proposed conversion of the domestic reciprocal insurer and
the manner in which the conversion is expected to benefit and serve
the best interests of the policyholders.
   (b) Submitted to the commissioner for consent in writing, subject
to the provisions of Section 1560.05, by an application executed by
an authorized officer of the domestic reciprocal insurer and
accompanied by the following documents, or true and correct copies of
the following documents:
   (1) The proposed plan of conversion.
   (2) The proposed articles of incorporation of each corporation
that is a constituent corporation of the conversion.
   (3) The proposed bylaws of each corporation that is a constituent
corporation of the conversion.
   (4) A list of the officers and directors, together with their
biographies in the form customarily required by the commissioner, of
each corporation that is a constituent corporation of the conversion.

   (5) The resolution of the governing board of the domestic
reciprocal insurer, certified by the secretary of the domestic
reciprocal insurer, authorizing the conversion under this article,
and a report of the percentage of directors approving the resolution.

   (6) Financial statements, which may be prepared on a pro forma
basis, in the form required by the commissioner.
   (7) A plan of operations for the converted insurer.
   (8) A summary of the plan of conversion and drafts of written
materials to be mailed to subscribers seeking their approval of the
plan, including an information statement containing, at a minimum,
the information required under Section 1560.06.
   (9) A description of any plans for an initial public offering,
including a description of the maximum percentage of stock to be
sold, the process to be used in offering the stock and setting the
initial sale price for the stock, and how policyholders would be
treated in an initial public offering.
   (10) A description of any plans for the transfer of assets and
liabilities, including any subsidiaries, to the reciprocal holding
company.
   (11) Any final rulings relating to the plan of reorganization
obtained from any federal government agency, and all supporting
documents submitted to the agency in connection with the rulings.
   (12) A copy of the proposed form of notice of special meeting to
be sent to members pursuant to Section 1560.06.
   (13) Other relevant information that the commissioner may require.

   (c) Approved by two-thirds vote of the subscribers of the domestic
reciprocal insurer voting at a meeting of the subscribers called for
that purpose, subject to the provisions of Section 1560.06.
   (d) Filed in the office of the commissioner after receipt of the
commissioner's consent, and after having been approved as provided in
Sections 1560.05 and 1560.06.



1560.05.  (a) The commissioner shall examine the plan submitted
pursuant to Section 1560.03.  As a part of the examination the
commissioner shall order a public hearing of the plan after written
notice of the hearing to the domestic reciprocal insurer and its
subscribers and the public, all of whom shall have the right to
appear at the hearing.  The hearing shall occur before the
policyholder vote.  The commissioner may require as a condition of
consent that the domestic reciprocal insurer make modifications of
the proposed plan that the commissioner finds necessary for the
protection of policyholders.  The commissioner shall consent to the
plan if he or she finds all of the following:
   (1) The plan is fair, just, and equitable to the insurer and its
policyholders.
   (2) The plan does not violate the law.
   (3) The converted insurer will, after the conversion, satisfy the
requirements for the issuance of a license to write the line or lines
of insurance for which it is presently licensed.
   (4) The plan will not require subscribers to pay additional funds
to retain their rights in surplus, but nothing herein is intended to
prohibit or restrict a reciprocal insurer that is converting to a
stock insurer by establishing a reciprocal holding company from
offering to its subscribers subscription rights that are in addition
to the rights in surplus to be held in the reciprocal holding
company.
   (5) Any stock issued to officers, directors, employees, or
employee benefit plans for their benefit, if any, will be fair, just,
and equitable and not hazardous to policyholders, stockholders, or
creditors.
   (6) The plan provides sufficient means for the accumulated
earnings, cash, and/or other non-operating assets held by the
reciprocal holding company to inure to the exclusive benefit of its
members.
   (b) The commissioner may appoint one or more actuarial, financial,
or other consultants, including legal counsel, as the commissioner
finds necessary to advise the commissioner in making the
determination of whether the proposed plan of conversion meets the
applicable requirements of this article.  The domestic reciprocal
insurer is responsible for the reasonable fees and expenses of any
actuarial, financial, or other consultants, including legal counsel,
appointed, and for the mailing and publication of notices to the
domestic reciprocal insurer and its members.



1560.06.  The meeting of subscribers prescribed by subdivision (c)
of Section 1560.03 shall be called by the governing board, the
chairperson of the board, or the president of the domestic reciprocal
insurer.  Notice of the meeting shall be given to eligible
subscribers by mail at least 45 days prior to the date set for the
meeting to subscribers of the domestic reciprocal insurer of record
on the date the plan of conversion was adopted by the governing
board.  The notice shall be accompanied by an information statement
describing the proposed reorganization.  The information statement
shall include, at a minimum, all of the following items:
   (a) A full copy and summary of the plan of reorganization.
   (b) A discussion addressing the reasons and purposes of the
proposed restructuring, which shall include a comparison to a
dereciprocalization.
   (c) An analysis of the benefits and risks associated with the
proposed reorganization to the reciprocal company and its
policyholders.
   (d) An explanation of how the restructuring will benefit
policyholders, as well as a description of any potential risks to
policyholder interests and a description of how the policyholders'
rights differ at the reciprocal holding company level from those in
the existing company.
   (e) A description of any stock issuance, including any shares or
options to be issued to directors, officers, agents, employees, or
employee benefit plans, for their benefit, that will be made in
conjunction with the plan of conversion, if any, and the guidelines
and parameters that shall apply in the event stock is to be issued,
including a detailed discussion of subscription rights that are to be
granted to policyholders.
   (f) The converted insurer's proposed articles of incorporation and
bylaws.
   (g) Any proposed articles and bylaws of the reciprocal holding
company and any other entities to be created in the reorganization.
   (h) Financial information.
   (i) Any other information that the commissioner determines is
necessary to make a complete and adequate disclosure to
policyholders.
   Voting shall be by ballot, in person, or by proxy.  A quorum shall
consist of 10 percent of the subscribers of the domestic reciprocal
insurer entitled to vote at the meeting.



1560.07.  Nothing in this article shall be deemed to prohibit the
inclusion in the plan of conversion of provisions under which the
insurer's officers, directors, employees, agents, and employee
benefit plans for their benefit may be entitled, in accordance with
reasonable classifications of those individuals and employee benefit
plans as may be included in the plan, to purchase for cash, at the
same price as offered to the public in the initial public offering,
voting stock not purchased by subscribers upon exercise of
subscription rights.  Nothing in this code shall be deemed to
prohibit the establishment of stock option, incentive, and share
ownership plans customary for publicly traded companies in the same
and similar industries.  The plan may not permit those persons to
acquire any of the following:
   (a) Greater than 25 percent of the voting stock issued pursuant to
the plan for a domestic reciprocal insurer having assets in excess
of two hundred million dollars (0,000,000) or 35 percent for a
domestic reciprocal insurer having assets of two hundred million
dollars (0,000,000) or less.
   (b) Greater than 25 percent of the stockholders' equity for a
medical malpractice reciprocal insurer having assets in excess of two
hundred million dollars (0,000,000) or 35 percent for a medical
malpractice reciprocal insurer having assets of less than two hundred
million dollars (0,000,000).
   (c) Unexercised options that exceed 20 percent of the number of
issued and outstanding shares.



1560.08.  No director, officer, agent, or employee of the domestic
reciprocal insurer shall receive any fee, commission, or other
valuable consideration whatsoever, other than regular salary and
compensation, for in any manner aiding, promoting, or assisting in
the conversion except as set forth in the plan approved by the
commissioner.  This provision shall not be deemed to prohibit the
payment of reasonable fees and compensation to attorneys at law,
accountants, and actuaries for services performed in the independent
practice of their professions, even though they may also be directors
of the domestic reciprocal insurer.


1560.09.  At any time before that plan of conversion becomes
effective, the domestic reciprocal company may, by resolution of at
least two-thirds of the governing board, amend the plan of conversion
or withdraw the plan of conversion.  Any plan amendment shall
require the written consent of the commissioner.  For a plan
amendment, all references in this article to the plan of conversion
shall be deemed to refer to the plan as amended, but no amendment
shall be deemed to change the adoption date of the plan of
conversion.  No amendment may change the plan of conversion in a
manner that the commissioner determines is materially disadvantageous
to policyholders of the insurer or members of the reciprocal holding
company, unless a further public hearing is held on the plan as
amended, if the amendment is made after the initial public hearing,
or if the plan as amended is submitted for reconsideration by the
subscribers if the amendment is made after the plan has been approved
by the subscribers.



1560.10.  Upon consent by the commissioner to the plan of conversion
of a domestic reciprocal insurer and filing of the plan of
conversion in accordance with the provisions of this article, the
commissioner shall issue a new certificate of authority to the
converted insurer.  Upon issuance of the certificate of authority to
a domestic reciprocal insurer and subject to subdivision (a) of
Section 110 of the Corporations Code, the Secretary of State shall
accept for filing the articles of incorporation of the reciprocal
holding company, the stock holding company, and the converted
insurer.  The plan is effective upon the filing of the articles of
incorporation or the certificate of amendment of the articles of
incorporation.



1560.11.  (a) Upon the effective date of a plan of conversion in
accordance with Section 1560.10, the domestic reciprocal insurer
immediately becomes a stock corporation, the interests and rights in
surplus of its subscribers are extinguished, the subscribers of the
insurer immediately become members of the reciprocal holding company,
and are granted rights in surplus in the reciprocal holding company
equivalent to those rights in surplus previously held in the
converted company, all of the voting stock initially issued by the
converted insurer is owned by the stock holding company, and all of
the voting stock initially issued by the stock holding company is
owned by the reciprocal holding company.  Except for the
subscribership interests in the reciprocal insurer, which becomes
membership interests in the reciprocal holding company, nothing
herein is intended to, nor shall eliminate, curtail or otherwise
diminish the contract rights of policyholders of a converted company.
  The stock holding company may thereafter, subject to compliance
with Article 8 (commencing with Section 820) of Chapter 1, issue
securities to other persons.  After the effective date, owners of
policies that are issued by a stock insurer that has been converted
from a domestic reciprocal insurer pursuant to proceedings under this
article shall become members of the reciprocal holding company
immediately upon issuance of the policies, except that an owner
solely of a reporting endorsement to a claims-made policy shall not
be members of the reciprocal holding company.
   (b) The converted insurer shall be a continuation of the original
reciprocal insurer, and the conversion shall in no way annul, modify,
or change any of the original reciprocal insurer's existing suits,
rights, contracts, or liabilities except as provided in the approved
plan.  The converted insurer shall exercise all the rights and powers
and perform all the duties conferred or imposed by law upon insurers
writing the classes of insurance written by it, and shall retain the
rights and contracts existing prior to conversion subject to the
effect of the plan.
   (c) From the effective date, the reciprocal holding company shall
hold at least 51 percent of the issued and outstanding voting stock
of the stock holding company and the stock holding company thereafter
shall at all times hold all of the issued and outstanding voting
stock of the converted insurer. The stock holding company may issue
additional voting stock to the reciprocal holding company and, in
addition, to other persons an amount of voting stock and securities
convertible into voting stock, if in the aggregate, the issued and
outstanding voting stock of the stock holding company held by the
reciprocal holding company is not less than 51 percent of the issued
and outstanding voting stock of the stock holding company.  For
purposes of the 51 percent limitation, any issued and outstanding
securities of the stock holding company that are convertible into
voting stock are considered issued and outstanding voting stock,
provided that securities having voting power only because of the
occurrence of a contingency shall not be considered securities
convertible into voting stock where the contingency has not occurred.

   From the effective date, the reciprocal holding company's equity
interest in the stock holding company shall not be less than 51
percent of the total stockholders' equity in the stock holding
company.  For purposes of the 51 percent limitation, any issued and
outstanding securities of the stock holding company that are
convertible into equity securities, whether voting or nonvoting,
shall be considered stockholders' equity.  Debt securities that
include a default contingency conversion interest shall not be
considered stockholders' equity for compliance with the foregoing
limitation.
   (d) The commissioner shall retain jurisdiction over the reciprocal
holding company organized pursuant to this article.  Except as
provided in this code, a reciprocal holding company is subject to the
provisions of the General Corporation Law in like manner with other
corporations.  However, provisions of that law referring to
shareholders or subscribers shall be applied as though those
provisions referred to the members of a reciprocal holding company.
For purposes of Section 1215.5, the reciprocal holding company shall
be considered as if it were an insurance company.  The commissioner
shall retain jurisdiction over the issuance of debt securities in
accordance with the protections provided in Article 8 (commencing
with Section 820) of Chapter 1.
   (e) If any proceedings under Article 14 (commencing with Section
1010), Article 14.3 (commencing with Section 1064.1), Article 14.5
(commencing with Section 1065.1), or Article 15.5 (commencing with
Section 1077), of Chapter 1, are brought naming as a party a stock
insurer created as a result of proceedings authorized by this
article, the reciprocal holding company formed as part of the
conversion automatically becomes a party to the proceedings. All of
the assets of the reciprocal holding company, including, but not
limited to, its interest in the stock holding company formed pursuant
to this article, are deemed assets of the estate of this stock
insurer to the extent necessary to satisfy claims of persons against
the stock insurer who have claims falling within the priorities
established in paragraphs (1) to (5), inclusive, of subdivision (a)
of Section 1033.  Claims of persons in their capacity as members of
the reciprocal holding company shall be claims falling within the
priority established in paragraph (6) of subdivision (a) of Section
1033.  A reciprocal holding company may not dissolve, liquidate, or
wind up and dissolve without the prior written approval of the
commissioner or the court pursuant to proceedings brought pursuant to
Article 15 (commencing with Section 1070) of Chapter 1.
   (f) With respect to the management, records, and affairs of a
reciprocal holding company and except as otherwise provided in this
article, a member of a reciprocal holding company has the same
character of rights and relationship as a stockholder has toward a
domestic stock life insurer subject to the provisions of this code.
   (g) Each member of a reciprocal holding company is entitled to one
vote on each matter coming to a vote at any meeting of members,
regardless of the number of policies that the member holds.
   (h) Notice of all meetings of members of a reciprocal holding
company, whether annual or special, shall be given in writing to the
members entitled to vote.  The notice shall be given by the
secretary, assistant secretary, or other persons charged with that
duty.  If there is no officer so charged, or if he or she neglects or
refuses this duty, notice may be given by any director.  At the
option of the converted insurer, the notice may be imprinted on
premium notices or receipts or on both.  A notice may be given to any
member either personally, or by mail, or other means of written
communication, charges prepaid, addressed to the member at his or her
address appearing on the books of the insurer, or given by the
member to the converted insurer for the purpose of notice.  If a
member gives no address, and if there is no address on the books of
the insurer, notice shall be deemed to have been given the member if
sent by mail or other means of written communication addressed to the
place where the principal office of the converted insurer is
situated, or if published at least once in a newspaper of general
circulation in the county in which the office is located and in the
newspaper that has the largest daily circulation in this state.
Notice of any meeting of members shall be sent to each member
entitled to notice not less than 14 days before a meeting.  Notice of
any meeting of members shall specify the place, the day, and the
hour of the meeting and the general nature of the business to be
transacted.
   For any member who gives no address and has no address on the
books of the insurer, notice of an annual meeting to be held at the
time and place specified is deemed adequate if published at least
once in each of four successive weeks in a newspaper of general
circulation in the county in which the principal office of the
converted insurer is located and in the newspaper that has the
largest daily circulation in this state.  If the notice is so
published, no other notice of the meeting is required.
   (i) The presence in person or by proxy of 5 percent of the members
of a reciprocal holding company entitled to vote at any meeting
constitutes a quorum for the transaction of all business of the
reciprocal holding company, including, but not limited to, the
amendment of the articles of incorporation or bylaws of the
reciprocal holding company.
   (j) Any required member approval shall be by the affirmative vote
of a majority of the members who vote, or a higher percentage of the
members as may be required by law or the articles of incorporation, a
quorum being present.
   (k) The governing body of the reciprocal holding company shall be
comprised of not less than 6 nor more than 18 directors.  A majority
of the reciprocal holding company directors shall be policyholders of
the converted insurer.  Unless the plan provides that at least a
majority of the directors of the boards of the stock holding company
and the converted insurer are also directors of the reciprocal
holding company, the commissioner shall determine whether the
proposed composition of the boards of directors of each of the
constituent corporations of the reciprocal holding company system, as
provided in the articles of incorporation and bylaws, facilitate the
control of the converted insurer by the reciprocal holding company.
No term shall continue longer than six years.  In the absence of
such provisions, each director shall be elected for a term of one
year.  All directors shall hold office for the term for which they
are elected and until their successors are elected and qualified.
The bylaws of the reciprocal holding company shall set forth a
procedure for establishing reciprocal holding company independent
directors in the event that the stock holding company issues
securities.  Not less than one of every six directors of the
reciprocal holding company shall be so designated.  A director may,
but need not, be a member of the reciprocal holding company of which
he or she is acting as director.  Vacancies in the board of directors
may be filled by a majority of the remaining directors, though less
than a quorum.  Each director so elected shall hold office until the
next annual meeting.
   (l) Member interests in a reciprocal holding company are exempt
from Article 8 (commencing with Section 820) of Chapter 1.  A
description of the member interests and related factual disclosure
shall not be considered to be an inducement to buy insurance in
violation of Section 10430.  Any promise of returns, profits, or
distributions, or representations with regard to the benefits of
membership, made as an inducement in connection with the issuance and
delivery of a policy is subject to Section 10430 and the remedy
provided in Section 10433.



1560.12.  Prior to, and for a period of five years following, the
effective date of the plan of conversion, no person or group of
persons acting in concert shall directly or indirectly offer to
acquire or acquire in any manner the beneficial ownership of 5
percent or more of any class of voting securities of a converted
insurer or of a person that controls, as defined by subdivision (b)
of Section 1215, the converted insurer, without the prior consent of
the commissioner.  Any application for that approval shall contain
information as the commissioner may require and shall be accompanied
by a filing fee in an amount equal to the filing fee specified in
Section 1215.2. In the event of any violation of this section, or of
any action that, if consummated, would constitute a violation, all
voting securities of the converted insurer or of the person acquired
by any person in excess of the maximum amount permitted to be
acquired by the person pursuant to this subdivision shall be deemed
to be nonvoting securities of the converted insurer or of that
person.  The violation or action may be enforced or enjoined by
appropriate proceeding commenced by the converted insurer, a person,
the commissioner, any policyholder or stockholder of the converted
insurer, or the person on behalf of the converted insurer or the
person in the superior court in the judicial district in which the
converted insurer has its home office or in any other court having
jurisdiction.  The court may issue any order it finds necessary to
cure the violation or to prevent the proposed action.  In addition to
the foregoing, whenever it appears to the commissioner that any
person has committed a violation of this section, the commissioner
may proceed as provided in Article 14 (commencing with Section 1010)
of Chapter 1 to take possession of the property of the converted
insurer and to conduct the business thereof.  For the purposes of
this section, "beneficial ownership," with respect to voting
securities, means the sole or shared power to vote, or direct the
voting of, voting securities or the sole or shared power to dispose,
or direct the disposition, of voting securities.  "Voting security"
includes voting stock as defined in Section 1560.02.  Any
preorganization certificate or subscription, including subscription
rights issued pursuant to a plan of conversion, or any security
convertible, with or without consideration, into voting security, or
carrying any warrant or right to subscribe for or purchase any voting
security, or any such warrant or right.  "Offer" includes an offer
to buy or acquire, solicitation of an offer to sell, tender offer
for, or request or invitation for tenders of a security or interest
in a security for value.



1560.13.  Unless otherwise provided in the plan of conversion, the
governing body and officers of the domestic reciprocal insurer shall
serve as directors and officers of the converted insurer until new
directors and officers have been duly elected and qualified pursuant
to the articles of incorporation and bylaws of the stock company.




1560.14.  (a) Notwithstanding any other provision of law and except
as otherwise provided in subdivision (b), actions concerning any plan
of conversion, proposed plan of conversion, plan amendment, or
proposed plan amendment under this article or any acts taken or
proposed to be taken under this article shall be commenced within one
year after the plan of conversion or plan amendment is filed in the
office of the commissioner pursuant to subdivision (d) of Section
1560.03 or Section 1560.10, or six months from the effective date of
the plan of conversion, whichever is later.  If the plan of
conversion is withdrawn, the actions or acts shall be commenced
within six months from the date the governing body approves a
resolution to withdraw the plan.  If an action concerns or arises out
of a plan amendment or proposed plan amendment made under Section
1560.09, the applicable time period is measured from the filing,
effective date, or approval of withdrawal of the plan amendment,
whichever is later.
   (b) Judicial review of any act of the commissioner or any other
governmental body or officer concerning or arising out of any plan of
conversion, proposed plan of conversion, plan amendment, or proposed
plan amendment under this article may only be had by filing a
petition for a writ of mandate within 30 days of the date of the act.
  However, any petition seeking judicial review shall be filed no
later than 30 days from the effective date of the plan of conversion
or plan amendment, whichever is the subject of the petition.



1560.15.  The offer or sale of securities issued pursuant to the
plan of conversion developed and approved in accordance with the
provisions of this article, shall be exempt from Article 8
(commencing with Section 820) of Chapter 1.



1560.16.  The commissioner shall have the authority from time to
time, to make, amend, and rescind any rules and regulations necessary
to carry out the provisions of this article.  The commissioner shall
also have the authority to charge and collect from the insurer for
the actual amount of expenses reasonably incurred by the state in
discharge of the commissioner's duties hereunder.



1560.17.  Upon completion of the act of conversion and issuance of
the certificate of authority under Section 1560.10, the Secretary of
State shall accept for filing a verified copy of the articles of
incorporation of the converted insurer.




1560.18.  (a) The articles of incorporation of a converted insurer
that have been adopted pursuant to a plan of conversion and filed
with the Secretary of State in accordance with Section 1560.10 may be
further amended after the effective date pursuant to applicable law.
  The plan of conversion may be amended in other respects after the
effective date of the plan as specified in this section.  An
amendment of the plan of conversion shall take effect upon filing
with the Secretary of State after compliance with the following:
   (1) Approval by a resolution of at least two-thirds of the board
of directors of the converted insurer.  The resolution shall specify
the reasons for and the purposes of the proposed amendment.
   (2) Submission to the commissioner for consent in writing, subject
to the provisions of Section 1560.05.
   (3) Approval by at least two-thirds of those members of the
corporation who were subscribers of the converting insurer and
entitled to vote on the original plan of conversion approved pursuant
to subdivision (c) of Section 1560.03 and who vote at a meeting
called for that purpose.
   (4) Filed in the office of the commissioner after having been
consented to and approved as contemplated by paragraphs (2) and (3).

   (b) If an amendment proposed under subdivision (a) would adversely
affect the rights of one or more classes of subscribers, but not all
of those subscribers, then only the subscribers of each class whose
rights would be adversely affected by the proposed amendment are
entitled to vote on the proposed plan amendment.
   (c) A subscriber meeting prescribed by paragraph (3) of
subdivision (a) shall be called by the board of directors, the
chairperson of the board, or the president of the converted insurer.
Notice of the meeting shall be given to subscribers entitled to vote
at the meeting by mail at least 45 days prior to the date set for
the meeting.  Voting shall be by ballot, in person, or by proxy.  A
quorum consists of 10 percent of the subscribers of the converted
insurer entitled to vote at the meeting.
   (d) At any time before the plan amendment becomes effective, the
converted insurer may, by resolution of at least two-thirds of the
board of directors, amend the plan amendment or withdraw its plan
amendment.  For an amendment to a plan amendment, all references in
this section to the plan amendment shall be deemed to refer to the
plan amendment as amended.  Any amendment of the plan amendment shall
require the written consent of the commissioner.  No amendment shall
be deemed to change the date of adoption of the plan amendment.  No
amendment made after approval by the subscribers as provided in
paragraph (3) of subdivision (a) may change the plan amendment in a
manner that the commissioner determines is materially disadvantageous
to any of the affected subscribers unless the plan amendment as
amended is submitted for reconsideration under the procedures
prescribed for the original plan amendment, subscriber approval.



1560.19.  If the name of a domestic reciprocal insurer converting to
a stock insurer pursuant to this article includes the word
"reciprocal," the new stock insurer may continue to use the word
"reciprocal" in its name if the name includes a word or words that
identify the new stock insurer as a stock insurer and the
commissioner finds that the continued use of the word "reciprocal" in
its name is not likely to mislead or deceive the public.