2015 Connecticut General Statutes
Title 38a - Insurance
Chapter 698 - Insurers
Section 38a-156a - Reorganization of domestic mutual insurer as domestic stock insurer owned by mutual holding company. Plan of reorganization. Approval. Use of the word “mutual” in name. Voting stock ownership. Prohibited fees, commission or other consideration.

(a) A domestic mutual insurer may reorganize, in accordance with this section and section 38a-156b, as a domestic stock insurer owned, directly or indirectly, by a mutual holding company.

(b) (1) A domestic mutual insurer seeking such reorganization shall propose a plan of reorganization that includes the reasons for the proposed reorganization and provisions for:

(A) Amending the domestic mutual insurer’s articles of incorporation to reorganize such insurer into a domestic stock corporation, including provisions governing an initial voting stock offer, if any;

(B) Forming a mutual holding company, including such company’s acquisition, directly or through one or more intermediate stock holding companies, of at least fifty-one per cent of the voting stock of the reorganized insurer;

(C) The succeeding of the rights, properties, debts, obligations and liabilities of the mutual insurer;

(D) The members of the reorganizing insurer becoming members of the mutual holding company;

(E) The members of the reorganizing insurer with policies in force on the effective date having equity rights and membership interests in the mutual holding company; and

(F) Any proposed fees, commissions or other consideration to be paid to any person for aiding, promoting or assisting, in any manner, such reorganization.

(2) A plan of reorganization may also include provisions restricting the ability of any person or persons acting in concert from directly or indirectly acquiring or offering to acquire the beneficial ownership of ten per cent or more of any class of voting stock of the reorganized insurer or any entity that directly or indirectly controls such insurer.

(3) The proposed plan of reorganization shall be approved by an affirmative vote of three-fourths of the board of directors of the domestic mutual insurer.

(4) Upon approval by its board of directors, a domestic mutual insurer seeking such reorganization shall submit to the Insurance Commissioner an application, in a form prescribed by the commissioner, that is executed by an authorized officer of such insurer. Such application shall be accompanied by the following:

(A) The proposed plan of reorganization;

(B) The proposed articles of incorporation of each corporation that will be a constituent corporation of the reorganization;

(C) The proposed bylaws of each corporation that will be a constituent corporation of the reorganization;

(D) The names and biographies of the officers and directors of each corporation that will be a constituent corporation of the reorganization;

(E) A resolution of the board of directors of the mutual insurer and certified by the secretary of such board, authorizing the reorganization;

(F) Financial statements in a form acceptable to the commissioner giving effect to the reorganization, for the mutual holding company and any corporation that will be a constituent corporation of the reorganization and that will experience a change in capitalization due to the reorganization;

(G) A draft of the materials the domestic mutual insurer intends to mail to its members to seek their approval of the plan, including a summary of the plan of reorganization; and

(H) Any other information the commissioner deems necessary to the commissioner’s review of the proposed plan of reorganization.

(c) (1) The commissioner shall hold a public hearing on the reasons for and purpose of such reorganization, the fairness of the terms and conditions of the proposed plan of reorganization and whether such reorganization is in the best interest of the domestic mutual insurer, is fair and equitable to its members and is not detrimental to the insuring public.

(2) The reorganizing insurer shall mail a notice of the public hearing to each member at such member’s last known mailing address as shown in the insurer’s records. The notice shall (A) be mailed at least sixty days prior to the date of the hearing, (B) include the date, time, place and purpose of the hearing, and (C) be accompanied or preceded by a true and complete copy of the proposed plan of reorganization or summary thereof approved by the commissioner and any other explanatory information or materials the commissioner may require. In addition, the reorganizing insurer shall provide notice of the date, time, place and purpose of the hearing by publication in three newspapers having general circulation, one of which shall be in the county in which the principal office of the reorganizing insurer is located, and two which shall be in other municipalities within or without the state and approved by the commissioner. Such notice shall be published not less than fifteen days and not more than sixty days prior to the hearing and shall be in a form approved by the commissioner. Any director, officer, employee or member of the reorganizing insurer shall have the right to appear and be heard at the hearing.

(3) (A) The commissioner shall approve or disapprove the proposed plan of reorganization, in writing, not later than sixty days after the conclusion of the public hearing held under subdivision (1) of this subsection. The commissioner shall approve the proposed plan of reorganization if the commissioner finds that: (i) The proposed reorganization is in the best interest of the reorganizing insurer; (ii) the plan is fair and equitable to the members of the reorganizing insurer; (iii) the plan will not substantially lessen competition in any line of insurance business; (iv) the plan provides for the enhancement of the operations of the reorganizing insurer; (v) the plan, when completed, provides for the reorganized insurer’s paid-in capital stock to be in an amount at least equal to the minimum paid-in capital stock and the net surplus required of a new domestic stock insurer upon such domestic stock insurer’s initial authorization to transact like kinds of insurance; and (vi) the plan complies with the provisions of this section and sections 38a-156b to 38a-156f, inclusive.

(B) The commissioner may engage the services of private consultants to assist the commissioner in determining whether a plan of reorganization meets the requirements of this section, the cost of which shall be borne by the domestic mutual insurer submitting such plan.

(C) Upon approval by the commissioner, the reorganizing insurer shall file with the commissioner the approved plan of reorganization.

(D) The commissioner may request such insurer to modify the proposed plan of reorganization if the commissioner finds that such plan does not meet the requirements for approval as set forth in subparagraph (A) of this subdivision. Such request for modification shall not prevent such insurer from withdrawing such plan pursuant to subsection (e) of this section.

(E) If the commissioner disapproves the proposed plan of reorganization, such disapproval shall be in writing and shall set forth the reasons for such disapproval. Within fifteen days after receipt of such disapproval, the reorganizing insurer may request a hearing. The commissioner shall provide such hearing within fifteen days after such request.

(d) (1) Upon approval by the commissioner of the proposed plan of reorganization, the board of directors, the chairperson of the board of directors or the president of the reorganizing insurer shall call a members’ meeting to present and hold a vote on the plan of reorganization. Such meeting shall be held not earlier than thirty days after the date of the public hearing held under subsection (c) of this section. The plan shall be approved by an affirmative vote of two-thirds of the members of the reorganizing insurer.

(2) (A) The reorganizing insurer shall mail a notice of the meeting to each member at such member’s last known mailing address as shown in the insurer’s records. The notice shall (i) be mailed at least sixty days prior to the date of the meeting and may be combined with the public hearing notice required under subsection (c) of this section, (ii) include the date, time, place and purpose of the meeting, and (iii) be accompanied or preceded by (I) a true and complete copy of the plan of reorganization or summary thereof approved by the commissioner, (II) the financial statements described in subparagraph (F) of subdivision (4) of subsection (b) of this section, (III) a description of material risks and benefits to members’ interests, (IV) any information pertaining to an initial offering of voting stock included in the plan of reorganization, and (V) any other explanatory information or materials the commissioner may require.

(B) (i) Each member whose name appears in the reorganizing insurer’s records as a member on the adoption date shall be entitled to vote on the proposed plan of reorganization. Each such member shall vote by written ballot cast in person, by mail or by proxy.

(ii) The commissioner shall have the power, to the extent the commissioner deems necessary to ensure a fair and accurate vote and consistent with the provisions of this section and sections 38a-156b to 38a-156f, inclusive, to prescribe and supervise the procedures for such vote. Such powers include, but are not limited to, the supervision and regulation of (I) the determination of members entitled to notice of the meeting and to vote on the proposed plan of reorganization, (II) the provision of notice to members of the meeting and the proposed plan or reorganization, (III) the receipt, custody, safeguarding, verification and tabulation of ballots and proxy forms, and (IV) the resolution of any disputes arising from such vote.

(e) (1) At any time before the effective date, the reorganizing insurer may, by an affirmative vote of three-fourths of its board of directors, amend or withdraw the plan of reorganization. With respect to an amended plan of reorganization, all references to a plan of reorganization in sections 38a-156 to 38a-156m, inclusive, shall be deemed to include such plan as amended. The reorganizing insurer shall submit any such amendment to the commissioner for approval. Upon approval by the commissioner, the reorganizing insurer shall file with the commissioner the approved plan of reorganization as amended.

(2) No amendment shall (A) be deemed to change the adoption date, or (B) change the plan of reorganization in a manner the commissioner determines is prejudicial to the members of the reorganizing insurer.

(3) (A) If the amendment is submitted after the public hearing held pursuant to subsection (c) of this section, the commissioner shall hold another public hearing on the plan of reorganization as amended, in accordance with the notice requirements set forth in subsection (c) of this section.

(B) If the amendment is submitted after the members have approved the plan of reorganization as set forth in subsection (d) of this section, the board of directors, the chairperson of the board of directors or the president of the reorganizing insurer shall call another members’ meeting, in accordance with the notice requirements set forth in subsection (d) of this section, to present and hold a vote on the plan of reorganization as amended. The plan of reorganization as amended shall be approved by an affirmative vote of two-thirds of the members of the reorganizing insurer.

(f) Upon approval by the members of the reorganizing insurer, the commissioner shall issue a new certificate of authority to the reorganized insurer and approve the articles of incorporation of the mutual holding company and the articles of incorporation of the reorganized insurer. The commissioner shall provide to the mutual holding company and the reorganized insurer certificates of approval for the articles of incorporation in such form as the commissioner prescribes.

(g) (1) The plan of reorganization shall be effective upon the date the mutual holding company and the reorganized insurer both file their articles of incorporation with the Secretary of the State, or upon such later date as is specified in the plan of reorganization or the articles of incorporation of the reorganized insurer, except that such later date shall not be more than thirty days after the date the mutual holding company files its articles of incorporation with said Secretary.

(2) If the name of a reorganizing insurer includes the word “mutual”, the reorganized insurer may continue to use such word in its name unless the commissioner finds the continued use of such word is likely to mislead or deceive the public.

(3) From the effective date, (A) at least fifty-one per cent of the issued and outstanding voting stock of the reorganized insurer shall be owned, directly or through another intermediate stock holding company, by the mutual holding company, and (B) at least fifty-one per cent of the issued and outstanding voting stock of any intermediate holding company shall be owned, directly or through another intermediate stock holding company, by the mutual holding company. For purposes of calculating the percentage of issued and outstanding voting stock, any issued and outstanding securities of the reorganized insurer or any intermediate stock holding company that are convertible into voting stock are considered voting stock.

(4) Upon the effective date:

(A) The reorganizing insurer shall immediately become a domestic stock insurer, which shall be a continuation of the corporate existence of the reorganizing insurer;

(B) All rights of any person to (i) vote on any matter concerning the reorganizing insurer, or (ii) share in any distribution of or receive any consideration based on the surplus of the reorganizing insurer in a conservation, liquidation or dissolution proceeding or under such insurer’s articles of incorporation or bylaws or the general statutes, shall be extinguished, except that any rights expressly conferred solely by the terms of a policy shall not be extinguished;

(C) The members of the reorganizing insurer shall immediately become members of the mutual holding company, except that in the case of a group annuity contract issued by a reorganizing insurer that is a domestic mutual life insurer, the group policyholder only shall become a member of the mutual holding company. The rights bestowed by virtue of such membership shall continue only as long as the related policy remains in force;

(D) The members of the reorganizing insurer whose policies in force on the effective date confer the right to vote shall immediately have equity rights in the mutual holding company. Such equity rights shall continue only as long as the related policy remains in force; and

(E) All of the voting stock initially issued by the reorganized insurer shall be owned, directly or through one or more intermediate stock holding companies, by the mutual holding company.

(5) Policyholders of policies that confer the right to vote and are issued after the effective date by the reorganized insurer shall be members of and have equity rights in the mutual holding company.

(h) Except as provided in the plan of reorganization approved by the commissioner, no person shall receive any fee, commission or other consideration, other than such person’s regular salary and compensation, for aiding, promoting or assisting, in any manner, a reorganization under this section and sections 38a-156b to 38a-156m, inclusive. This provision shall not be deemed to prohibit the payment of reasonable fees and compensation to attorneys, accountants, actuaries and other individuals who are directors or officers of the reorganizing insurer for services performed in the independent practice of their professions.

(P.A. 14-123, S. 2; P.A. 15-118, S. 34.)

History: P.A. 14-123 effective June 6, 2014; P.A. 15-118 made a technical change in Subsec. (g)(5).