2016 North Dakota Century Code Title 26.1 Insurance Chapter 26.1-12.2 Mutual Property and Casualty Insurance Company Conversion
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CHAPTER 26.1-12.2
MUTUAL PROPERTY AND CASUALTY INSURANCE COMPANY CONVERSION
26.1-12.2-01. Definitions.
As used in this chapter:
1. "Capital stock" means common or preferred stock or any hybrid security or other
equity security issued by a converted stock company or other company or entity
pursuant to the exercise of subscription rights granted pursuant to the provisions of
subdivision c of subsection 1 of section 26.1-12.2-03.
2. "Converted stock company" means a mutual company or mutual holding company that
has converted to a stock company under this chapter.
3. "Converting mutual company" means a mutual company or mutual holding company
that has adopted a plan of conversion under this chapter.
4. "Eligible member" means a member of a converting mutual company whose policy is
in force on the date the governing body of the converting mutual company adopts a
plan of conversion or such earlier date as the converting mutual company may
establish with the consent of the commissioner. A person insured under a group policy
is not an eligible member. A person whose policy becomes effective after the
governing body adopts the plan of conversion but before the effective date of the plan
of conversion is not an eligible member but has those rights established under section
26.1-12.2-09.
5. "Issued minority shares" means the number of shares issued by a subsidiary
insurance company or subsidiary holding company of a mutual holding company in all
minority stock offerings.
6. "Minority stock offering" means an offering of capital stock by a subsidiary insurance
company or subsidiary holding company controlled by a mutual holding company in
which less than fifty percent of the voting stock of the subsidiary insurance company or
subsidiary holding company is offered and sold under this chapter or chapter
26.1-12.1.
7. "Mutual company" means a mutual property and casualty insurance company
domiciled in this state.
8. "Mutual holding company" means:
a. A corporation resulting from a reorganization of a mutual company under chapter
26.1-12.1; or
b. A domestic corporation surviving or resulting from a merger or consolidation with
a corporation that resulted from a reorganization of a mutual insurer under the
laws of any other jurisdiction as provided by section 26.1-12.1-03.
9. "Participating policy" means a policy that grants a holder the right to receive dividends
if, as, and when declared by the mutual company.
10. "Plan of conversion" or "plan" means a plan adopted by the governing body of a
mutual company or mutual holding company to convert into a stock company or stock
insurance holding company in accordance with the requirements of this chapter.
11. "Policy" means an insurance policy.
12. "Standby investor" means any person that has agreed in writing to purchase all or a
portion of the capital stock to be sold in a conversion which is not subscribed by
eligible members.
13. "Subscription right" means the nontransferable right to purchase, for a period of not
less than forty-five days, the stock of the converted stock company, its proposed
subsidiary holding company, or an unaffiliated stock insurance company or other
corporation or entity that will acquire the stock of the converted stock company.
14. "Voting member" means a member who is an eligible member and is also a member of
the converting mutual company as of a date not more than ninety days before the date
of the meeting at which the plan of conversion must be voted upon by members.
Page No. 1
26.1-12.2-02. Adoption of plan of conversion.
1. A plan of conversion does not become effective unless the converting mutual company
seeking to become a converted stock company adopted, by the affirmative vote of not
less than two-thirds of its governing body, a plan of conversion consistent with the
requirements of sections 26.1-12.2-03 and 26.1-12.2-04, or of section 26.1-12.2-05. At
any time before approval of a plan of conversion by the commissioner, the converting
mutual company, by the affirmative vote of not less than two-thirds of its governing
body, may amend or withdraw the plan.
2. Before the eligible members of a converting mutual company may vote on approval of
a plan of conversion, a converting mutual company whose governing body has
adopted a plan shall file all of the following documents with the commissioner within
ninety days after adoption of the plan of conversion together with the application fee:
a. The plan of conversion, including the independent evaluation required by
subsection 4 of section 26.1-12.2-03.
b. The form of notice and proxy required by subsection 7 of section 26.1-12.2-02.
c. The form of notice required by section 26.1-12.2-09 to persons whose policies
are issued after adoption of the plan of conversion but before the plan of
conversion's effective date.
d. The proposed certificate of incorporation and bylaws of the converted stock
company.
e. The acquisition of control statement, as required by section 26.1-10-03.
f. The application fee, equal to the greater of ten thousand dollars or an amount
equal to one-tenth of one percent of the estimated pro forma market value of the
converted stock company as determined in accordance with subsection 4 of
section 26.1-12.2-03. If such value is expressed as a range of values, the
application fee must be based upon the midpoint of the range. The application fee
is in addition to other direct costs incurred by the commissioner in reviewing the
proposed plan of conversion. For good cause shown, the commissioner may
waive the application fee in whole or in part, or permit a portion of the application
fee to be deferred until completion of the conversion.
g. Such other information as the commissioner may request.
3. Upon filing with the commissioner the documents required under subsection 2, the
converting mutual company shall send to eligible members a notice advising eligible
members of the adoption and filing of the plan of conversion, the ability of the eligible
members to provide the commissioner and the converting mutual company with
comments on the plan of conversion within thirty days of the date of such notice, and
the procedure of providing such comments.
4. The commissioner shall approve the plan if the commissioner finds:
a. The plan complies with this chapter;
b. The plan is fair and equitable to the converting mutual company, the members of
the converting mutual company, and the eligible members of the converting
mutual company;
c. The plan's method of allocating subscription rights is fair and equitable;
d. The plan will not otherwise prejudice the interests of the members; and
e. The converted stock company will have the amount of capital and surplus
deemed by the commissioner to be reasonable for its future solvency.
5. At the expense of the converting mutual company, the commissioner may retain any
qualified expert not otherwise a part of the commissioner's staff, including counsel and
financial advisors, to assist in reviewing the plan of conversion and the independent
valuation required under subsection 4 of section 26.1-12.2-03.
6. The commissioner shall order a hearing on whether the terms of the plan of
conversion comply with this chapter after giving written notice by mail or publication to
the converting mutual company and other interested persons, all of whom have the
right to appear at the hearing.
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The commissioner shall give written notice of any decision to the converting mutual
company and, in the event of disapproval, a detailed statement of the reasons for the
decision.
All voting members must be sent notice of the members' meeting to vote on the plan of
conversion no later than forty-five days before the meeting. The notice must describe
the proposed plan of conversion, must inform the member how the proposed plan of
conversion will affect the member's membership rights, must inform the voting member
of the voting member's right to vote upon the plan of conversion, and must be sent to
each voting member's last-known address, as shown on the records of the converting
mutual company. The notice must provide instructions on how the member can obtain,
either by mail or electronically, a full copy of the proposed plan of conversion. If the
meeting to vote upon the plan of conversion is held during the annual meeting of
policyholders, only a combined notice of meeting is required.
The plan of conversion must be voted upon by voting members and must be adopted
upon receiving the affirmative vote of at least two-thirds of the votes cast by voting
members at the meeting. Voting members entitled to vote upon the proposed plan of
conversion may vote in person or by proxy. The number of votes each voting member
may cast must be determined by the bylaws of the converting mutual company. If the
bylaws are silent, each voting member may cast one vote.
The certificate of incorporation of the converted stock company must be considered at
the meeting of the voting members called for the purpose of adopting the plan of
conversion and must require for adoption the affirmative vote of at least two-thirds of
the votes cast by voting members.
Within thirty days after the voting members have approved the plan of conversion in
accordance with the requirements of this section, the converted stock company shall
file with the commissioner:
a. The minutes of the meeting of the voting members at which the plan of
conversion was approved, which must include the record of total votes cast in
favor of the plan; and
b. The certificate of incorporation and bylaws of the converted stock company.
26.1-12.2-03. Required provisions of plan of conversion.
1. The following provisions must be included in the plan of conversion:
a. The reasons for proposed conversion.
b. The effect of conversion on existing policies, including all of the following:
(1) A provision that all policies in force on the effective date of conversion
continue to remain in force under the terms of the policies, except that the
following rights, to the extent the rights existed in the converting mutual
company, must be extinguished on the effective date of the conversion:
(a) Any voting rights of the policyholders provided under the policies.
(b) Except as provided under paragraph 2, any right to share in the
surplus of the converting mutual company, unless such right is
expressly provided for under the provisions of the existing policy.
(c) Any assessment provisions provided for under certain types of
policies.
(2) A provision that holders of participating policies in effect on the date of
conversion continue to have a right to receive dividends as provided in the
participating policies, if any.
c. The grant of subscription rights to eligible members.
(1) For purposes of any plan, the transfer of subscription rights from any of the
following may not be deemed an unpermitted transfer for purposes of this
chapter:
(a) An individual to such individual and the individual's spouse or children
or to a trust or other estate or wealth planning entity established for
the benefit of such individual or the individual's spouse or children;
Page No. 3
(b)
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An individual to such individual's individual or joint individual
retirement account or other tax-qualified retirement plan;
(c) An entity to the shareholders, partners, or members of such entity; or
(d) The holder of such rights back to the converting mutual company, its
proposed subsidiary holding company, or an unaffiliated corporation or
entity that will purchase the stock of the converted stock company as
provided in item 3 of subparagraph a of paragraph 2 of subdivision c
of subsection 1.
(2) The grant of subscription rights to eligible members must include:
(a) A provision that each eligible member is to receive, without payment,
nontransferable subscription rights to purchase the capital stock of the
converted stock company and that, in the aggregate, all eligible
members have the right, before the right of any other party, to
purchase one hundred percent of the capital stock of the converted
stock company, exclusive of any shares of capital stock required to be
sold or distributed to the holders of surplus notes, if any, and any
capital stock purchased by the company's tax-qualified employee
stock benefit plan which is in excess of the pro forma market value of
the capital stock established under subsection 4, as permitted by
subsection 3 of section 26.1-12.2-04. As an alternative to subscription
rights in the converting mutual company, the plan of conversion may
provide each eligible member is to receive, without payment,
nontransferable subscription rights to purchase a portion of the capital
stock of one of the following:
[1] A corporation or entity organized for the purpose of becoming a
holding company for the converted stock company;
[2] A stock insurance company owned by the mutual company into
which the mutual company will be merged; or
[3] An unaffiliated stock insurer or other corporation or entity that will
purchase the stock of the converted stock company.
(b) A provision that subscription rights must be allocated in whole shares
among the eligible members using a fair and equitable formula. The
formula need not allocate subscription rights to eligible members on a
pro rata basis based on premium payments or contributions to
surplus, but may take into account how the different classes of policies
of the eligible members contributed to the surplus of the mutual
company or any other factors that may be fair or equitable. Allocation
of subscription rights on a per capita basis are entitled to a
presumption that such method is fair, subject to a rebuttal of fairness
by clear and convincing evidence. In accordance with subsection 5 of
section 26.1-12.2-02, the commissioner may retain an independent
consultant to assist in the determination that the allocation of
subscription rights is fair and equitable.
The plan must provide a fair and equitable means for allocating shares of capital stock
in the event of an oversubscription to shares by eligible members exercising
subscription rights received under subdivision c of subsection 1.
The plan must provide any shares of capital stock not subscribed to by eligible
members exercising subscription rights received under subdivision c of subsection 1 or
any other individuals or entities granted subscription rights pursuant to section
26.1-12.2-04 must be sold:
a. In a public offering; however, if the number of shares of capital stock not
subscribed by eligible members is so small in number or other factors exist that
do not warrant the time or expense of a public offering, the plan of conversion
may provide for sale of the unsubscribed shares through a private placement or
other alternative method approved by the commissioner which is fair and
equitable to eligible members; or
Page No. 4
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To a standby investor or to another corporation or entity that is participating in the
plan of conversion, as provided in paragraph 2 of subdivision c of subsection 1.
The plan must provide for the preparation of a valuation by a qualified independent
expert which establishes the dollar value of the capital stock for which subscription
rights must be granted pursuant to subdivision c of subsection 1 which must be equal
to the estimated pro forma market value of the converted stock company. The qualified
independent expert may, to the extent feasible, determine the pro forma market value
by reference to a peer group of stock companies and the application of generally
accepted valuation techniques; state the pro forma market value of the converted
stock company as a range of value; and establish the value as the value estimated to
be necessary to attract full subscription for the shares.
The dollar value of a subscription right based upon the application of the
Black-Scholes option pricing model or another generally accepted option pricing
model. In connection with the determination of stock price volatility or other valuation
inputs used in option pricing models, the qualified independent expert may assume
that the attributes of the converted stock company will be substantially similar to the
attributes of the stock of the peer companies used to determine the estimated pro
forma market value of the converted stock company. The term of a subscription right is
a minimum of ninety days for the sole purpose of determining the value of a
subscription right.
The plan must provide that each eligible member has the right to require the mutual
company to redeem such subscription rights, in lieu of exercising the subscription
rights allocated to each eligible member, at a price equal to the number of subscription
rights allocated to each eligible member multiplied by the dollar value of the
subscription right as determined by the qualified independent expert pursuant to
subsection 4. The obligation of the mutual company to redeem subscription rights
arises only upon the effective date of the plan. The redemption price payable to each
eligible member must be paid to the member within thirty days of the effective date of
the plan. Alternatively, the converted stock company may offer each eligible member
the option of receiving the redemption amount in cash or having the redemption
amount credited against future premium payments. An eligible member that does not
exercise the member's subscription rights, and which also fails to affirmatively request
redemption of the member's subscription rights before the expiration of the
subscription offering, nevertheless is deemed to have requested redemption of the
member's subscription rights and shall receive the redemption amount in cash in the
manner otherwise provided in this subsection.
The plan must set the purchase price per share of capital stock equal to any
reasonable amount. However, the minimum subscription amount required of any
eligible member may not exceed five hundred dollars, but the plan may provide that
the minimum number of shares any person may purchase pursuant to the plan is
twenty-five shares. The purchase price per share at which capital stock is offered to
persons that are not eligible members may be greater than but not less than the
purchase price per share at which capital stock is offered to eligible members.
The plan must provide that any person or group of persons acting in concert may not
acquire, in the public offering or pursuant to the exercise of subscription rights, more
than five percent of the capital stock of the converted stock company or the stock of
another corporation that is participating in the plan of conversion, as provided in item 3
of subparagraph a of paragraph 2 of subdivision c of subsection 1, except with the
approval of the commissioner. This limitation does not apply to any entity that is to
purchase one hundred percent of the capital stock of the converted stock company as
part of the plan of conversion approved by the commissioner or to any person that acts
as a standby investor for the capital stock of the converted stock company for an
amount equal to ten percent or more of the capital stock of the converted stock
company, if in each case such purchase is approved by the commissioner in
accordance with the provisions of North Dakota law following the filing of an
acquisition of control statement under section 26.1-10-03.
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The plan must provide that a director or officer or person acting in concert with a
director or officer of the mutual company may not acquire any capital stock of the
converted stock company or the stock of another corporation that is participating in the
plan of conversion, as provided in item 3 of subparagraph a of paragraph 2 of
subdivision c of subsection 1, for three years after the effective date of the plan of
conversion, except through a broker-dealer, without the permission of the
commissioner. This provision does not prohibit the directors and officers from:
a. Making block purchases of one percent or more of the outstanding common stock
other than through a broker-dealer if approved in writing by the insurance
department;
b. Exercising subscription rights received under the plan; or
c. Participating in a stock benefit plan permitted by subsection 3 of section
26.1-12.2-04 or approved by shareholders pursuant to subsection 2 of section
26.1-12.2-11.
The plan must provide that a director or officer may not sell stock purchased pursuant
to this section or subsection 1 of section 26.1-12.2-04 within one year after the
effective date of the conversion, except that nothing contained in this section may be
deemed to restrict a transfer of stock by such director or officer if the stock is the stock
of an unaffiliated corporation that is participating in the plan of conversion as provided
in item 3 of subparagraph a of paragraph 2 of subdivision c of subsection 1 and has a
class of stock registered under the federal Securities Exchange Act of 1934 [15 U.S.C.
78a et seq.], or if the transfer is to the spouse or minor children of such director or
officer, or to a trust or other estate or wealth planning entity established for the benefit
of such director or officer, or the spouse or minor children of such director or officer.
The plan of conversion must provide the rights, if any, of a holder of a surplus note to
participate in the conversion are governed by the terms of the surplus note.
The plan of conversion must provide that without the prior approval of the
commissioner, for a period of two years from the date of the completion of the
conversion, a converted stock company or any corporation participating in the plan of
conversion pursuant to item 1 of subparagraph a of paragraph 2 of subdivision c of
subsection 1 or item 2 of subparagraph a of paragraph 2 of subdivision c of
subsection 1, may not repurchase any of its capital stock from any person. However,
this restriction does not apply to a:
a. Repurchase on a pro rata basis pursuant to an offer made to all shareholders of
the converted stock company or any corporation participating in the plan of
conversion pursuant to, or item 1 of subparagraph a of paragraph 2 of
subdivision c of subsection 1, or item 2 of subparagraph a of paragraph 2 of
subdivision c of subsection 1; or
b. Purchase in the open market by a tax-qualified or nontax-qualified employee
stock benefit plan in an amount reasonable and appropriate to fund the plan.
26.1-12.2-04. Optional provisions of plan of conversion.
1. The plan of conversion may allocate to a tax-qualified employee benefit plan
nontransferable subscription rights to purchase up to ten percent of the capital stock of
the converting mutual company or the stock of another corporation that is participating
in the plan of conversion, as provided in item 3 of subparagraph a of paragraph 2 of
subdivision c of subsection 1 of section 26.1-12.2-03. A tax-qualified employee benefit
plan may exercise subscription rights granted under this subsection regardless of the
total number of shares purchased by eligible members. If eligible members purchase
shares sufficient to yield gross proceeds equal to the maximum of the valuation range
established by subsection 4 of section 26.1-12.2-03, then the tax-qualified employee
benefit plan may purchase additional shares of capital stock of the converting mutual
company or the stock of another corporation that is participating in the plan of
conversion, as provided in item 3 of subparagraph a of paragraph 2 of subdivision c of
subsection 1 of section 26.1-12.2-03 in an amount sufficient to equal ten percent of the
total shares of capital stock of the converted stock company outstanding.
Page No. 6
2.
The plan may provide that other classes of subscribers approved by the commissioner
shall receive nontransferable subscription rights to purchase capital stock of the
converting stock company or the stock of another corporation that is participating in
the plan of conversion, as provided in item 3 of subparagraph a of paragraph 2 of
subdivision c of subsection 1 of section 26.1-12.2-03 provided that such subscription
rights are subordinate to the subscription rights of eligible members. Other classes of
subscribers that may be approved by the commissioner include:
a. Members of the converting mutual company which became members after the
date fixed for establishing eligible members;
b. The shareholders of another corporation that is participating in the plan of
conversion, as provided in item 3 of subparagraph a of paragraph 2 of
subdivision c of subsection 1 of section 26.1-12.2-03; or
c. The shareholders of another corporation that is a party to an acquisition, merger,
consolidation, or other similar transaction with the converting mutual company.
26.1-12.2-05. Alternative plan of conversion.
The governing body of the converting mutual company may adopt a plan of conversion that
does not rely in whole or in part upon issuing nontransferable subscription rights to members to
purchase stock of the converting stock company if the commissioner finds the plan of
conversion does not prejudice the interests of the members, is fair and equitable, and is not
inconsistent with the purpose and intent of this chapter. Subject to a finding of the commissioner
that an alternative plan of conversion is fair and equitable and is not inconsistent with the
purpose and intent of this chapter, an alternative plan of conversion may:
1. Include the merger of a domestic mutual insurance company into a domestic or foreign
stock insurance company.
2. Provide for the issuance of transferable or redeemable subscription rights.
3. Provide for issuing stock, cash, policyholder credits, or other consideration, or any
combination of the foregoing, to policyholders instead of subscription rights.
4. Set forth another plan of conversion containing any other provisions approved by the
commissioner.
26.1-12.2-06. Minority stock offering by a mutual holding company.
A mutual holding company may make a minority stock offering in accordance with the
provisions of chapter 26.1-12.1 or this chapter. A minority stock offering pursuant to chapter
26.1-12.1 may not include the grant of subscription rights to policyholders. Except as otherwise
provided in section 26.1-12.2-05 concerning an alternative plan of conversion, a minority stock
offering pursuant to this chapter must include the grant of subscription rights to policyholders.
26.1-12.2-07. Conversion of a mutual holding company.
1. If a mutual holding company converts from a mutual to stock form, the conversion
must comply with the provisions of this chapter.
2. If a mutual holding company seeks to convert to stock form under this chapter and it
has previously completed one or more minority stock offerings in which policyholders
were granted subscription rights pursuant to this chapter, the valuation required by
subsection 4 of section 26.1-12.2-03 must take into account the existence of this
minority interest as provided in this section. The amount of capital stock required to be
offered by the mutual holding company or another corporation that is participating in
the plan of conversion as provided in item 3 of subparagraph a of paragraph 2 of
subdivision c of subsection 1 of section 26.1-12.2-03 may be expressed as a range of
value and must equal: the pro forma fair market value of the mutual holding company,
multiplied by one minus a quotient equal to the number of issued minority shares,
divided by the sum of the issued minority shares and the number of shares held by the
mutual holding company.
3. The plan of conversion of a mutual holding company must provide that any
outstanding issued minority shares must be exchanged for stock issued by the
Page No. 7
4.
converting mutual company or the stock of any corporation participating in the
conversion of the mutual holding company pursuant to subparagraph a of paragraph 2
of subdivision c of subsection 1 of section 26.1-12.2-03. The mutual holding company
shall demonstrate to the satisfaction of the commissioner that the basis for the
exchange is fair and reasonable. An exchange in which the holders of outstanding
issued minority shares retain approximately the same percentage ownership in the
resulting company as the quotient of the number of issued minority shares, divided by
the sum of issued minority shares and the number of shares held by the mutual
holding company, is presumed to be fair and reasonable.
If a mutual holding company seeking to convert under this chapter previously
completed one or more minority stock offerings, the conversion of the mutual holding
company to stock form may not be consummated unless a majority of the shares
issued and outstanding to persons other than the mutual holding company vote in
favor of the conversion. This vote requirement is in addition to the required
policyholder vote.
26.1-12.2-08. Effective date of plan of conversion.
A plan of conversion is effective when the commissioner has approved the plan of
conversion, the voting members have approved the plan of conversion and adopted the
certificate of incorporation of the converted stock company, and the certificate of incorporation is
filed in the office of the secretary of state of this state.
26.1-12.2-09. Rights of members whose policies are issued after adoption of the plan
of conversion and before effective date.
1. All members whose policies are issued after the proposed plan of conversion has
been adopted by the governing body and before the effective date of the plan of
conversion must be sent a written notice regarding the plan of conversion upon
issuance of such policy.
2. Except as provided in subsection 3, each member of a property or casualty insurance
company entitled to receive the notice provided for in subsection 1 must be advised of
the member's right of cancellation and to a pro rata refund of unearned premiums.
3. A member of a property or casualty insurance company who has made or filed a claim
under such member's insurance policy is not entitled to any right to receive any refund
under subsection 2. A person that has exercised the rights provided by subsection 2 is
not entitled to make or file any claim under such person's insurance policy.
26.1-12.2-10. Corporate existence.
1. On the effective date of the conversion, the corporate existence of the converting
mutual company continues in the converted stock company. On the effective date of
the conversion, all the assets, rights, franchises, and interests of the converting mutual
company in and to every species of property, real, personal, and mixed, and any
accompanying things in action, are vested in the converted stock company without any
deed or transfer and the converted stock company assumes all the obligations and
liabilities of the converting mutual company.
2. Unless otherwise specified in the plan of conversion, the individuals who are directors
and officers of the converting mutual company on the effective date of the conversion
shall serve as directors and officers of the converted stock company until new directors
and officers of the converted stock company are elected pursuant to the certificate of
incorporation and bylaws of the converted stock company.
26.1-12.2-11. Conflict of interest.
1. A director, officer, agent, or employee of the converting mutual company may not
receive any fee, commission, or other valuable consideration, other than such person's
usual regular salary or compensation, for aiding, promoting, or assisting in a
conversion under this chapter. This provision does not prohibit the payment of
Page No. 8
2.
3.
reasonable fees and compensation to attorneys, accountants, financial advisors, and
actuaries for services performed in the independent practice of their professions, even
if the attorney, accountant, financial advisor, or actuary is also a director or officer of
the converting mutual company.
For a period of two years after the effective date of the conversion, a converted stock
company may not implement any nontax-qualified stock benefit plan unless the plan is
approved by a majority of votes cast at a duly convened meeting of shareholders held
not less than six months after the effective date of the conversion.
All the costs and expenses connected with a plan of conversion must be paid for or
reimbursed by the converting mutual company or the converted stock company.
However, if the plan of conversion provides for participation by another entity in the
plan pursuant to subparagraph a of paragraph 2 of subdivision c of subsection 1 of
section 26.1-12.2-03, such entity may pay for or reimburse all or a portion of the costs
and expenses connected with the plan of conversion.
26.1-12.2-12. Failure to give notice.
If the converting mutual company complies substantially and in good faith with the notice
requirements of this chapter, the failure of the converting mutual company to send a member
the required notice does not impair the validity of any action taken under this chapter.
26.1-12.2-13. Limitation on actions.
Any action challenging the validity of or arising out of acts taken or proposed to be taken
under this chapter must be commenced on or before the later of:
1. Sixty days after the approval of the plan of conversion by the commissioner; or
2. Thirty days after notice of the meeting of voting members to approve the plan of
conversion is first mailed or delivered to voting members or posted on the website of
the converting mutual company.
26.1-12.2-14. Converting mutual company insolvent or in hazardous financial
condition.
1. If a converting mutual company seeking to convert under this chapter is insolvent or is
in hazardous financial condition according to information supplied in the mutual
company's most recent annual or quarterly statement filed with the insurance
department or as determined by a financial examination performed by the insurance
department, the requirements of this chapter, including notice to and policyholder
approval of the plan of conversion, may be waived at the discretion of the
commissioner. If a waiver under this section is ordered by the commissioner, the
converting mutual company shall specify in the mutual company's plan of conversion:
a. The method and basis for the issuance of the converted stock 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 converted stock
company to a sound financial condition.
b. That the conversion must be accomplished without granting subscription rights or
other consideration to policyholders.
2. This section does not alter or limit the authority of the commissioner under any other
provisions of law, including receivership and liquidation provisions applicable to
insurance companies.
26.1-12.2-15. Rules.
The commissioner may adopt rules to administer and enforce this chapter.
26.1-12.2-16. Laws applicable to converted stock company.
1. A converting mutual company is not permitted to convert under this chapter if, as a
direct result of the conversion, any person or any affiliate thereof acquires control of
the converted stock company, unless that person and such person's affiliates comply
Page No. 9
2.
with the provisions of North Dakota law regarding the acquisition of control of an
insurance company.
Except as otherwise specified in this chapter, a converted stock company has and may
exercise all the rights and privileges and is subject to all of the requirements and
regulations imposed on stock insurance companies under the laws of North Dakota
relating to the regulation and supervision of insurance companies, but the converting
stock company may not exercise rights or privileges that other stock insurance
companies may not exercise.
26.1-12.2-17. Commencement of business as a stock insurance company.
A converting mutual company may not engage in the business of insurance as a stock
company until the converting stock company complies with all provisions of this chapter.
26.1-12.2-18. Amendment of policies.
A mutual company, by endorsement or rider approved by the commissioner and sent to the
policyholder, may simultaneously with or at any time after the effective date of the conversion
amend any outstanding insurance policy for the purpose of extinguishing the membership rights
of such policyholder.
26.1-12.2-19. Prohibition on acquisitions of control.
Except as otherwise specifically provided in section 26.1-12.2-03, from the date a plan of
conversion is adopted by the governing body of a converting mutual company until three years
after the effective date of the plan of conversion, a person may not directly or indirectly offer to
acquire, make any announcement to acquire, or acquire in any manner, including making a filing
with the insurance department for such acquisition under a statute or regulation of this state, the
beneficial ownership of ten percent or more of a class of a voting security of the converted stock
company or of a person that controls the voting securities of the converted stock company,
unless the converted stock company or a person that controls the voting securities of the
converted stock company consents to such acquisition and such acquisition is otherwise
approved by the commissioner.
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