2006 Code of Virginia § 38.2-1005.1:5 - Adoption and approval of plan of MHC conversion

38.2-1005.1:5. Adoption and approval of plan of MHC conversion.

A. The board of directors of a mutual company may adopt a plan of MHCconversion that is consistent with the provisions of 38.2-1005.1:4 by theaffirmative vote of not less than two-thirds of the members of the board. Atany time before approval of the plan by the mutual company's eligiblemembers, the board of directors, by affirmative vote of not less thantwo-thirds of its members, may amend or withdraw the plan.

B. After a plan of MHC conversion has been adopted by the board of directors,the plan and all amendments subsequently adopted shall be filed with theCommission for review and approval. In addition to the plan and supportingdocuments, the filing shall include (i) the form of notice to eligiblemembers required by subdivision E 1 of this section, (ii) the form of anyproxy to be solicited from eligible members together with all material to bedistributed in connection with such solicitation, (iii) the proposed articlesof incorporation and bylaws of the mutual holding company and eachintermediate holding company, if any, and (iv) the revised articles ofincorporation and bylaws of the converted company.

C. Upon receipt of the plan and other documents specified in subsection B ofthis section, the Commission shall conduct a review of the plan. TheCommission shall approve the plan if it determines that the provisions ofthis article have been complied with and that the plan is fair and equitableas regards the interests of the members of the mutual company. The Commissionmay in its discretion order a public hearing for the purpose of determiningwhether the plan complies with the conditions listed in the precedingsentence. The Commission may retain, at the mutual company's expense, anyqualified expert not a member of its staff to assist in its review of theplan.

D. The Commission may condition approval of the plan upon such conditions,stipulations or provisions as it determines are reasonably necessary toprotect policyholder interests of the converted company, including, but notlimited to:

1. Its prior approval of:

a. Any acquisition or formation of affiliate entities of the mutual holdingcompany;

b. The capital structure of any intermediate holding company or anysubsequent change thereto;

c. Any initial public offering or other issuance of equity or debt securitiesof an intermediate holding company or the converted company by private saleor public offering; and

d. Expansion of the activities of the mutual holding company into lines ofbusiness, industries or operations not identified or apparent at the time ofapproval of the plan.

2. Limitations on:

a. Dividends and distributions, in addition to those otherwise provided bylaw, if their effect would be to reduce the capital and surplus of theconverted company; and

b. The pledge, encumbrance or transfer of the stock of the converted company.

E. 1. Upon approval of a plan of MHC conversion by the Commission, the planshall be submitted to a vote of the eligible members at an annual or specialmeeting of the members of the mutual company held not less than twenty-fivenor more than sixty days from the date notice of the meeting is given. Noticeof the members' meeting to act on the plan shall be given to each eligiblemember at the member's address as shown on the company's records not laterthan forty-five days following the date of the Commission's approval of theplan. The notice shall identify in reasonable detail the benefits and risksof the plan of MHC conversion and shall be accompanied by a copy of the planor, if authorized by the Commission, a summary thereof; provided, however,that if a summary of the plan is sent with the notice, members shall beadvised that a complete copy of the plan will be available without chargeupon request. The notice shall state that the Commission has approved theplan but that such approval does not constitute a recommendation that membersvote to adopt the plan.

2. Approval of the plan shall be by the affirmative vote of more thantwo-thirds of the votes cast by eligible members at a meeting at which aquorum is present. Eligible members may vote in person or by proxy. Thenumber of votes an eligible member may cast shall be determined by the bylawsof the mutual company. If the bylaws contain no such provisions, eacheligible member shall be entitled to cast one vote.

3. Upon approval of the plan by the eligible members of the mutual company,the articles of incorporation of the mutual holding company, any intermediateholding company, and the converted company shall be adopted and filed withthe Commission. In addition, the converted company shall file with theCommission a copy of the minutes of the meeting at which the members approvedthe plan together with a copy of the bylaws of the mutual holding company,any intermediate holding company, and the converted company. The plan of MHCconversion shall become effective on the date that all of the provisions ofthis section have been complied with and the new and revised articles ofincorporation have been filed and admitted to record in the office of theclerk of the Commission in the manner provided by Chapter 9 ( 13.1-601 etseq.) of Title 13.1.

(2001, c. 726.)