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The 192nd General Court of the Commonwealth of Massachusetts

Section 19D: Conversion from stock to mutual company

Section 19D. Any domestic stock life insurance company or any domestic stock insurance company transacting business solely under subdivisions (a) and (d) of clause Sixth of section forty-seven, may become a mutual insurance company, and to that end may formulate and carry out a plan for the acquisition by it of its outstanding capital stock, as follows:—

(1) Such plan shall have been adopted by a vote of a majority of the directors of such company;

(2) Such plan shall have been submitted to the commissioner and shall have been approved by him as conforming to the requirements of this chapter and as not prejudicial to the policyholders of such company or to the insuring public;

(3) Such plan shall have been approved by a vote of the stockholders of such company owning at least two thirds of the outstanding capital stock of such company, at a special meeting of the stockholders called for that purpose. The notice of such meeting shall comply with section eighty-seven of chapter one hundred and fifty-six B;

(4) Such plan shall have been approved by the vote of a majority of the policyholders of such company who are eligible to vote and who do vote at a meeting called for that purpose. A policyholder may vote in person, by proxy or by mail, and his eligibility shall be determined by the provisions of section ninety-four as if he were a mutual policyholder. Notice of the meeting shall be given by mailing such notice from the home office of the company at least thirty days prior to such meeting in a sealed envelope, postage prepaid, addressed to each policyholder eligible to vote at his last known post office address. The meeting shall be conducted in such manner as may be provided for in the plan with the approval of the commissioner. The commissioner shall supervise and direct the methods and procedure of said meeting and shall appoint an adequate number of inspectors to conduct the voting at said meeting, who shall have power to determine all questions concerning the verification of the ballots, the ascertaining of the validity thereof, the qualifications of the voters and the canvass of the vote. Such inspectors, or any one thereof designated by the commissioner, shall certify to the commissioner and to such company the result of such vote, and with respect thereto shall act under such rules as shall be prescribed by the commissioner. All necessary expenses for such meeting incurred by the commissioner or incurred with his approval by the inspectors appointed by him shall be paid by such company upon the certificate of the commissioner;

(5) Such plan shall specify the method of acquisition and mode of payment for shares of its capital stock, whether immediate or deferred, and may specify the purchase price to be paid for such shares in which case the price specified shall be adhered to. If such plan does not specify the price to be paid for such shares, such company shall first obtain the approval of the commissioner for every payment made for the acquisition of any shares of its capital stock. Neither such plan nor any such payment shall be approved by the commissioner unless he shall find that at the time of such approvals, respectively, the company, after deducting the aggregate sum appropriated by such plan for the acquisition of any part or all of its capital stock and, after deducting any payment not fixed by such plan and subject to separate approval by the commissioner, shall be possessed of admitted assets in an amount not less than the entire liabilities of the company, including the net values of its outstanding contracts computed in accordance with the provisions of this chapter, and including all liability funds, contingent reserves and surplus, except for such surplus as has been appropriated or paid under such plan;

(6) In pursuance of such plan such company shall have power, and shall be privileged to acquire any shares of its capital stock by gift, bequest or purchase. Until all of the shares of its outstanding capital stock are acquired, any shares so acquired shall be held in trust for all the policyholders of such company, as hereinafter provided, and shall be assigned and transferred on the books of the company to not less than three and not more than five trustees, who shall be qualified directors of the company and named in such plan. Such trustees shall continue in office until the purpose of the trust is accomplished or abandoned unless they cease to be directors or are removed for cause by the commissioner. Such plan shall provide for the method of filling vacancies occurring among such trustees, and any trustee named, before undertaking any duties of his appointment, shall file with the commissioner a verified acceptance of his appointment. All shares held by such trustees shall be deemed admitted assets of such company at their par value. Such trustees shall have power to vote any shares so acquired at all corporate meetings at which stockholders have the right to vote, until all of the outstanding capital stock of such company shall have been acquired, or until the maximum period provided in accordance with subparagraph (8) of this section shall have expired, whichever is earlier, at which time the entire capital stock of such company shall be retired and cancelled and thereupon such company shall be and become a mutual insurance company without capital stock and without any right of assessment on its policyholders. All dividends and other sums received by such trustees on the shares of stock so acquired by them, shall, after paying the necessary expenses of executing the trust, be immediately repaid to the company for the benefit of all who are or may become policyholders of such company and entitled to participate in the profits thereof, and shall be added to and become a part of the surplus earned by such company;

(7) If a stockholder of the company objects to the proposed mutualization in the manner provided in section eighty-six of chapter one hundred and fifty-six B, sections eighty-six through ninety-six and section ninety-eight of chapter one hundred and fifty-six B shall be applicable. In determining the fair value of the stock any appreciation or depreciation in consequence of such mutualization shall be excluded. Upon payment by the company to the stockholder of the agreed or awarded price of his stock, the stockholder shall forthwith transfer and assign the stock certificates held by him to the trustees provided for in subparagraph (6) of this section;

(8) Such plan shall specify a maximum period following its approval by the policyholders as above provided, within which all stockholders of the company shall surrender their stock for cancellation pursuant to the plan, and upon any stockholder's failing or neglecting to so surrender his stock within such period, all of his rights, powers and privileges as such stockholder shall nevertheless terminate and be extinguished, excepting only his right to receive payment for his stock as provided in such plan, or in accordance with the provisions of subparagraph (7) of this section;

(9) The company may by a majority vote of the directors and of the stockholders abandon such plan at any time before a vote of the policyholders approving such plan. Upon such abandonment, the rights of any stockholders to be paid for their stock in accordance with the plan, and the rights of any dissenting stockholders to be paid the fair cash value of their stock as provided in subparagraph (7) of this section shall terminate, and the company shall continue to conduct its business as a domestic stock insurance company as though no such plan had ever been adopted;

(10) Any refusal by the commissioner to give any approval required by this section shall be subject to judicial review;

(11) Neither the retirement of the company's capital stock nor the amendment of its articles of incorporation shall affect existing suits, rights or contracts of such company. When the capital stock of such company has been retired and cancelled and the company has become a mutual company, the officers and directors of the stock company shall remain as the officers and directors of the mutual company until the expiration of their terms of office in accordance with the terms of the by-laws of the stock company.