Section 19H: Plan of reorganization; public hearing; approval of plan; meeting
Section 19H. (a) The plan of reorganization shall include appropriate proceedings for amending the mutual insurer's articles of organization to give effect to the reorganization from a mutual insurer into a stock corporation. The plan of reorganization shall be:
(1) approved by vote of a three-fourths majority of the board of directors;
(2) submitted to the commissioner for consent in writing, subject to the provisions of subsection (d), by an application executed by an authorized officer of the reorganizing insurer and accompanied by the following documents, or true and correct copies of the documents:
(i) the proposed plan of reorganization;
(ii) the proposed articles of organization of each corporation that is a constituent corporation of the reorganization;
(iii) the proposed by-laws of each corporation that is a constituent corporation of the reorganization;
(iv) 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 reorganization;
(v) the resolution of the board of directors of the mutual insurer, certified by the secretary of the mutual insurer, authorizing the reorganization under sections 19F to 19W, inclusive;
(vi) financial statements in a form acceptable to the commissioner giving effect to the reorganization for the mutual holding company and any entities which will be subsidiaries of the mutual holding company after the reorganization and which will experience a change in capitalization due to the reorganization;
(vii) a draft of materials to be mailed to members seeking their approval of the plan, including a summary of the plan of reorganization; and
(viii) other relevant information that the commissioner may require.
(3) approved by a vote of not less than two-thirds of the members of the mutual insurer voting at a meeting of the members called for that purpose, subject to the provisions of subsection (e);
(4) filed with the commissioner after receipt of the commissioner's consent, and after having been approved as provided in subsection (d).
(b) A plan of reorganization adopted pursuant to sections 19F to 19W, inclusive, shall demonstrate a purpose and specify reasons for the proposed reorganization, and shall provide that the mutual insurer will become a stock insurer, that the members of the mutual insurer will become members of a mutual holding company, that the owners of policies issued by the reorganizing insurer and in force on the effective date shall as of the effective date have equity rights in the mutual holding company, and that the mutual holding company will acquire, directly or through one or more intermediate stock holding companies, at least 51 per cent of the voting stock of the reorganized insurer.
(c) The commissioner shall hold a public hearing upon the fairness of the terms and conditions of the plan of reorganization, the reasons and purposes for the reorganization of the mutual insurer, and whether the reorganization is in the best interest of said mutual insurer and is fair and equitable to its policyholders, and not detrimental to the insuring public. Notice stating the time, place and purpose of the hearing shall be mailed by the reorganizing insurer to each eligible policyholder, at his last known address as shown on the records of the reorganizing insurer, except in instances where mailing of notice is not feasible as determined by the commissioner. Such notice shall be mailed at least 60 days prior to the date of the hearing. Such notice shall be preceded or accompanied by a true and complete copy of the plan, or by a summary thereof approved by the commissioner, and such other explanatory information as the commissioner shall approve or require. In addition, the reorganizing insurer shall give notice of the time, place and purpose of the hearing by publication in three newspapers of general circulation, one in the county in which the reorganizing insurer has its principal office and two in other cities within or without the state approved by the commissioner. Such newspaper publications shall be made not less than 15 days nor more than 60 days prior to the hearing, and shall be in a form approved by the commissioner. The directors, officers, employees and policyholders of the reorganizing insurer shall have the right to appear and be heard at the hearing.
(d) The commissioner shall, after the public hearing required by subsection (c), approve the plan of reorganization if he finds that: the proposed reorganization is in the best interests of the reorganizing insurer; the plan is fair and equitable to the reorganized insurer's policyholders; the plan provides for the enhancement of the operations of the reorganizing insurer; the plan will not substantially lessen competition in any line of insurance business and, 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 its initial authorization to transact like kinds of insurance; and, the plan complies with the requirements of sections 19F to 19W, inclusive. The commissioner shall approve or disapprove the plan in writing on or before 60 days after the conclusion of the public hearing required by subsection (c). The commissioner, if he determines that the plan of reorganization is not fair and equitable to the policyholders, may request that the reorganizing insurer modify said plan prior to his approval or disapproval of said plan; provided, however, that such request does not prevent the reorganizing insurer from withdrawing said plan pursuant to subsections (a) to (n), inclusive, of section 19K. If approval is denied, the denial shall be in writing setting forth a statement of the reasons therefor and the reorganizing insurer shall have the right to a hearing before the commissioner within 30 days of the date of such denial.
(e) The meeting of members prescribed by clause (3) of subsection (a) shall be called by the board of directors, the chairperson of the board or the president of the reorganizing insurer. Notice stating the date, time and place of the meeting shall be mailed by the reorganizing insurer to its policyholders at their last known addresses as shown on the records of the reorganizing insurer, except in instances where mailing of notice is not feasible as determined by the commissioner, and notice given to the holder of a policy shall constitute notice to the member whose membership arises from the policy. Said meeting shall be held no sooner than 30 days after the date of the public hearing pursuant to this subsection. Said notice shall be mailed at least 60 days prior to the date of said meeting. Such notice may be combined with the notice of public hearing mailed to policyholders pursuant to subsection (c). Such notice shall be preceded or accompanied by a true and complete copy of the plan, or by a summary thereof approved by the commissioner, and such other explanatory information as the commissioner shall approve or require including financial statements as described in subclause (vi) of clause (2) of subsection (a), a description of material risks and benefits to policyholders' interests, and any information pertaining to an offering of stock to the public included in the provisions of the plan of reorganization submitted to the commissioner as described in section 19P. Each member entitled to vote on the plan of reorganization shall vote by written ballot cast in person or by mail or by a proxy agent duly appointed by the member. Persons entitled to vote on the plan of reorganization shall be those persons whose names appear on the reorganizing insurer's records as members on the adoption date.
The commissioner shall have the power to supervise and direct and prescribe the rules governing the procedure for the conduct of voting on the proposal to such extent, consistent with the provisions of sections 19F to 19W, inclusive, as he deems necessary to insure a fair and accurate vote. Such powers shall include, but not be limited to, power to supervise and regulate: (a) the determination of policyholders entitled to notice of and to vote on the proposal; (b) the giving of notice of the proposal; (c) the receipt, custody, safeguarding, verification and tabulation of proxy forms and ballots; and (d) the resolution of disputes.
For the purposes of determining whether a reorganization plan meets the requirements of sections 19F to 19W, inclusive, the commissioner may employ staff personnel and private consultants. All reasonable costs related to the review of a plan of reorganization, including costs attributable to the use of staff personnel, shall be borne by the insurer submitting the plan.