Section 19K: Issuance of certificate of authority to reorganized insurer; approval of articles of organization; status upon effective date of plan; rights of members
Section 19K. Upon consent by the commissioner to the plan of reorganization of a mutual insurer and filing of the plan of reorganization in accordance with the provisions of clause (4) of subsection (a) of section 19H, the commissioner shall issue a new certificate of authority to the reorganized insurer and approve the articles of organization of the mutual holding company and amended articles of organization of the reorganized insurer for filing with the state secretary by attaching thereto a certificate of approval in such form as the commissioner may prescribe. The commissioner instead of the state secretary shall have the power to perform the duties relative thereto specified in section 6 of chapter 156B. The plan of reorganization shall be effective upon the filing of the articles of organization of the mutual holding company and amended articles of organization of the reorganized insurer with the state secretary or upon such later date as is specified in the plan of reorganization and amended articles of organization of the reorganized insurer; provided, however, that such later date shall not be more than 30 days after the filing of the articles of organization of the mutual holding company with the state secretary.
[There is no subsection (a).]
(b) Upon the effective date of a plan of reorganization:
(i) the reorganizing insurer immediately shall become a domestic stock insurer and shall be a continuation of the corporate existence of the reorganizing insurer, and for all purposes of this chapter, its articles of organization shall be the amended articles of organization filed in accordance with subsection (a), as they may thereafter be amended in accordance with this chapter;
(ii) all rights of any person to vote, including the right to vote in the election of directors or at annual or special meetings of the reorganizing insurer, or to share in any distribution of, or to receive consideration based upon, the surplus of the reorganizing insurer in liquidation or winding up, in dissolution or conservation or otherwise under the General Laws or the charter or by-laws of the mutual company or otherwise by law, shall be extinguished; provided, however, that rights expressly conferred solely by the terms of a policy, except the right to vote, shall not be extinguished;
(iii) the members of the reorganizing insurer on such effective date shall immediately become members of the mutual holding company; provided, however, that, the rights of a person as a member shall continue only so long as the related policy remains in force;
(iv) owners of policies that make provision for the right to vote 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; provided, however, that, the rights of a person as a holder of equity rights shall continue only so long as the related policy remains in force; and
(v) 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.
Owners of policies that make provision for the right to vote that are issued after the effective date by the reorganized insurer shall be members of the mutual holding company and holders of equity rights in the mutual holding company. The rights of a person as a member of a mutual holding company or as holder of equity rights shall continue only so long as the related policy remains in force. Any person may be a member of a mutual holding company.
(c) From the effective date of a plan of reorganization, at least 51 per cent of the issued and outstanding voting stock of the reorganized insurer shall be owned by the mutual holding company or an intermediate stock holding company, and at least 51 per cent of the issued and outstanding voting stock of any intermediate stock holding company shall be owned by the mutual holding company or another intermediate stock holding company. For purposes of these calculations, any issued and outstanding securities of the reorganized insurer or any intermediate stock holding company that are convertible into voting stock are considered issued and outstanding voting stock.
(d) So far as pertinent and not in conflict with the express provisions of this chapter, with other provisions of law relative to mutual holding companies or with their charters:
(i) the mutual holding company shall not engage in the insurance business;
(ii) the mutual holding company shall be a ''holding company'' within the meaning of sections 206 to 206D, inclusive;
(iii) the general principles of law relative to the powers, duties and liabilities of corporations shall apply to all mutual holding companies;
(iv) sections 46B, 50A, 50B and 60 and the provisions of the third paragraph of section 77 shall be applicable to mutual holding companies;
(v) sections 2 and 7, sections 9 to 13, inclusive, sections 16, 49 and 52, sections 54 to 59, inclusive, and section 67 of chapter 156B, shall be applicable to mutual holding companies;
(vi) the term ''stockholders'' and other terms of similar meaning where they appear in applicable sections of chapter 156B shall, in the case of a mutual holding company, mean the members thereof; and
(vii) the mutual holding company shall not make any payment of income, dividends contingent upon an apportionment of profits, or any other distribution of profits, except to the limited extent provided in the mutual holding company articles of organization or as otherwise directed or approved by the commissioner. The commissioner shall, subject to the specific authority granted by this chapter, retain jurisdiction at all times over a mutual holding company to assure that the reorganizing insurer's policyholders' interests are protected.
(e) Members of the mutual holding company shall be notified of the annual meetings of the mutual holding company by written notice to all policyholders of the reorganized insurer by first class mail at least 60 days in advance of an annual meeting.
(f) Every member of the mutual holding company shall be entitled to one vote; provided, however, that, except in the circumstances described in sections 36, 132D and 137, every member of the mutual holding company under a policy of life or endowment insurance issued by reorganized insurer shall be entitled to one vote and, except in the case of a policy of life or endowment insurance which is a contract on a variable basis, one vote additional for each $5,000 of insurance in excess of the first $5,000, every member of the mutual holding company holding an annuity or pure endowment contract issued by such insurer shall be entitled to one vote and, except in the case of an annuity contract which is a contract on a variable basis, one vote additional for each $150 of annual annuity income in excess of the first $150, and, except as provided in section 110, every member of the mutual holding company insured under any policy issued by any such insurer under clause Sixth of section 47 shall be entitled to one vote; but no member of a mutual holding company shall, in person or by proxy, cast more than 20 votes.
(g) Members of the mutual holding company may vote by proxies dated and executed within three months of, and returned and recorded on the books of the company seven days or more before, the meeting at which they are to be used.
(h) Any required member approval shall be by the affirmative vote of a majority of the members of the mutual holding company who vote, or a higher percentage of the members as may be required by law or the articles of organization.
(i) The articles of organization or the by-laws of the mutual holding company may provide that the directors may be divided into two or more classes whose terms of office shall expire at different times. No term shall continue longer than six years. In the absence of such provisions, each director shall be elected for a term of one year. All directors shall hold office for the term for which they are elected and until their successors are elected and qualified. Vacancies in the board of directors may be filled by a majority of the remaining directors, though less than a quorum. Each director so elected shall hold office until the next annual meeting.
(j) For a period of ten years from the effective date of a plan of reorganization, if any proceedings under section 6 or sections 180A to 180L, inclusive, are brought naming as a party a stock insurer created as a result of proceedings authorized by sections 19F to 19W, inclusive, the mutual holding company formed as part of the reorganization shall become a party to the proceedings. The assets of the mutual holding company, including, but not limited to, its interest in any intermediate stock holding company formed pursuant to this section, shall be deemed assets of the estate of the reorganized insurer to the extent necessary to satisfy claims of persons against the reorganized insurer who have claims falling within the priorities established in subparagraphs (1) to (4), inclusive, of the fifth paragraph of section 180F; provided, however, that in no event shall a mutual holding company's contribution to the estate of a reorganized insurer pursuant to this sentence exceed the value of assets, net of liabilities, which such reorganized insurer transferred to the mutual holding company or to one or more persons owned or controlled by the mutual holding company pursuant to section 19O. Claims of persons in their capacity as members of the mutual holding company shall have the same priority as members of a mutual insurer authorized to do the same kinds of business as the reorganized insurer would have upon the liquidation of such an insurer under said section 180F. A mutual holding company may not dissolve, liquidate, or wind up and dissolve without the prior written approval of the commissioner or the court pursuant to proceedings brought pursuant to sections 180A to 180L, inclusive.
(k) Membership interests in a mutual holding company shall not be considered a security as that term is defined by section 401 of chapter 110A. A description of the membership interests and related factual disclosure shall not be considered to be an inducement to buy insurance in violation of section 181 or 182 of this chapter or section 3 of chapter 176D, and receiving such description and related factual disclosure shall not subject the receiver to the provisions of section 183.
(l) A mutual holding company organized under this section may hold, directly or indirectly, multiple subsidiaries, including multiple intermediate stock holding companies, and an intermediate stock holding company may hold multiple subsidiaries; directly or indirectly, including multiple reorganized insurers.
(m) Notwithstanding any general or special law to the contrary, a mutual holding company shall not be permitted to transfer its domicile to any other state without the approval of the commissioner for a period of five years after the effective date.
(n) If the total adjusted capital, as such term is defined in the risk based capital regulations promulgated by the commissioner, effective as of June 30, 1997, and published in 211 CMR 20, of the reorganized insurer is less than 300 per cent of its authorized control level risk based capital, as such term is defined in the risk based capital regulations, as of any calendar year-end after the reorganization effective date, then for so long as such deficiency continues, the reorganized insurer shall not, without prior notice to and review by the commissioner, make any acquisitions of subsidiaries. The restrictions set forth above shall be for the purpose of protecting the solvency of the reorganized insurer and shall be in addition to any other restrictions imposed on such insurer by the risk based capital regulations.
(o) The plan of reorganization or any plan of conversion adopted pursuant to section 19U may also include provisions restricting the ability of any person or persons acting in concert from directly or indirectly offering to acquire or acquiring the beneficial ownership of 10 per cent or more of any class of voting stock of the reorganized insurer or converted holding company, as the case may be, or any entity that, directly or indirectly, controls either.