Section 19R: Additional requirements applicable to reorganizing insurers, intermediate stock holding companies and mutual holding companies
Section 19R. Other requirements applicable to a reorganizing insurer, an intermediate stock holding company and a mutual holding company shall be as follows:
(1) Notwithstanding any other provision of the General Laws, nothing in this section shall be deemed to prohibit provisions under which the officers, directors, employees, agents, and employee benefit plans of the mutual holding company, reorganizing insurer or an intermediate stock holding company, for their benefit, may be entitled, in accordance with reasonable classifications of those individuals and employee benefit plans, to purchase for cash, at the same price as offered to the public in any public offering, voting stock issued by the reorganized insurer or any intermediate stock holding company. Subject to limitations set forth in this section, nothing in sections 19F to 19W, inclusive, shall be deemed to prohibit the establishment of stock option, incentive, and share ownership plans customary for publicly traded companies.
(2) Until six months after the completion of either an initial public offering, private equity placement or the first issuance of public or private stock or securities convertible into voting stock of the reorganized insurer or the intermediate stock holding company to any person other than the mutual holding company or an intermediate stock holding company, neither an intermediate stock holding company nor the reorganized insurer shall award any stock options or stock grants to persons who are officers or directors of the mutual holding company, an intermediate stock holding company or the reorganized insurer; provided, however, that, if a reorganized insurer or its intermediate stock holding company distributes stock purchase rights to the policyholders of a reorganized insurer in connection with a public offering of stock, then directors and officers who are policyholders of such reorganized insurer shall receive and may exercise such stock purchase rights on the same basis as all other such policyholders.
(3) Until two years after the six month period referred to in paragraph (2), the officers, directors and outside directors of the mutual holding company, an intermediate stock holding company and of the reorganized insurer may not own beneficially, in the aggregate, more than 5 per cent of the voting stock of the intermediate stock holding company or the reorganized insurer.
(4) The officers and directors of the mutual holding company, an intermediate stock holding company or the reorganized insurer shall not own beneficially, in the aggregate, more than 18 per cent of the voting stock of the intermediate stock holding company or the reorganized insurer; provided, however, that the commissioner may, in the event of a distress situation find that beneficial ownership of more than 18 per cent is necessary and appropriate.
(5) In no event shall any person, directly or indirectly, offer to acquire or acquire in any manner beneficial ownership of more than 10 per cent of any class of voting securities of the reorganized insurer, any intermediate stock holding company or any other institution which owns, directly or indirectly, a majority of the voting securities of the reorganized insurer without the prior approval of the commissioner.
(6) If the mutual holding company elects to cause an intermediate stock holding company or the reorganized insurer to conduct an initial public offering or initial private equity placement or the initial issuance of voting stock or securities convertible into voting stock of the reorganized insurer or the intermediate stock holding company, it shall, subject to any limitations necessary or appropriate under law applicable to particular classes of policyholders, cause each eligible person to receive stock purchase rights in connection with such initial offering unless a committee of its board of directors consisting of its outside directors determines, by vote of at least two-thirds of the members of such committee, that a stock purchase rights offering would not be in the best interests of its policyholders. Such determination shall be approved by the commissioner.
(7) Any voting stock or securities convertible into voting stock held by officers and directors of the mutual holding company, the intermediate stock holding company and the reorganized insurer shall not be sold for a period of at least one year following the date of the initial offering of such securities, except in the event of death or disability of such officer or director.
(8) Nothing in sections 19F to 19W, inclusive, shall prevent the mutual holding company, the intermediate stock holding company or the reorganized insurer from issuing stock of the intermediate stock holding company or the reorganized insurer to a trust established in connection with an employee stock ownership plan or other employee benefit plan established for the benefit of the employees of the mutual holding company, the intermediate stock holding company or the reorganized insurer and qualified under the Internal Revenue Code. No individual may receive more than 12.5 per cent of any such plan and directors who are not employees shall not receive more than 2.5 per cent of the stock individually or 15 per cent in the aggregate of any plan but in no event shall any individual exceed the limitation on ownership contained in paragraph (4). The voting shares initially issued to employee stock ownership plans or other employee benefit plans, in the aggregate, shall not exceed 5 per cent of the voting shares initially issued.
(9) For purposes of this section, an officer shall mean a person elected as an officer by the board of directors of the mutual holding company, an intermediate stock holding company or the reorganized insurer.
(10) For purposes of this section, an outside director is a director of the mutual holding company, the intermediate stock holding company or the reorganized insurer who is not an officer or employee of either the mutual holding company, the intermediate stock holding company or the reorganized insurer.