Section 94N. Upon compliance with the requirements and completion of the proceedings prescribed by this section, a domestic exchange may convert into a domestic mutual insurance company or may merge with a domestic mutual insurance company and the consideration to be provided in such merger may be interests in the resulting or surviving corporation or any other corporation, cash, or other consideration. Any such merger shall be authorized under this section and approved as provided herein and not pursuant to section nineteen A.
Such conversion shall be accomplished pursuant to a plan which complies with the following:
(1) Such plan shall be filed with the commissioner and shall be approved by him as conforming to the requirements of this section and as fair, reasonable and not prejudicial to the subscribers of such exchange or to the insuring public, after a hearing thereon for which notice was given to the exchange and its attorney-in-fact, members of the advisory committee, employees and subscribers, all of whom shall have the right to appear and be heard at the hearing.
(2) Such plan shall be approved by vote of not less than two-thirds of the votes of the exchange’s subscribers voting thereon in person, by proxy or by mail at a meeting of subscribers called for that purpose pursuant to such reasonable notice and procedure as may be approved by the commissioner. Upon such approval, the conversion shall be effective as of the date specified in the plan. On and after such date, all the rights, franchises and interests of the exchange in and to every species of property shall be vested in the converted insurer without any deed or transfer and the converted insurer shall succeed to all the obligations and liabilities of the exchange.
(3) In exchange for all membership interests in the exchange, such plan shall give each eligible subscriber appropriate consideration. Said consideration shall be determinable under a fair and reasonable formula approved by the commissioner, and shall be based upon the exchange’s entire surplus as shown by the exchange’s financial statement most recently filed with the commissioner pursuant to section ninety-four I, including all voluntary reserves but excluding contingently repayable funds and outstanding guaranty capital shares at the redemption value thereof, and without taking into account the value of nonadmitted assets or insurance business in force.
(4) Such plan shall give each eligible subscriber a preemptive right to acquire his proportionate part of all of the proposed interests in the mutual insurer within a designated reasonable period; and to apply upon the purchase thereof the amount of his consideration, as determined under paragraph (3), except that the plan may provide that a subscriber may not purchase or receive interests pursuant to this section if he has an aggregate subscription price of two thousand dollars or less and that such preemptive right shall not apply to subscribers who reside in jurisdictions in which the issuance of mutual insurance company interests is impossible, would involve unreasonable delay or would require the exchange to incur unreasonable costs; provided, however, that any such subscriber shall receive his consideration in cash. Notwithstanding the above, the commissioner shall retain the full authority to disapprove such plan in accordance with the provisions of paragraph (1).
(5) The subscriber eligible to participate in the distribution of consideration and to purchase interests in the converted insurer shall be the person whose name appears, on the conversion date, on the exchange’s records as a member with a right to vote and who, on both the December thirty-first immediately preceding the conversion date and the date the exchange’s advisory committee first votes to convert to mutual form, owned a policy in full force for its full basic benefits with no unpaid premium or consideration at the expiration of any applicable grace period, or which is being continued under a nonforfeiture benefit and continues to be eligible for participation in the exchange’s annual distribution of divisible surplus.
(6) Interests in the converted insurer are to be offered to subscribers at a price not greater than to be thereafter offered under the plan to others.
(7) Such plan shall provide for payment to each subscriber of consideration which may consist of cash, securities, a certificate of contribution, additional insurance or annuity benefits, increased dividends or other consideration or any combination of such forms of consideration.
(8) Such plan, when completed, shall provide for the converted insurer’s surplus to be in an amount not less than the minimum combined capital and surplus required of a new domestic mutual insurer upon initial authorization to transact like kinds of insurance.
(9) The commissioner shall find that the exchange’s management has not, through reduction in volume of new business written, or cancellation or through any other means sought to reduce, limit or affect the number or identity of the exchange’s subscribers to be entitled to participate in such plan or to otherwise secure for the individuals comprising management any unfair advantage through such plan.
The conversion plan 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 ten percent or more of any class of interests in the converted insurer.
No director, officer, agent or employee of the exchange, or any other person, shall receive any fee, commission or other valuable consideration whatsoever, other than their usual regular salaries and compensation, for in any manner aiding, promoting or assisting in such conversion, except as set forth in the plan approved by the commissioner. This provision shall not be deemed to prohibit the payment of reasonable fees and compensation to attorneys at law, accountants and actuaries for services performed in the independent practice of their professions, even though also members of the exchange’s advisory committee.
With respect to the conversion of a reciprocal insurance exchange created on or after January first, nineteen hundred and ninety-five, in applying the provisions of section eighty-five A to the post conversion mutual insurance company, (a) if prior to the conversion the reciprocal insurance exchange was authorized by the commissioner of insurance to exchange non-assessable contracts of insurance, then the mutual insurance company shall be eligible to issue non-assessable insurance policies, notwithstanding the requirement of section eighty-five A that the company and its predecessor or predecessors shall have been actively engaged in the insurance business in one or more states in the United States continuously for ten or more years; and (b) the mutual insurance company shall be credited with active engagement in the insurance business for the number of years of such active engagement by the reciprocal insurance exchange prior to the conversion. With respect to the conversion of a reciprocal insurance exchange created before January first, nineteen hundred and ninety-five, if prior to the conversion the reciprocal insurance exchange has been actively engaged in the insurance business in one or more states in the United States for at least five years then the mutual insurance company shall be eligible immediately after the conversion date to issue non-assessable insurance policies, notwithstanding the requirement of section eighty-five A that the company and its predecessor or predecessors shall have been actively engaged in the insurance business in one or more states in the United States continuously for ten or more years.