Public Act 098-0755
Public Act 0755 98TH GENERAL ASSEMBLY
|
Public Act 098-0755
| | SB2634 Enrolled | LRB098 15214 RPM 50203 b |
|
| AN ACT concerning regulation.
| Be it enacted by the People of the State of Illinois,
| represented in the General Assembly:
| Section 5. The Illinois Insurance Code is amended by | changing Section 59.1 as follows:
| (215 ILCS 5/59.1)
| (Section scheduled to be repealed on January 1, 2017)
| Sec. 59.1. Conversion to stock company.
| (1) Definitions. For the purposes of this Section, the | following terms shall
have the meanings indicated:
| (a) "Eligible member" is a member as of the
date
the | mutual company's board of directors adopts a plan of | conversion. A person
insured under a group policy is not an | eligible member, unless:
| (i) the person is insured or covered under a group | life policy or group
annuity contract under which funds | are accumulated and allocated to the
respective | covered persons;
| (ii) the person has the right to direct the | application of the funds so
allocated;
| (iii) the group policyholder makes no contribution | to the premiums or
deposits for the policy or contract; | and
|
| (iv) the mutual company has the names and addresses | of the persons
covered under the group life policy or | group annuity contract.
| A person whose policy is issued after the board of | directors adopts the
plan but before the plan's effective | date is not an eligible member but shall
have those rights | set forth in subsection (10) of this Section.
| (b) "Converted stock company" is an Illinois domiciled | stock company that
converted from an Illinois domiciled | mutual company under this Section.
| (c) "Plan of conversion" or "plan" is a plan adopted by | an Illinois
domestic mutual company's board of directors | under this Section to convert the
mutual company into an | Illinois domiciled stock company.
| (d) "Policy" includes an annuity contract.
| (e) "Member" means a person who, on the records of the | mutual company
and pursuant to its articles of | incorporation or bylaws, is deemed to be a
holder of a | membership interest in the mutual company.
| (2) Adoption of the plan of conversion by the board of | directors.
| (a) A mutual company seeking to convert to a stock | company shall, by the
affirmative vote of two-thirds of its | board of directors, adopt a plan of
conversion consistent | with the requirements of subsection (6) of this Section.
| (b) At any time before approval of a plan by the |
| Director, the mutual
company by the affirmative vote of | two-thirds of its board of directors, may
amend or withdraw | the plan.
| (3) Approval of the plan of conversion by the Director of | Insurance.
| (a) Required findings. After adoption by the mutual | company's board of
directors, the plan shall be submitted | to the Director for review and approval.
The Director shall | approve the plan upon finding that:
| (i) the provisions of this Section have been | complied with;
| (ii) the plan will not prejudice the interests of | the members; and
| (iii) the plan's method of allocating subscription | rights is fair and
equitable.
| (b) Documents to be filed.
| (i) Prior to the members' approval of the plan, a | mutual company seeking
the Director's approval of a | plan shall file the following documents with the
| Director for review and approval:
| (A) the plan of conversion, including the | independent evaluation of
pro forma market value | required by item (f) of subsection (6) of this | Section;
| (B) the form of notice required by item (b) of | subsection (4) of this
Section for eligible |
| members of the meeting to vote on the plan;
| (C) any proxies to be solicited from eligible | members pursuant to
subitem (ii) of item (c) of | subsection (4) of this Section;
| (D) the form of notice required by item (a) of | subsection (10) of this
Section for persons whose | policies are issued after adoption of the plan but
| before its effective date; and
| (E) the proposed articles of incorporation and | bylaws of the converted
stock company.
| Once filed, these documents shall be approved or | disapproved by the
Director within a reasonable time.
| (ii) After the members have approved the plan, the | converted stock
company shall file the following | documents with the Director:
| (A) the minutes of the meeting of the members | at which the plan was
voted upon; and
| (B) the revised articles of incorporation and | bylaws of the converted
stock company.
| (c) Consultant. The Director may retain, at the mutual | company's expense,
any qualified expert not otherwise a | part of the Director's staff to assist in
reviewing the | plan and the independent evaluation of the pro forma market | value
which is required by item (f) of subsection (6) of | this Section.
| (4) Approval of the plan by the members.
|
| (a) Members entitled to notice of and to vote on the | plan. All eligible
members shall be given notice of and an | opportunity to vote upon the plan.
| (b) Notice required. All eligible members shall be | given notice of the
members' meeting to vote upon the plan. | A copy of the plan or a summary of the
plan shall accompany | the notice. The notice shall be mailed to each member's
| last known address, as shown on the mutual company's | records, within 45 days of
the Director's approval of the | plan. The meeting to vote upon the plan shall
not be set | for a date less than 30 60 days after the date when the | notice of the
meeting is mailed by the mutual company. If | the meeting to vote upon the plan
is held coincident with | the mutual company's annual meeting of policyholders,
only | one combined notice of meeting is required.
| (c) Vote required for approval.
| (i) After approval by the Director, the plan shall | be adopted upon
receiving the affirmative vote of at | least two-thirds of the votes cast by
eligible members.
| (ii) Members entitled to vote upon the proposed | plan may vote in person
or by proxy. Any proxies to be | solicited from eligible members shall be filed
with and | approved by the Director.
| (iii) The number of votes each eligible member may | cast shall be
determined by the mutual company's | bylaws. If the bylaws are silent, each
eligible member |
| may cast one vote.
| (5) Adoption of revised articles of incorporation. | Adoption of the revised
articles of incorporation of the | converted stock company is necessary to
implement the plan and | shall be governed by the applicable provisions of
Section 57 of | this Code. For a Class 1 mutual company, the members may adopt
| the revised articles of incorporation at the same meeting at | which the members
approve the plan. For a Class 2 or 3 mutual | company, the revised articles of
incorporation may be adopted | solely by the board of directors or trustees, as
provided in | Section 57 of this Code.
| (5.5) Prior to the completion of a plan of conversion filed | by a mutual
company with the Director, no person shall | knowingly acquire, make any offer,
or make any announcement of | an offer for any security issued or to be issued by
the | converting mutual company in connection with its plan of | conversion or for
any security issued or to be issued by any | other company authorized in
item(c)(i) of subsection (6) of | this Section and organized for purposes of
effecting the | conversion, except in compliance with the maximum purchase
| limitations imposed by item (i) of subsection (6) of this | Section or the terms
of the plan of conversion as approved by | the Director.
| (6) Required provisions in a plan of conversion. The | following provisions
shall be included in the plan:
| (a) Reasons for conversion. The plan shall set forth |
| the reasons for the
proposed conversion.
| (b) Effect of conversion on existing policies.
| (i) The plan shall provide that all policies in | force on the effective
date of conversion shall | continue to remain in force under the terms of those
| policies, except that any voting rights of the | policyholders provided for under
the policies or under | this Code and any contingent liability policy | provisions
of the type described in Section 55 of this | Code shall be extinguished on the
effective date of the | conversion.
| (ii) The plan shall further provide that holders of | participating
policies in effect on the date of | conversion shall continue to have the right
to receive | dividends as provided in the participating policies, | if any.
| (iii) Except for a mutual company's participating | life policies,
guaranteed renewable
accident and | health policies, and non-cancelable accident and | health policies,
the converted stock company may issue | the insured a nonparticipating policy as
a substitute | for the participating policy upon the renewal date of a
| participating policy.
| (c) Subscription rights to eligible members.
| (i) The plan shall provide that each eligible | member is to receive,
without payment, nontransferable |
| subscription rights to purchase a portion of
the | capital stock of the converted stock company. As an | alternative to
subscription rights in the converted | stock company, the plan may provide that
each eligible | member is to receive, without payment, nontransferable
| subscription rights to purchase a portion of the | capital stock of: (A) a
corporation organized and owned | by the mutual company for the purpose of
acquiring or | holding all the stock of the converted
stock company; | or (B) a
stock insurance company owned by the mutual | company into which the mutual
company will be merged.
| (ii) The subscription rights shall be allocated in | whole shares among
the eligible members using a fair | and equitable formula. This formula may but
need not | take into account how the different classes of policies | of the
eligible members contributed to the surplus of | the mutual company.
| (d) Oversubscription. The plan shall provide a fair and | equitable means
for the allocation of shares of capital | stock in the event of an
oversubscription to shares by | eligible members exercising subscription rights
received | pursuant to item (c) of subsection (6) of this Section.
| (e) Undersubscription. The plan shall provide that any | shares of capital
stock not subscribed to by eligible | members exercising subscription rights
received under item | (c) of subsection (6) of this Section shall be sold in a
|
| public offering through an underwriter. If the number of | shares of capital
stock not
subscribed by eligible members | is so small
or the additional time or expense required for | a public offering of those
shares would be otherwise | unwarranted under the circumstances, the plan of | conversion may provide for the
purchase of the unsubscribed | shares by a private placement or other alternative
method | approved by the Director that is fair and equitable to the | eligible
members.
| (f) Total price of stock. The plan shall set the total | price of the
capital stock equal to the estimated pro forma | market value of the converted
stock company based upon an | independent evaluation by a qualified person. The
pro forma | market value may be the value that is estimated to be | necessary to
attract full subscription for the shares as | indicated by the independent
evaluation.
| (g) Purchase price of each share. The plan shall set | the purchase price of
each share of capital stock equal to | any reasonable amount that will not
inhibit the purchase of | shares by members. The purchase price of each share
shall | be uniform for all purchasers except the price may be | modified by the
Director by reason of his consideration of | a plan for the purchase of
unsubscribed stock pursuant to | item (e) of subsection (6) of this Section.
| (h) Closed block of business for participating life | policies of a Class 1
mutual company.
|
| (i) The plan shall provide that a Class 1 mutual | company's participating
life policies in force on the | effective date of the conversion shall be
operated by | the converted stock company for dividend purposes as a | closed block
of participating business except that any | or all classes of group participating
policies may be | excluded from the closed block.
| (ii) The plan shall establish one or more | segregated accounts for the
benefit of the closed block | of business and shall allocate to those segregated
| accounts enough assets of the mutual company so that | the assets together with
the revenue from the closed | block of business are sufficient to support the
closed | block including, but not limited to, the payment of | claims, expenses,
taxes, and any dividends that are | provided for under the terms of the
participating | policies with appropriate adjustments in the dividends | for
experience changes. The plan shall be accompanied | by an opinion of a qualified
actuary or an appointed | actuary who meets the standards set forth in the
| insurance laws or regulations for the submission of | actuarial opinions as to
the adequacy of reserves or | assets. The opinion shall relate to the adequacy
of the | assets allocated to the segregated accounts in support | of the closed
block of business. The actuarial opinion | shall be based on methods of analysis
deemed |
| appropriate for those purposes by the Actuarial | Standards Board.
| (iii) The amount of assets allocated to the | segregated accounts of the
closed block shall be based | upon the mutual company's last annual statement
that is | updated to the effective date of the conversion.
| (iv) The converted stock company shall keep a | separate accounting for
the closed block and shall make | and include in the annual statement to be filed
with | the Director each year a separate statement showing the | gains, losses, and
expenses properly attributable to | the closed block.
| (v) Periodically, upon the Director's approval, | those assets allocated
to the closed block as provided | in subitem (ii) of item (h) of subsection (6)
of this | Section that are in excess of the amount of assets | necessary to support
the remaining policies polices in | the closed block shall revert to the benefit of the
| converted stock company.
| (vi) The Director may waive the requirement for the | establishment of a
closed block of business if the | Director deems it to be in the best interests
of the | participating policyholders of the mutual insurer to | do so.
| (i) Limitations on acquisition of control. The plan | shall provide that any
one person or group of persons |
| acting in concert may not acquire, through
public offering | or subscription rights, more than 5% of the capital stock | of
the converted stock company for a period of 5 years from | the effective date of
the plan except with the approval of | the Director. This limitation does not
apply to any entity | that is to purchase 100% of the capital stock of the
| converted company as part of the plan of conversion | approved by the Director or
to a purchase of stock by a | tax-qualified employee benefit plan pursuant to
| subscription grants granted to that plan as authorized | under item (b) of
subsection (7) of this Section and to a | purchase of unsubscribed stock pursuant
to item (e) of | subsection (6) of this Section.
| (7) Optional provisions in a plan of conversion. The | following provisions
may be included in the plan:
| (a) Directors and officers subscription rights.
| (i) The plan may provide that the directors and | officers of the mutual
company shall receive, without | payment, nontransferable subscription rights to
| purchase capital stock of the converted stock company | or the stock of another
corporation that is | participating in the conversion plan as provided in | subitem
(i) of item (c) of subsection (6) of this | Section. Those subscription rights
shall be allocated | among the directors and officers by a fair and | equitable
formula.
|
| (ii) The total number of shares that may be | purchased under subitem (i)
of item (a) of subsection | (7) of this Section may not exceed 35% of the total
| number of shares to be issued in the case of a mutual | company with total assets
of less than $50 million or | 25% of the total shares to be issued in the case of
a | mutual company with total assets of more than $500 | million. For mutual
companies with total assets | between $50 million and $500 million, the total
number | of shares that may be purchased shall be interpolated.
| (iii) Stock purchased by a director or officer | under subitem (i) of item
(a) of subsection (7) of this | Section may not be sold within one year following
the | effective date of the conversion.
| (iv) The plan may also provide that a director or | officer or person
acting in concert with a director or | officer of the mutual company may not
acquire any | capital stock of the converted stock company for 3 | years after the
effective date of the plan, except | through a broker or dealer, without the
permission of | the Director. That provision may not apply to prohibit | the
directors and officers from purchasing stock | through subscription rights
received in the plan under | subitem (i) of item (a) of subsection (7) of this
| Section.
| (b) Tax-qualified employee stock benefit plan. The |
| plan may allocate to a
tax-qualified employee benefit plan | nontransferable subscription rights to
purchase up to 10% | of the capital stock of the converted stock company or the
| stock of another corporation that is participating in the | conversion plan as
provided in subitem (i) of item (c) of | subsection (6) of this Section. That
employee benefit plan | shall be entitled to exercise its subscription rights
| regardless of the amount of shares purchased by other | persons.
| (8) Alternative plan of conversion. The board of directors | may adopt a plan
of conversion that does not rely in whole or | in part upon the issuance to
members of non-transferable | subscription rights to purchase stock of the
converted stock | company if the Director finds that the plan does not prejudice
| the interests of the members, is fair and equitable, and is | based upon an
independent appraisal of the market value of the | mutual company by a qualified
person and a fair and equitable | allocation of any consideration to be given
eligible members. | The Director may retain, at the mutual company's expense,
any | qualified expert not otherwise a part of the Director's staff | to assist in
reviewing whether the plan may be approved by the | Director.
| (9) Effective date of the plan. A plan shall become | effective when the
Director has approved the plan, the members | have approved the plan, and the
revised articles of | incorporation have been adopted.
|
| (10) Rights of members whose policies are issued after | adoption of the plan
and before its effective date.
| (a) Notice. All members whose policies are issued after | the proposed plan
has been adopted by the board of | directors and before the effective date of the
plan shall | be given written notice of the plan of conversion. The | notice shall
specify the member's right to rescind that | policy as provided in item (b) of
subsection (10) of this | Section within 45 days after the effective date of the
| plan. A copy of the plan or a summary of the plan shall | accompany the notice.
The form of the notice shall be filed | with and approved by the Director.
| (b) Option to rescind. Any member entitled to receive | the notice described
in item (a) of subsection (10) of this | Section shall be entitled to rescind his
or her policy and | receive a full refund of any amounts paid for the policy or
| contract within 10 days after the receipt of the notice.
| (11) Corporate existence.
| (a) Upon the conversion of a mutual company to a | converted stock company
according to the provisions of this | Section, the corporate existence of the
mutual company | shall be continued in the converted stock company. All the
| rights, franchises, and interests of the mutual company in | and to every type of
property, real, personal, and mixed, | and things in action thereunto belonging,
is deemed | transferred to and vested in the converted stock company |
| without any
deed or transfer. Simultaneously, the | converted stock company is deemed to
have assumed all the | obligations and liabilities of the mutual company.
| (b) The directors and officers of the mutual company, | unless otherwise
specified in the plan of conversion, shall | serve as directors and officers of
the converted stock | company until new directors and officers of the converted
| stock company are duly elected pursuant to the articles of | incorporation and
bylaws of the converted stock company.
| (12) Conflict of interest. No director, officer, agent, or | employee of the
mutual company or any other person shall | receive any fee, commission, or other
valuable consideration, | other than his or her usual regular salary and
compensation, | for in any manner aiding, promoting, or assisting in the
| conversion except as set forth in the plan approved by the | Director. This
provision does not prohibit the payment of | reasonable fees and compensation to
attorneys, accountants, | and actuaries for services performed in the independent
| practice of their professions, even if the attorney, | accountant, or actuary is
also a Director of the mutual | company.
| (13) Costs and expenses. All the costs and expenses | connected with a plan of
conversion shall be paid for or | reimbursed by the mutual company or the
converted stock company | except where the plan provides either for a holding
company to | acquire the stock of the converted stock company or for the |
| merger
of the mutual company into a stock insurance company as | provided in subitem (i)
of item (c) of subsection (6) of this | Section. In those cases, the acquiring
holding company or the | stock insurance company shall pay for or reimburse all
the | costs and expenses connected with the plan.
| (14) Failure to give notice. If the mutual company complies | substantially
and in good faith with the notice requirements of | this Section, the mutual
company's failure to give any member | or members any required notice does not
impair the validity of | any action taken under this Section.
| (15) Limitation of actions. Any action challenging the | validity of or
arising out of acts taken or proposed to be | taken under this Section
shall be commenced within 30 days | after the effective date of the plan.
| (Source: P.A. 90-381, eff. 8-14-97.)
| Section 99. Effective date. This Act takes effect upon | becoming law.
|
Effective Date: 7/16/2014
|
Translate
