§ 38a-156j — Conversion of domestic mutual holding company to domestic stock corporation. Plan of conversion. Approval. Prohibited fees, commission or other consideration.

(a) A domestic mutual holding company may convert to a domestic stock corporation pursuant to a plan of conversion. (b) (1) A domestic mutual holding company seeking such conversion shall propose a plan of conversion that includes the reasons for the proposed conversion and provisions for: (A) Amending the mutual holding company's articles of incorporation to convert such company to a domestic stock corporation; (B) Giving each person holding equity rights in the mutual holding company appropriate consideration in exchange for such rights. Such consideration shall be equal, in the aggregate, to the value of the entire capital and surplus of the mutual holding company, excluding any funds required to be held in segregated accounts by federal law and shall be determinable under a fair and reasonable formula approved by the commissioner. (i) If the plan of conversion provides for the mutual holding company to continue as a surviving corporation after the conversion, then consideration to eligible policyholders shall be in the form of stock, cash or other form of compensation as approved by the commissioner. Distribution of all the stock of the converting company to eligible policyholders, or in the case of certain eligible policyholders other consideration of equivalent value, shall constitute appropriate consideration under this subparagraph. (ii) If the plan of conversion does not provide for the mutual holding company to continue as a surviving corporation after the conversion, then consideration payable in such form as permitted under this section shall be distributed to eligible policyholders; (C) Giving each person holding equity rights a preemptive right to acquire such person's proportionate part of all the proposed capital stock of the converted company and to apply, upon the purchase of such stock, the amount of such person's consideration as determined under subparagraph (B) of this subdivision. (i) Such plan may provide that (I) such person may not purchase or receive stock pursuant to this section if such stock has an aggregate subscription price of two thousand dollars or less, and (II) such preemptive right shall not apply to such persons who reside in jurisdictions in which the issuance of stock is impossible, would involve unreasonable delay or would require the converting company to incur unreasonable costs, provided any such person shall receive such person's consideration in cash. (ii) In the case of a plan of conversion in which the appropriate consideration received by persons under subparagraph (B) of this subdivision is stock of a corporation in a transaction authorized under this section, or other consideration as approved by the commissioner, the plan of conversion shall provide either (I) that no member or person holding equity rights in the converting company shall have any preemptive right to acquire any of the proposed capital stock of the converted company or of the proposed parent or other corporation, or (II) for preemptive rights on such other terms as approved by the commissioner; (D) The offering of shares to persons holding equity rights in the mutual holding company, at a price not greater than that to be offered to others under such plan of conversion; (E) The payment to each person holding equity rights in the mutual holding company of consideration, which may consist of cash, securities, a certificate of contribution, additional insurance under policies issued by a reorganized insurer or other consideration or any combination of such forms of consideration; (F) Any proposed fees, commissions or other consideration to be paid to any person for aiding, promoting or assisting, in any manner, such conversion; and (G) The effective date of such conversion. (2) A plan of conversion may also include provisions restricting the ability of any person or persons acting in concert from directly or indirectly acquiring or offering to acquire the beneficial ownership of ten per cent or more of any class of voting stock of the converted company or any entity that directly or indirectly controls such company. (3) Each person whose name appears in the converting company's records as a person holding equity rights on both the December thirty-first immediately preceding the effective date of such conversion and the date the converting company's board of directors first voted to convert shall be entitled to participate in the distribution of consideration and the purchasing of stock. (4) The proposed plan of conversion shall be approved by an affirmative vote of three-fourths of the board of directors of the domestic mutual holding company. (5) Upon approval by its board of directors, the domestic mutual holding company seeking such conversion shall submit the proposed plan of conversion to the Insurance Commissioner. (c) (1) The commissioner shall hold a public hearing on the reasons for and purpose of such conversion, the fairness of the terms and conditions of the proposed plan of conversion and whether such conversion is in the best interest of the domestic mutual holding company, is fair and equitable to its members and is not detrimental to the insuring public. (2) The converting company shall mail a notice of the public hearing to each member at such member's last known mailing address as shown in the company's records. The notice shall (A) be mailed at least sixty days prior to the date of the hearing, (B) include the date, time, place and purpose of the hearing, and (C) be accompanied or preceded by a true and complete copy of the proposed plan of conversion or a summary thereof approved by the commissioner and any other explanatory information or materials the commissioner may require. In addition, the converting company shall provide notice of the date, time, place and purpose of the hearing by publication in three newspapers having general circulation, one of which shall be in the county in which the principal office of the converting company is located, and two that shall be in other municipalities within or without the state and approved by the commissioner. Such notice shall be published not less than fifteen days and not more than sixty days prior to the hearing and shall be in a form approved by the commissioner. Any director, officer, employee or member of the converting company shall have the right to appear and be heard at the hearing. (3) (A) The commissioner shall approve or disapprove the proposed plan of conversion, in writing, not later than sixty days after the conclusion of the public hearing held under subdivision (1) of this subsection. The commissioner shall approve the proposed plan of conversion if the commissioner finds that: (i) The proposed conversion is in the best interest of the converting company; (ii) the plan is fair and equitable to the members of the converting company; (iii) the plan will not substantially lessen competition in any line of insurance business; (iv) the plan provides for the enhancement of the operations of the converting company; (v) the plan complies with the provisions of this section; and (vi) the converting company has not, (I) through a reduction in volume of new business written, cancellations by a reorganized insurer or any other means, reduced, limited or affected or sought to reduce, limit or affect, the number or identity of the converting company's members or persons holding equity rights in such company that are entitled to participate in such plan, or (II) otherwise secured or attempted to secure any unfair advantage through such plan for individuals comprising the management of such company. (B) If the commissioner disapproves the proposed plan of conversion, such disapproval shall be in writing and shall set forth the reasons for such disapproval. Within fifteen days after receipt of such disapproval, the converting company may request a hearing. The commissioner shall provide such hearing within fifteen days after such request. (4) The commissioner may engage the services of private consultants to assist the commissioner in determining whether a plan of conversion meets the requirements of this section, the cost of which shall be borne by the domestic mutual holding company submitting such plan. (5) Upon approval by the commissioner, the converting company shall file with the commissioner the approved plan of conversion. (d) (1) Upon approval by the commissioner of the proposed plan of conversion, the board of directors, the chairperson of the board of directors or the president of the converting company shall call a members' meeting to present and hold a vote on the plan of conversion. Such meeting shall be held not earlier than thirty days after the date of the public hearing held under subsection (c) of this section. The plan shall be approved by an affirmative vote of two-thirds of the members of the converting company. (2) The converting company shall mail a notice of the meeting to each member at such member's last known mailing address as shown in the company's records. The notice shall (A) be mailed at least sixty days prior to the date of the meeting and may be combined with the public hearing notice required under subsection (c) of this section, (B) include the date, time, place and purpose of the meeting, and (C) be accompanied or preceded by a true and complete copy of the plan of conversion or a summary thereof approved by the commissioner and any other explanatory information or materials the commissioner may require. (3) Each member entitled to vote shall vote by written ballot cast in person, by mail or by proxy. (4) The commissioner shall have the power, to the extent the commissioner deems necessary to ensure a fair and accurate vote and consistent with the provisions of this section, to prescribe and supervise the procedures for such vote. Such powers include, but are not limited to, the supervision and regulation of (A) the determination of members entitled to notice of the meeting and to vote on the proposed plan of conversion, (B) the provision of notice to members of the meeting and proposed plan of conversion, (C) the receipt, custody, safeguarding, verification and tabulation of ballots and proxy forms, and (D) the resolution of disputes arising from such vote. (e) (1) Upon approval by the members of the converting company, the conversion shall be effective on the date specified in the plan of conversion. (2) Upon such date, (A) the converting company shall immediately become a domestic stock corporation and all rights and properties of the converting company shall accrue to and become, without any deed or transfer, the rights and properties of the converted company, which shall succeed to all the obligations and liabilities of the converting company, and (B) all membership interests and equity rights in the domestic mutual holding company shall be extinguished. (f) Except as provided in the plan of conversion approved by the commissioner, no person shall receive any fee, commission or other consideration, other than such person's regular salary and compensation, for aiding, promoting or assisting, in any manner, a conversion under this section. This provision shall not be deemed to prohibit the payment of reasonable fees and compensation to attorneys, accountants and other individuals who are directors or officers of the converting company for services performed in the independent practice of their professions. (g) Nothing in this section shall be deemed to prohibit the purchase for cash, by individuals comprising the management or employee group of a converting company, an intermediate stock holding company or a reorganized insurer, of shares of stock not taken on a preemptive offering by persons holding equity rights, in accordance with reasonable classifications of such individuals and at the same price offered to such persons holding equity rights.

Legislative History

(P.A. 14-123, S. 11; P.A. 17-15, S. 11.) History: P.A. 14-123 effective June 6, 2014; P.A. 17-15 made a technical change in Subsec. (c)(2).