§ 27 — Merger or acquisition of control

Massachusetts § 27

• Jurisdiction: Massachusetts
• Part I: ADMINISTRATION OF THE GOVERNMENT
• Title XXII: CORPORATIONS
• Ch. 176G: HEALTH MAINTENANCE ORGANIZATIONS

Text

Section 27. (a) No person other than the health maintenance organization shall make a tender offer for or a request or invitation for tenders of, or enter into any agreement to exchange securities, or seek to acquire, or acquire, in the open market or otherwise, any voting security of, any membership rights in, or any right to appoint or elect members of the board of directors of a domestic health maintenance organization if, after the consummation thereof, such person would, directly or indirectly, or by conversion or by exercise of any right to acquire, be in control of such health maintenance organization. A person shall not enter into an agreement to merge with or otherwise to acquire control of a domestic health maintenance organization or any person controlling a domestic health maintenance organization unless, at the time any such offer, request or invitation is made or any such agreement is entered into, or prior to the acquisition of such securities, membership rights, or board of directors appointment or election rights, if no offer or agreement is involved, such person has filed with the commissioner and has sent to such health maintenance organization, a statement containing the information required by this section, and such offer, request, invitation, agreement or acquisition has been approved by the commissioner in the manner hereinafter described. For purposes of this section a domestic health maintenance organization shall include any person controlling a domestic health maintenance organization. For the purposes of this section, a person shall not include any securities broker holding, in the usual and customary broker's function, less than 10 per cent of the voting securities, membership rights, or board of directors appointment or election rights, of a domestic health maintenance organization or of any person which controls a domestic health maintenance organization.(b) The statement to be filed with the commissioner pursuant to subsection (a) shall be made under oath or affirmation and shall contain the following information:(1) The name and address of each person by whom or on whose behalf the merger or other acquisition of control referred to in subsection (a) is to be effected, hereinafter called the acquiring party, and (i) if such person is an individual, his principal occupation and all offices and positions held during the past 5 years, and any convictions of crimes other than minor traffic violations during the past 10 years; (ii) if such person is not an individual, a report of the nature of its business operations during the past 5 years or for such lesser period as such person and any predecessors thereof shall have been in existence; an informative description of the business intended to be done by such person and such person's subsidiaries; and a list of all individuals who are or who have been selected to become directors or executive officers of such person, or who perform or will perform functions appropriate to such positions. Such list shall include for each such individual the information required by this subparagraph.(2) The source, nature and amount of the consideration used or to be used in effecting the merger or other acquisition of control, a description of any transaction wherein funds were or are to be obtained for any such purpose, including any pledge of the health maintenance organization's stock or assets, or the stock or assets of any of its subsidiaries, or controlling affiliates, and the identity of persons furnishing such consideration; provided, however, that where the source of such consideration is a loan made in the lender's ordinary course of business, the identity of the lender shall remain confidential, if the person filing such statement so requests.(3) Fully audited financial information as to the earnings and financial condition of each acquiring party for the preceding 5 fiscal years of each such acquiring party or for such lesser period as such acquiring party and any predecessors thereof shall have been in existence, and similar unaudited information as of a date not earlier than 90 days prior to the filing of the statement.(4) Any plans or proposals which each acquiring party may have to liquidate such health maintenance organization, to sell its assets or merge or consolidate it with any person, or to make any other material change in its business or corporate structure or management. A person who omits from the statement filed hereunder any plans or proposals that should have been included pursuant to this subsection, and shall be granted approval for a change of control without the disclosure of the plans or proposals, shall be prohibited for a period of 2 years from the date of the approval from engaging in or taking any steps preparatory to engaging in any transaction described or referenced in or contemplated by the plans or proposals except with the specific approval of the commissioner.(5) The number of any shares of any security, or the extent of any membership rights, or board of directors appointment or election rights, as the case may be, referred to in subsection (a) which each acquiring party proposes to acquire, and the terms of the offer, request, invitation, agreement or acquisition referred to in said subsection (a), and a statement as to the method by which the fairness of the proposal was arrived at.(6) The amount of each class of any security, membership right, board of directors appointment or election rights referred to in said subsection (a), as the case may be, which is beneficially owned or concerning which there is a right to acquire beneficial ownership by each acquiring party.(7) A full description of any contracts, arrangements or understandings with respect to any security, membership right, board of directors appointment or election rights, as the case may be, referred to in said subsection (a) in which any acquiring party is involved, including but not limited to transfer of any of the securities, joint ventures, loan or option arrangements, put or calls, guarantees of loans, guarantees against loss or guarantees of profits, division of losses or profits or the giving or withholding of proxies. The description shall identify the persons with whom such contracts, arrangements or understandings have been entered into.(8) A description of the purchase of any security, membership right, board of directors appointment or election rights, as the case may be, referred to in said subsection (a) during the 12 calendar months preceding the filing of the statement, by the acquiring party, including the dates of purchase, names of the purchasers and consideration paid or agreed to be paid therefore.(9) A description of any recommendations to purchase any security, membership right, board of directors appointment or election rights, as the case may be, referred to in said subsection (a) made during the 12 calendar months preceding the filing of the statement, by any acquiring party, or by anyone based on interviews or at the suggestion of such acquiring party.(10) Copies of all tender offers for, requests, or invitations for tenders of, exchange offers for, and agreements to acquire or exchange any securities, membership rights, board of directors appointment or election rights, as the case may be, referred to in said subsection (a), and, if distributed, of additional soliciting material relating thereto.(11) The term of any agreement, contract or understanding made with or proposed to be made with any broker-dealer as to solicitation of securities, membership rights, board of directors appointment or election rights, as the case may be, referred to in said subsection (a) for tender or the like, and the amount of any fees, commissions or other compensation to be paid to broker-dealers with regard thereto.(12) Such additional information as the commissioner may by rule or regulation prescribe as necessary or appropriate for the protection of enrolled members, policyholders, stockholders and members of the health maintenance organization or in the public interest.If the person required to file the statement pursuant to subsection (a) is a partnership, limited partnership, limited liability company, syndicate or other group, the commissioner may require that the information required by subparagraphs (1) to (12), inclusive, shall be given with respect to each partner of such partnership or limited partnership, each member or manager of such limited liability company, each member of such syndicate or group and each person who controls such partner, member or manager. If any such partner, member, manager or person is a corporation or the person required to file the statement referred to in said subsection (a) is a corporation, the commissioner may require that the information called for by said subparagraphs (1) to (12), inclusive, shall be given with respect to such corporation, each officer and director of such corporation and each person who is directly or indirectly the beneficial owner of more than ten percent of the outstanding voting securities of such corporation. If any material change occurs in the facts set forth in the statement filed with the commissioner and sent to such health maintenance organization pursuant to this section, an amendment setting forth such change, together with copies of all documents and other material relevant to such change, shall be filed with the commissioner and sent to such health maintenance organization within two business days after the person learns of such change.(c) If any offer, request, invitation, agreement or acquisition referred to in subsection (a) is proposed to be made by means of a registration statement under the Securities Act of 1933, 5 U.S.C. section 77, et seq., or in circumstances requiring the disclosure of similar information under the Securities Act of 1934, 15 U.S.C. sections 78a to 78k, inclusive, or under a law of any state requiring similar registration or disclosure, the person required to file the statement referred to in said subsection (a) may utilize such documents in furnishing the information called for by that statement.(d)(1) The commissioner shall approve any merger or other acquisition of control referred to in subsection (a) unless, after a public hearing on the merger or other acquisition, he finds that:(i) after the change of control, the domestic health maintenance organization referred to in said subsection (a) would not be able to satisfy such requirements as the commissioner may, by rule or regulation, establish for an organization seeking approval as a health maintenance organization under this chapter;(ii) the effect of the merger or other acquisition of control would be substantially to lessen competition in the health care insurance market in this commonwealth or tend to create a monopoly in the commonwealth;(iii) the financial condition of any acquiring party is such as might jeopardize the financial stability of the health maintenance organization, or prejudice the interests of its subscribers, policyholders or enrolled members;(iv) the terms of the offer, request, invitation, agreement or acquisition referred to in said subsection (a) are unfair and unreasonable to the subscribers, policyholders or enrolled members of the health maintenance organization;(v) the plans or proposals which the acquiring party has to liquidate the health maintenance organization, sell its assets or any seat on its board of directors, or consolidate or merge it with any person, or to make any other material change in its business or corporate structure or management, are unfair and unreasonable to the subscribers, policyholders or enrolled members of the health maintenance organization and not in the public interest;(vi) the competence, experience and integrity of those persons who would control the operation of the health maintenance organization are such that it would not be in the interest of the subscribers, policyholders or enrolled members of the health maintenance organization or of the public to permit the merger or other acquisition of control; or(vii) the acquisition is likely to be hazardous or prejudicial to the health insurance buying public or to the actual enrollees under health insurance plans in the commonwealth.(2) The public hearing referred to in subparagraph (1) of subsection (d) shall be held within 30 days after the statement required by subsection (a) is filed, and at least 20 days notice thereof shall be given by the commissioner to the person filing the statement. The person filing the statement shall give not less than 7 days notice of such public hearing to the health maintenance organization and to such other persons as the commissioner may designate. The commissioner shall make a determination within 30 days after the conclusion of such hearing. At the hearing, the person filing the statement, the health maintenance organization, any person to whom notice of hearing was sent, and any other person whose interest may be affected thereby, shall have the right to present evidence, examine and cross-examine witnesses, offer oral or written arguments in connection therewith, and shall be entitled to conduct discovery proceedings in the same manner as is presently allowed in the superior court department of the trial court. All discovery proceedings shall be concluded not later than 3 days before the commencement of the public hearing.(3) The commissioner may retain at the acquiring party's expense any attorneys, actuaries, accountants and other experts not otherwise a part of the commissioner's staff as may be reasonably necessary to assist the commissioner in reviewing the proposed acquisition of control.(4) The commissioner may condition the approval of the merger or other acquisition on the removal of the basis of disapproval within a specified period of time.(e) This section shall not apply to any offer, request, invitation, agreement or acquisition that the commissioner by order shall exempt from this section as:(1) not having been made or entered into for the purpose, and not having the effect, of changing or influencing the control of a domestic health maintenance organization, or(2) otherwise not comprehended within the purposes of this section.(f) The following shall be violations of this section:(1) The failure to file any statement, amendment or other material required to be filed pursuant to subsection (a) or (b); or(2) The effectuation or any attempt to effectuate an acquisition of control of, or merger with, a domestic health maintenance organization unless the commissioner has given his approval thereto.(g) The courts of the commonwealth shall be vested with jurisdiction over any person not resident, domiciled or authorized to do business in the commonwealth who files a statement with the commissioner under this section and over all actions involving such person arising out of violations of this section, and each such person shall be deemed to have performed acts equivalent to and constituting an appointment by such a person of the commissioner to be his true and lawful attorney upon whom may be served all lawful process in any action, suit or proceeding arising out of violations of this section. Copies of all such lawful process shall be served on the commissioner and transmitted by registered or certified mail by the commissioner to such person at his last known address.(h) Nothing in this section shall be construed to relieve any health maintenance organization or any person acquiring control of a health maintenance organization of any obligation arising on their part under chapter 180 with respect to any transaction contemplated under this section; and to the extent that any transaction contemplated under this section requires the approval, consent or endorsement of the attorney general pursuant to chapter 180, or otherwise, such approval, consent or endorsement shall first be obtained in writing from the attorney general prior to the filing of the statement required by subsection (b), and such written approval, consent or endorsement shall be filed with the commissioner along with the statement required by subsection (b).