§ 7302 — Conversion of stock life insurance companies into mutual companies

§ 7302. Conversion of stock life insurance companies into mutual\ncompanies. (a) A domestic stock life insurance company may become a\nmutual life insurance company, whether or not its policyholders have\nbecome entitled to vote for directors pursuant to section four thousand\ntwo hundred twelve of this chapter or the former insurance law, and to\nthat end may formulate and carry out a plan for the acquisition of its\noutstanding shares, as follows:\n (1) Such plan shall have been adopted by a vote of a majority of the\ndirectors of the company.\n (2) Such plan shall have been approved by a vote of shareholders\nrepresenting a majority of the outstanding shares at a meeting called\nfor that purpose.\n (3) Such plan shall have been approved by the vote of a majority of\nthe policyholders eligible to vote who vote at a meeting called for that\npurpose. Any policyholder who holds life insurance in such company in an\namount at least equal to one thousand dollars or an equivalent thereto\nas hereinafter provided and whose insurance is then in force and has\nbeen in force for at least one year prior to such shareholders' meeting,\nshall be eligible to vote thereat, either in person or by proxy or by\nmail. The aforementioned reference to life insurance in an amount at\nleast equal to one thousand dollars shall be deemed to include, as\nequivalent thereto, an annuity contract which at normal date of maturity\nrequires the payment of one hundred dollars or more annually, a pure\nendowment contract for the principal sum of one thousand dollars or\nmore, and a policy of accident or health insurance requiring the payment\nof a premium of not less than twenty-five dollars annually. In the case\nof every policy or contract of group insurance or group annuity\ncontract, issued by such company, the employer, or other person, firm,\ncorporation or association to whom or in whose name the master policy\nshall have been issued and held, shall be deemed one policyholder within\nthe meaning of this paragraph. Notice of such meeting shall be given by\nmailing such notice from the home office of such company at least thirty\ndays prior to such meeting, in a sealed envelope, postage prepaid,\naddressed to each policyholder at his last known post office address.\nSuch meeting shall be conducted in such manner as may be provided for in\nsuch plan, with the approval of the superintendent. The superintendent\nshall supervise and direct the methods and procedure of such meeting\nand, to conduct the voting, shall appoint an adequate number of\ninspectors who shall have power to determine all questions concerning\nthe validity and verification of the ballots, the qualifications of the\nvoters and the canvass of the vote. Such inspectors, or any one thereof\ndesignated by the superintendent, shall certify to the superintendent\nand to such company the result of such vote, under such rules as shall\nbe prescribed by the superintendent. All necessary expenses incurred by\nthe superintendent or incurred with his approval by the inspectors\nappointed by him shall be paid by such company upon the certificate of\nthe superintendent.\n (4) Such plan may specify the purchase price to be paid by such\ncompany for its shares, and in such case the price so specified shall be\nadhered to. If such plan does not specify the price to be paid for such\nshares, the company shall first obtain the approval of the\nsuperintendent for every payment made for the acquisition of any shares.\n (5) The plan shall name three trustees authorized to receive shares of\nthe company and hold them in trust for all policyholders until the\nconversion process has been completed. The plan shall provide a method\nfor filling vacancies among the trustees.\n (6) The plan shall have been submitted to the superintendent and\napproved as conforming to the requirements of this chapter and as not\nprejudicial to the policyholders of the company or to the insuring\npublic. Before approving any such plan or any such payment, the\nsuperintendent shall be satisfied, by such investigation as he may make\nor by such evidence as he may require, that such company, after\ndeducting the aggregate sum appropriated by such plan for the\nacquisition of any or all of its shares, and in the case of any payment\nnot fixed by such plan, after deducting also the amount of such payment,\nwill be possessed of admitted assets in an amount equal to the sum of:\n (A) its entire liabilities, including the net values of its\noutstanding contracts computed in accordance with the provisions of this\nchapter,\n (B) the minimum surplus prescribed by this chapter for mutual life\ninsurance companies organized to do the same kinds of business, and\n (C) an additional contingent surplus deemed by the superintendent\nnecessary to protect the company's policyholders and the insuring\npublic, in view of the past experience of such company, the character of\nits assets, its present management, and its probable future earnings.\n (7) No change shall be made in any such plan, adopted and approved as\naforesaid, except upon the formulation, adoption and approval of a new\nplan in accordance with the foregoing requirements.\n (8) In pursuance of any such plan to convert a domestic stock life\ninsurance company into a mutual life insurance company, such company\nshall have power, and shall be privileged, to acquire any of its shares\nby gift, bequest, or purchase. Until all of its outstanding shares are\nacquired, any shares so acquired shall be taken and held in trust for\nall the policyholders of such company, by the trustees named in such\nplan. Before undertaking any of the duties of the appointment each\ntrustee shall file with the company an acceptance of the appointment and\na declaration that he will faithfully discharge his duties as trustee,\nsubscribed and affirmed by him as true under the penalties of perjury.\nAll shares held by the trustees shall be deemed admitted assets of the\ncompany at their par value. The trustees shall have power to vote any\nshares so acquired at all corporate meetings at which shareholders have\nthe right to vote. All dividends and other sums received by such\ntrustees on the shares acquired by them, after paying the necessary\nexpenses of the trust, shall be immediately repaid to such company for\nthe benefit of all who are or may become policyholders of such company\nand entitled to participate in the profits thereof, and shall be added\nto and become a part of the surplus earned by such company,\napportionable as a part of such surplus among such policyholders. The\nprovisions of section six hundred twenty-one of the business corporation\nlaw and of section 9-1.1 of the estates, powers and trusts law shall not\napply to the trust hereinbefore authorized.\n (b) (1) Whenever:\n (A) a plan adopted and approved in accordance with subsection (a) of\nthis section shall have been in effect for more than ten years,\n (B) the company shall have acquired and transferred to the trustees\nunder the plan at least ninety percent of its outstanding shares,\n (C) the plan itself contains no provision for the compulsory\ncompletion of the mutualization of the company inconsistent with the\nterms of subsection (a) hereof, the directors by a vote of a majority\nmay offer to acquire by purchase all of the shares of the company not\ntheretofore acquired under the plan, at a specified price, uniform as to\nclass and series of shares, which the company considers to be their fair\nvalue as of the date of making such offer. Before such offer shall be\nmade, it shall be submitted to the superintendent for approval. Before\napproving any such offer the superintendent shall be satisfied, by such\ninvestigation as he may make or by such evidence as he may require, that\nthe offer complies with the requirements of this chapter, that such\nacquisition of such shares pursuant to such offer will not be\nprejudicial to the policyholders of the company and that such company,\nafter deducting the sum required to acquire such shares at the price\nstated in such offer, or any lesser price agreeable to shareholders,\nwill be possessed of admitted assets in an amount equal to the sum of:\n (i) its entire liabilities, including the net values of all\noutstanding contracts computed in accordance with the provisions of this\nchapter;\n (ii) the minimum surplus prescribed by this chapter for mutual life\ninsurance companies organized to do the same kind or kinds of business;\nand\n (iii) such additional contingent surplus based upon the past\nexperience of such company, its assets, its present management and its\nprobable future earnings as the superintendent deems necessary to\nprotect its policyholders.\n (2) If the offer is approved by the superintendent, the company may\nmake a written offer, by registered mail, to each shareholder whose\nshares have not theretofore been acquired by the company under the plan\nor otherwise, to acquire all his shares at the specified price if\naccepted in writing within thirty days after the mailing of such offer.\nSuch offer shall be accompanied by a copy of this subsection and by the\nmost current available balance sheet of the company, which shall be as\nof a date not earlier than twelve months before the mailing of such\noffer, and a profit and loss statement or statements for not less than a\ntwelve month period ended on the date of such balance sheet. Any\nshareholder accepting such offer within the thirty day period shall,\nwithin sixty days after his acceptance, transfer his shares and\nsurrender the certificates representing such shares, to the company and\nshall thereupon be paid the offered price. All such shares shall be\nassigned to the trustees referred to in paragraph five of subsection (a)\nhereof and held by them as shares acquired pursuant to the plan.\n (3) Each shareholder who does not accept such offer to acquire his\nshares within such thirty day period shall within thirty days after the\nexpiration of such period apply to the supreme court, at any special\nterm thereof held in the district in which is situated the county in\nwhich the company making the offer has its principal place of business,\nupon at least eight days' notice to such company, for the appointment of\nthree disinterested persons to appraise the value of his shares as of\nthe date of making such offer, and the court shall appoint such\nappraisers and designate the time and place of their first meeting, with\nsuch directions in respect to their proceedings as shall be deemed\nproper. The court may fill any vacancies in the board of appraisers\noccurring by refusal to hold such office or neglect to act. The\nappraisers shall meet at the time and place designated and, after being\nduly sworn, shall hear the parties, faithfully and fairly discharge\ntheir duties, estimate and certify in writing the fair value of such\nshares as of the date of the offer, and deliver one copy of such\ncertificate to such company and another to each such shareholder. Within\ntwenty days after such delivery any party to the appraisal proceedings\nmay apply to the supreme court, at any such special term thereof upon at\nleast eight days' notice to all the parties to such appraisal\nproceedings and to the superintendent, for approval of the report of the\nboard of appraisers. The court, after hearing the parties and the\nsuperintendent, may approve the report and the value of the shares as\nstated therein, or may itself, upon the evidence and proceedings before\nthe appraisers, determine the fair value of the shares as of the date of\nsuch offer, or may refer the matter back to the same appraisers or other\nappraisers to be so appointed by the court, to proceed in the same\nmanner. Whenever the court shall approve or determine the fair value of\nsuch shares, it may also determine the terms of payment thereof by the\ncompany. The charges and expenses of the appraisers, after approval by\nthe court, shall be paid by the company. Upon any such order approving\nor determining the value of the shares and the method of the payment\nthereof becoming final and from which no appeal is pending, or when the\ntime to appeal therefrom has expired, each shareholder party to the\nproceeding shall transfer his shares and surrender the certificates\nrepresenting such shares to the company and the company shall make\npayment therefor as provided in such order. Any shares so acquired by\nthe company shall be assigned and transferred to the trustees and held\nby them as shares acquired pursuant to the plan.\n (4) Any shareholder who does not make application to the court in the\nmanner and within the time prescribed in paragraph three hereof shall be\ndeemed to have accepted the offer referred to in paragraph two hereof,\neffective, however, upon the expiration of the time prescribed in\nparagraph three hereof for making such an application and such\nshareholder's time for accepting such offer shall, for that purpose\nonly, be deemed to have been extended accordingly.\n (5) Any offer to acquire shares made pursuant to this subsection\nshall, except as otherwise provided in paragraphs two and four hereof\nlimiting the time for acceptance at the offered price, be irrevocable\nuntil all proceedings upon such offer provided by this subsection have\nbeen completed or all shares have otherwise been earlier acquired by the\ncompany.\n (6) Upon application by the company or by any aggrieved shareholder,\nand upon at least eight days' notice to all persons to be affected\nthereby and to the superintendent, the supreme court, at any special\nterm thereof held in the district in which is situated the county in\nwhich the company has its principal place of business, may make any\norder appropriate in the circumstances to implement or enforce the\nprovisions of this subsection. If any proceeding in respect of any of\nthe shares shall have been commenced pursuant to paragraph three hereof,\nall subsequent applications pursuant to this subsection shall be made or\ntransferred to, and be heard and determined by, the court in which such\nproceeding has been commenced.\n (c) When all of the outstanding shares of the company have been\nacquired, they shall be retired and cancelled, and thereupon the company\nshall become a mutual life insurance company without shares.\n