§ 7308 — Conversion of domestic reciprocal insurers into stock property/casualty insurance companies

§ 7308. Conversion of domestic reciprocal insurers into stock\nproperty/casualty insurance companies. (a) Any domestic reciprocal\ninsurer doing business under the provisions of this article may, by the\naffirmative vote of its subscribers holding two-thirds of its operating\nreserve accumulations at the date of the meeting at which the proposal\nto convert is voted upon, be converted into and licensed as a stock\nproperty/casualty insurance company, in the manner prescribed by this\nsection and subject to any other requirements of law. The advisory\ncommittee of any such reciprocal insurer proposing so to convert shall\ncause the attorney-in-fact of such reciprocal insurer to give to each\nsubscriber of record at the close of business on the last day of the\nquarter year next preceding the issue of such notice not less than\nthirty days notice by mail of the meeting at which the proposed\nconversion is to be voted upon and of a hearing of the subscribers\nbefore the superintendent. At such hearing or any adjournment thereof,\nthe superintendent shall pass upon the fairness of the terms and\nconditions of the proposed conversion and of the issuance of shares of\nthe corporation and he shall approve or disapprove the same. The\nprovisions of this chapter relative to a similar domestic insurance\ncompany organized to do the same kinds of insurance business shall apply\nto the organization and licensing of such corporation.\n (b) If converted into a stock insurance corporation, subscriptions to\nthe capital shares may be made, in whole or in part, by the subscribers\nof the reciprocal insurer, and their subscriptions may be paid in to the\nextent of their operating reserve accumulations by a transfer thereof or\nany portion thereof to such corporation. The contingent surplus of the\nreciprocal insurer accumulated pursuant to subsection (a) of section six\nthousand one hundred five of this chapter shall be included in the\ncapital and surplus of the corporation and shares representing the same\nshall be issued to existing subscribers, at the rate determined as\nprovided in the next sentence for each dollar of par value of the shares\nof such new corporation, in proportion to their shares in the aggregate\noperating reserves at the time when the proposal to convert is adopted.\nThe rate of payment for each dollar of par value of the stock of such\nnew corporation shall be determined by agreement between the advisory\ncommittee of the reciprocal insurer and the board of directors of the\nstock insurance company. Every such subscriber shall be entitled in the\nsubscription to the capital shares of such corporation to a priority in\nsubscribing thereto for thirty days after the opening of the books of\nsubscription in proportion to his interest in such reciprocal insurer at\nsuch date but at the rate of payment fixed by the board of directors. At\nthe expiration of such thirty days the board of directors may sell and\ndispose of the capital shares which have not been taken or subscribed,\nas aforesaid, but at not less than the same rate of payment.\n (c) If after examination, the superintendent finds that the\nproceedings for the conversion to a corporation of any such insurer have\nbeen regularly taken in conformity with law, and that the corporation\nmeets with the requirements of this chapter, he may issue a license to\nsuch insurer to do business under the provisions of this chapter.\nThereupon, the remaining assets shall be forthwith transferred to it,\nand the predecessor reciprocal insurer or insurers shall cease to have\nauthority to do business as such and shall be deemed extinguished. Every\nsuch new corporation formed by conversion shall assume and succeed to\nall of the obligations and liabilities of the converting reciprocal\ninsurer and be held liable to pay and discharge all such debts and\nliabilities in the same manner as if they had been incurred or\ncontracted by the corporation, but the subscribers of the reciprocal\ninsurer shall continue subject to all the liabilities, claims and\ndemands which shall then exist, or which may thereafter accrue against\nthem, or any of them, by reason of any obligations incurred by them or\nin their behalf as such subscribers before the date of conversion. Upon\nthe conversion of any reciprocal insurer, dissenting subscribers,\nmeaning thereby subscribers who shall not within thirty days after the\nopening of the books of subscription have subscribed to shares of the\ncorporation and applied their accumulated operating reserves to payment\ntherefor as provided in subsection (b) hereof, shall be entitled to the\nconditional withdrawal of their accumulated operating reserves on\ndeposit with the reciprocal insurer as of the date of conversion but a\nsufficient amount thereof shall be retained by the corporation as a\ndeposit until all of the obligations incurred on its behalf have been\nextinguished. When all of such obligations have been paid, discharged or\nterminated, and the superintendent after an examination shall have so\ncertified, the said subscribers' deposits or the balances thereof\nremaining to their credit shall be returned and released, whereupon the\npowers of the attorney-in-fact relating thereto shall cease and\nterminate.\n