§ 27-1-38 — § 27-1-38. Acquisition of minority interests in subsidiary insurers.

Rhode Island § 27-1-38

• Jurisdiction: Rhode Island
• Title 27: Insurance
• Ch. 27-1: Domestic Insurance Companies

Text

§ 27-1-38. Acquisition of minority interests in subsidiary insurers.

(a) Any parent corporation directly or indirectly owning at least ninety-five percent (95%) of the aggregate issued and outstanding shares of all classes of voting stock of an insurance company created by special act of the general assembly may, pursuant to a plan for acquisition of minority interests in the insurance company adopted pursuant to this section, acquire all of the remaining issued and outstanding shares of voting stock of the insurance company, by exchange of stock, other securities, cash, other consideration, or any combination of these.

(b) The board of directors, trustees, or other governing body of the parent corporation may adopt a plan for the acquisition of minority interests in a subsidiary insurer. Every plan shall set forth:

(1) The name of the company whose shares are to be acquired;

(2) The total number of issued and outstanding shares of each class of voting stock of the company, the number of its shares owned by the parent corporation and, if either of these is subject to change prior to the effective date of acquisition, the manner in which any change may occur;

(3) The terms and conditions of the plan, including the manner and basis of exchanging the shares to be acquired for shares or other securities of the parent corporation, for cash, other consideration, or any combination of these, the proposed effective date of acquisition, and a statement clearly describing the rights of dissenting shareholders to demand appraisal;

(4) If the parent corporation that has adopted the plan is neither a domestic corporation nor an authorized insurer, its consent to the enforcement against it in this state of the rights of shareholders pursuant to the plan, and a designation of the insurance commissioner as the agent upon whom process may be served against the parent corporation in the same manner as if the parent corporation were a foreign insurance company licensed to do business in this state; and

(5) The other provisions with respect to the plan that the board of directors, trustees or other governing body deems necessary or desirable, or which the director of the department of business regulation may prescribe.

(c) Upon adoption of the plan, it shall be duly executed by the president and attested by the secretary, or the executive officers corresponding to the president and the secretary, under the corporate seal of the parent corporation that has adopted the plan. A certified copy of the plan, together with a certificate of its adoption subscribed by the officers and affirmed by them as true under the penalties of perjury and under the seal of the parent corporation, shall be submitted to the director of business regulation for the director's approval. The director of business regulation shall consider the plan and, if satisfied that it complies with this section, is fair and equitable and not inconsistent with law, the director of business regulation shall approve the plan. The director of business regulation shall approve, modify, or disapprove the plan within sixty (60) days of its submission to the director. If the director of business regulation modifies or disapproves the plan, notification of the director's modification or disapproval, assigning the reasons for that action, shall be given in writing by the director to the parent corporation that submitted the plan. No plan shall take effect unless the approval of the director of the department of business regulation has been obtained.

(d) If the director of business regulation approves the plan as submitted or modified, the parent corporation that has adopted the plan shall deliver to each person who as of the date of delivery is a holder of record of stock to be acquired pursuant to the plan a copy of the plan, or a summary of the plan approved by the director of the department of business regulation in person or by depositing a copy or a summary of the plan in the post office, postage prepaid, addressed to the shareholder at the shareholder's address of record. On or before the date of acquisition proposed in the plan, the parent corporation that has adopted the plan shall file with the director of the department of business regulation a certificate, executed by its president and attested by its secretary, or the executive officers corresponding to the president and the secretary, and subscribed by the officers and affirmed by them as true under the penalties of perjury and under the seal of the parent corporation, attesting to compliance with this subsection.

(e) Upon compliance with this section, ownership of the shares to be acquired pursuant to the plan shall vest in the parent corporation that has adopted the plan on the date of acquisition proposed in the plan whether or not the certificates for the shares have been surrendered for exchange. The parent corporation shall be entitled to have new certificates registered in its name. Shareholders whose shares have been acquired in this manner shall after this retain only the right either to receive the consideration to be paid in exchange for their shares pursuant to the plan or to demand appraisal pursuant to subsection (g).

(f) Neither the right granted by this section nor the exercise of that right by a parent corporation shall preclude the exercise by the parent corporation of any other rights it may have under any other applicable law.

(g)(1) Any shareholder of an insurance company whose shares are to be acquired by a parent corporation pursuant to a plan for the acquisition of minority interests adopted under this section shall have the right to dissent from the plan.

(2) A shareholder may not dissent as to less than all of the shares registered in the shareholder's name that are owned beneficially by the shareholder. A nominee or fiduciary may not dissent on behalf of any beneficial owner as to less than all of the shares of the owner registered in the name of the nominee or fiduciary.

(3) Any shareholder electing to exercise the right of dissent shall file with the parent corporation a written demand for payment of the fair value of the shareholder's shares within fifteen (15) days after the plan shall have been mailed to the shareholder.

(4) Any shareholder failing to make demand within the fifteen-day (15) period shall be bound by the terms of the plan. Any shareholder making a demand shall be entitled only to payment as provided in this section and shall not be entitled to vote or to exercise any other rights of a shareholder.

(5) No demand may be withdrawn unless the parent corporation consents. If the demand shall be withdrawn upon consent, or if the plan shall be abandoned, or if no demand or petition for the determination of fair value by a court shall have been made or filed within the time provided in this section, or if a court of competent jurisdiction shall determine that the shareholder is not entitled to the relief provided by this section, then the right of the shareholder to be paid the fair value of the shareholder's shares shall cease and the shareholder's status as a shareholder shall be restored, without prejudice to any corporate proceedings that may have been taken during the interim.

(6) Within ten (10) days after the effective date of the acquisition under the plan, the parent corporation shall make a written offer to each shareholder who has made demand to pay for the shares at a specified price deemed by the corporation to be fair value of the shares. The notice and offer shall be accompanied by a balance sheet of the insurance company as of the latest available date and not more than twelve (12) months prior to the making of the offer, and a profit and loss statement of the insurance company for the twelve-month (12) period ended on the date of the balance sheet.

(7) If within thirty (30) days after the effective date of the acquisition under the plan the fair value of the shares is agreed upon between any dissenting shareholder and the parent corporation, payment for the shares shall be made within ninety (90) days after the effective date of the acquisition under the plan upon surrender of the certificate or certificates representing the shares. Upon payment of the agreed value, the dissenting shareholder shall cease to have any interest in the shares.

(8) If within the period of thirty (30) days a dissenting shareholder and the parent corporation do not agree as provided in subsection (g)(7) of this section, then the parent corporation shall file a petition in any court of competent jurisdiction in the county in this state where the insurance company maintains its principal office praying that the fair value of the shares be found and determined; provided, that the parent corporation shall have received a written request for the filing from any dissenting shareholder given within sixty (60) days after the effective date of the acquisition under the plan, and the parent corporation shall file the petition within thirty (30) days after receipt of the request. If no request is made, the parent corporation may at its election file a petition at any time within sixty (60) days after the effective date of the acquisition date of the plan. If the parent corporation shall fail to institute the proceeding, any dissenting shareholder may do so in the name of the parent corporation.

(9) The subsidiary insurance company shall join as a party petitioner in the proceeding, and in the event that the insurance company shall fail to do so, the court upon the motion of any party shall join the insurance company as a party petitioner.

(10) All dissenting shareholders, wherever residing, shall be made parties to the proceeding as an action against their shares quasi in rem. A copy of the petition shall be served on each dissenting shareholder who is a resident of this state and shall be served by registered or certified mail on each dissenting shareholder who is a nonresident. Service on nonresidents shall also be made by publication as provided by law. The jurisdiction of the court shall be plenary and exclusive. All shareholders who are parties to the proceeding shall be entitled to judgment against the parent corporation and the subsidiary insurance company jointly and severally for the amount of the fair value of their shares, and execution shall issue upon the motion of any party respondent against either or both of the parent corporation and the subsidiary insurance company and their respective assets, and any execution so issued against the insurance company shall have priority over the claims of any other shareholder.

(11) The court may, if it elects, appoint one or more persons as appraisers to receive evidence and recommend a decision on the question of fair value. The appraisers shall have the power and authority specified in the order of their appointment or an amendment of the order. The judgment shall be payable only upon and concurrently with the surrender to the parent corporation of the certificate or certificates representing the shares. Upon payment of the judgment, the dissenting shareholder shall cease to have any interest in the shares.

(12) The judgment shall include an allowance for interest at a rate that the court may find to be fair and equitable in all the circumstances, from the date of acquisition proposed in the plan to the date of payment.

(13) The costs and expenses of any proceeding shall be determined by the court and shall be assessed against the parent corporation, but all or any part of the costs and expenses may be apportioned and assessed as the court may deem equitable against any or all of the dissenting shareholders who are parties to the proceeding to whom the parent corporation shall have made an offer to pay for the shares, if the court shall find that the action of the shareholders in failing to accept the offer was arbitrary or vexatious or not in good faith. The expenses shall include reasonable compensation for and reasonable expenses of the counsel for any experts employed by any party; but if the fair value of the share as determined materially exceeds the amount that the parent corporation offered to pay, or if no offer was made, the court in its discretion may award to any shareholder who is a party to the proceeding the sum as the court may determine to be reasonable compensation to any expert or experts employed by the shareholder in the proceeding.

(14) Within twenty (20) days after demanding payment for the shareholder's shares, each shareholder demanding payment shall submit the certificate or certificates representing the shareholder's shares to the parent corporation for notation on the certificate or certificates that the demand has been made. The shareholder's failure to do this shall, at the option of the parent corporation, terminate the shareholder's rights under this subsection unless a court of competent jurisdiction, for good and sufficient cause shown, otherwise directs. If shares represented by a certificate on which notation has been made in this manner shall be transferred, each new certificate issued shall bear similar notation, together with the name of the original dissenting holder of the shares, and a transferee of the shares shall acquire by transfer no rights in the insurance company other than those that the original dissenting shareholder had after making demand for payment of the fair value of the shares.

Legislative History

P.L. 1975, ch. 146, § 1; P.L. 2002, ch. 292, § 5.