AB773: Bill Text

AB773,17,18 (c) Effective date. The date upon which the commissioner issues the certificate of authority to the converted insurance company shall be the effective date of the restructuring unless a later time is designated in the mutual holding company plan.

AB773,18,5 (d) Effect on policyholders. A policyholder who has a membership interest in the converting insurance company on the effective date of the restructuring shall become a member of the mutual holding company. Policyholders of policies or contracts that are issued by a converted insurance company after the effective date of its conversion under this section shall become members of the mutual holding company in accordance with the articles of incorporation and bylaws of the mutual holding company and the applicable provisions of this chapter immediately upon issuance of the policy. The articles and bylaws of the mutual holding company may provide that a policyholder of any other insurance company that is or becomes a subsidiary of the mutual holding company may become a member of the mutual holding company. In no event shall a person remain a member after he or she ceases to be a policyholder.

AB773,18,9 (e) Nontransferability of membership interests. No member of a mutual holding company may transfer such member's membership interests in the mutual holding company or any right arising from such membership interests apart from the policy that gives rise to the membership interest.

AB773,18,12 (f) Liability of member. A member of a mutual holding company is not, by virtue of being a member, personally liable for the acts, debts, liabilities or obligations of the mutual holding company.

AB773,18,18 (10m) Effect on service insurance corporation of disapproval of plan. Notwithstanding sub. (1) (a) 2. and s. 644.02 (1) (b), if the converting insurance company is a service insurance corporation, and the commissioner disapproves the mutual holding company plan under sub. (7) or the policyholders disapprove the mutual holding company plan under sub. (8), the converting insurance company shall remain a service insurance corporation subject to ch. 613.

AB773,19,2 (11) Expenses. The converting insurance company may not pay compensation of any kind to any person in connection with the mutual holding company plan other than regular salaries to the company's personnel. This subsection does not prohibit the payment of reasonable fees and compensation to attorneys at law, accountants, financial advisers, actuaries or other consultants for services performed in the independent practice of their professions. All expenses of the restructuring, including the expenses incurred by the commissioner and the prorated salaries of any involved office staff members of the office of the commissioner of insurance, shall be borne by the converting insurance company.

AB773,19,4 644.08 Reservation of corporate name. Section 181.07 applies to mutual holding companies.

AB773,19,7 644.09 Articles, amendments, bylaws and principal officers. (1) Articles. Section 181.31 applies to the articles of a mutual holding company, except that all of the following apply:

AB773,19,9 (a) The name of the mutual holding company shall include the word "mutual" and shall comply with s. 181.06 (3).

AB773,19,11 (b) The articles shall include provisions for mutual bonds, if any are to be authorized, which shall conform to s. 611.33 (2).

AB773,19,13 (c) The purposes of the mutual holding company shall be limited to those permitted in this chapter.

AB773,19,17 (d) Subject to s. 644.07 (10) (d), the articles may specify those classes of persons who may be members of the mutual holding company or may prescribe the procedure for establishing or removing restrictions on the classes of persons who may be members of the mutual holding company.

AB773,20,5 (2) Amendment of articles. A mutual holding company may amend its articles in the manner provided in ss. 181.35 to 181.37 and 181.39 in any desired respect, including substantial changes of its original purposes, except that no amendment may be made that is contrary to sub. (1). In addition to the requirements of s. 181.37, the articles of amendment of a mutual holding company shall, if mail voting is used, state the number of members voting by mail and the number of such members voting for and against the amendment. No amendment may become effective until the articles of amendment have been filed with the commissioner. No amendment shall affect any existing cause of action in favor of or against such mutual holding company, any pending suit to which the mutual holding company is a party or the existing rights of persons other than members. In the event that the corporate name is changed by amendment, no suit brought by or against such mutual holding company under its former name shall abate for that reason.

AB773,20,9 (3) Bylaws. The bylaws of a mutual holding company shall comply with this chapter. A copy of the bylaws and any amendments to the bylaws shall be filed with the commissioner within 60 days after adoption. Subject to this subsection, s. 181.13 applies to mutual holding companies.

AB773,20,11 (4) Principal officers. Section 181.25 (1) and (2) applies to mutual holding companies.

AB773,20,19 644.10 Acquisition, merger or consolidation as part of the plan. (1) The converting insurance company may propose to acquire, or to merge or consolidate with, one or more domestic or foreign insurers, or both, as part of a mutual holding company plan under s. 644.07. The commissioner shall approve the acquisition, merger or consolidation as part of the mutual holding company plan and shall approve the continued corporate existence of any domestic insurer that is a party to the plan under this section as a subsidiary of the mutual holding company or any intermediate stock holding company, if any of the following applies:

AB773,20,21 (a) In the case of a domestic stock corporation, no grounds for disapproval exist under s. 611.72 (3).

AB773,21,5 (b) In the case of a domestic mutual, no grounds for disapproval exist under s. 611.73 (3) and the domestic mutual has complied with s. 644.07 (2) to (8). The converting insurance company and any domestic mutual that the converting insurance company proposes to acquire, or merge or consolidate with, may adopt one plan. The commissioner may combine the hearings required under s. 644.07 (6) for the converting insurance company and any domestic mutual that is the subject of the acquisition by, or merger or consolidation with, the converting insurance company. Section 644.07 (9), (10) (b) to (f) and (11) applies to a domestic mutual acquired by, merged into or consolidated with a converting insurance company under this section.

AB773,21,8 (2) Any foreign insurer acquired under a plan under this section may remain a foreign company after such acquisition and may be admitted to do business in this state if it meets the applicable requirements of ch. 618.

AB773,21,12 644.11 Restructuring of domestic or foreign mutual with existing domestic mutual holding company. (1) Definition. In this section, "existing domestic mutual holding company" means a mutual holding company formed under this chapter.

AB773,21,20 (2) Domestic mutual reorganization. (a) Merger with existing domestic mutual holding company. A domestic mutual insurance company organized under ch. 611 may restructure by merging its policyholders' membership interests into an existing domestic mutual holding company in accordance with this section and any rules promulgated by the commissioner. The restructuring shall continue the corporate existence of the converting insurance company as a stock insurance company subsidiary of the existing domestic mutual holding company or as a stock insurance company subsidiary of an intermediate stock holding company.

AB773,21,23 (b) Procedures applicable to converting insurance company. Sections 644.04 (3) and (4) and 644.07 (2) to (6), (8), (9), (10) (b) to (f), (10m) and (11) apply to a domestic mutual insurance company restructuring under this subsection.

AB773,22,7 (c) Procedures applicable to existing domestic mutual holding company. 1. The board of the existing domestic mutual holding company into which the converting insurance company's policyholders' membership interests are proposed to be merged under this subsection shall adopt a resolution approving the proposed plan of merger and directing that it be submitted to the commissioner for approval and to its members for a vote at a regular or special meeting. The existing domestic mutual holding company shall provide written notice of the meeting to each member in the manner provided under s. 644.07 (8) for notice to policyholders of a meeting for a vote on approval of a mutual holding company plan.

AB773,22,13 2. The commissioner may hold a hearing on the plan of merger prior to the meeting at which a vote of the members will be taken. A hearing under this subdivision may be combined with the hearing required under par. (b). The existing domestic mutual holding company shall provide written notice of the hearing to each member in the manner provided under s. 644.07 (6) (b) 1. for notice to policyholders of the hearing under s. 644.07 (6).

AB773,22,16 3. The commissioner shall approve the proposed plan of merger unless he or she finds that the plan is not fair and equitable to members or is contrary to the interests of members.

AB773,22,20 4. The proposed plan of merger shall be approved by the members of the existing domestic mutual holding company upon the affirmative vote of not less than a majority of those members voting in person or by proxy at the meeting required under subd. 1.

AB773,23,2 (d) Commissioner issues new certificate of authority if approved. If under par. (b) the policyholders of the converting insurance company approve the plan of restructuring and under par. (c) the members of the existing domestic mutual holding company approve the plan of merger, the commissioner shall issue a new certificate of authority to the converting insurance company. The issuance of the certificate of authority shall be conclusive evidence of compliance with this subsection.

AB773,23,4 (e) Effect of restructuring. On the effective date of the restructuring described in this subsection, all of the following shall occur:

AB773,23,6 1. The converting insurance company shall at once become a stock corporation organized and operating under ch. 611 and is no longer a mutual.

AB773,23,11 2. All membership interests and rights in surplus of the converting insurance company shall be extinguished and the members of the converting insurance company shall become members of the existing domestic mutual holding company in accordance with this chapter and the articles of incorporation and bylaws of the existing domestic mutual holding company.

AB773,23,15 3. All shares of the voting stock of the converting insurance company shall be acquired and retained by the existing domestic mutual holding company or any intermediate stock holding company, 51% or more of whose voting stock is owned by the existing domestic mutual holding company.

AB773,23,17 4. The converted insurance company shall be considered to have been organized at the time that the converting insurance company was organized.

AB773,23,20 5. Except as otherwise provided in the plan, the trustees, directors, officers, agents and employes of the converting insurance company shall continue in like capacity with the converted insurance company.

AB773,24,10 (3) Foreign mutual reorganization. A foreign mutual insurance company organized under the laws of any other state that, if a domestic corporation, would be organized under ch. 611 may restructure by merging its policyholders' membership interests into an existing domestic mutual holding company in accordance with rules promulgated by the commissioner and in compliance with the requirements of any other law or regulation that is applicable to the foreign mutual. The restructuring shall continue the corporate existence of the converting insurance company as a foreign stock insurance company subsidiary of the existing domestic mutual holding company or as a foreign stock insurance company subsidiary of an intermediate stock holding company. The restructuring foreign mutual insurance company may remain a foreign insurer after the restructuring and may be admitted to do business in this state if it meets the applicable requirements of ch. 618. A foreign mutual insurance company that is a party to the restructuring may at the same time redomesticate to this state by complying with the applicable requirements of this state and its state of domicile.

AB773,24,18 644.12 Transfers of a mutual holding company's place of domicile to this state. (1) A mutual holding company that is domiciled in another state and that desires to become a domestic mutual holding company may submit to the commissioner an application for a certificate of incorporation. The application shall comply with rules promulgated under sub. (2) and shall include or have attached any other relevant documents or information that the commissioner reasonably requires. Upon review of the application, the commissioner may issue a certificate of incorporation if the commissioner determines that all the following are satisfied:

AB773,24,20 (a) The applicant is in compliance with the provisions of this chapter that apply to domestic mutual holding companies.

AB773,24,23 (b) The directors and officers of the applicant are trustworthy and competent and collectively have the competence and experience to engage in the business proposed.

AB773,24,25 (c) The applicant's insurance company subsidiary that converted from a mutual has become a domestic insurer under s. 611.223.

AB773,25,5 (2) The commissioner shall by rule specify the required contents and form of an application under sub. (1). In determining the required contents, the commissioner shall consider the information and documents that will permit the commissioner to determine whether the requirements of sub. (1) (a) to (c) are satisfied.

AB773,25,6 644.13 Restrictions on ownership. (1) In this section:

AB773,25,9 (a) "Beneficial ownership", with respect to any voting stock, has the same meaning as provided by the rules administering section 16 of the Securities Exchange Act of 1934.

AB773,25,10 (b) "Offer" means any of the following:

AB773,25,12 1. An offer to buy or acquire voting stock, or an interest in voting stock, for value.

AB773,25,14 2. A solicitation of an offer to sell voting stock, or an interest in voting stock, for value.

AB773,25,15 3. A tender offer for voting stock, or an interest in voting stock, for value.

AB773,25,17 4. A request or invitation for tenders of voting stock, or an interest in voting stock, for value.

AB773,26,2 (2) (a) Before the date that is one year after the initial sale to 3rd parties in a public offering of voting stock of the converted insurance company or any intermediate stock holding company, the directors, officers and other members of management of the mutual holding company, any intermediate stock holding company and the converted insurance company are prohibited from acquiring or offering to acquire, in any manner, the legal or beneficial ownership of any class of voting stock of the converted insurance company or intermediate stock holding company, except that this paragraph shall not in any way limit the rights of the directors, officers or other members of management to exercise subscription rights generally accorded to members of the mutual holding company.

AB773,26,8 (b) Except as otherwise provided by the commissioner by rule, beginning on the date that is one year after the initial sale to 3rd parties of voting stock of the converted insurance company or any intermediate stock holding company, the directors, officers and other members of management of the mutual holding company, any intermediate stock holding company and the converted insurance company may not do any of the following:

AB773,26,11 1. Acting individually, directly or indirectly acquire or offer to acquire, in any manner, the legal or beneficial ownership of more than 5% of any class of voting stock of the converted insurance company or intermediate stock holding company.

AB773,26,14 2. In the aggregate, directly or indirectly acquire or offer to acquire, in any manner, the legal or beneficial ownership of more than 10% of any class of voting stock of the converted insurance company or intermediate stock holding company.

AB773,26,20 (3) (a) In the event of any violation of sub. (2), or of any action which, if consummated, might constitute such a violation, all voting stock of any intermediate stock holding company or the converted insurance company that is acquired by any person in excess of the maximum amount permitted to be acquired by such person under sub. (2) shall be considered to be nonvoting stock of any such intermediate stock holding company or converted insurance company, as the case may be.

AB773,26,22 (b) In addition to the result specified in par. (a), the violation or action is subject to the enforcement procedures under s. 601.64.

AB773,26,25 644.14 Member rights. (1) Communication to members; member voting. Subject to this section, ss. 611.41, 611.42 (1), (2), (3), (4) (a) and (5), 611.43 and 611.53 (2) apply to mutual holding companies.

AB773,27,5 (2) Notice of regular meetings and elections. Notice of the time and place of regular meetings or elections may be given to a member by printing such time and place conspicuously on each policy under which the member derives a membership interest, or in such other reasonable manner as the commissioner approves or requires.

AB773,27,11 644.15 Sale of voting stock; subscription rights; dividends. (1) (a) No solicitation for the initial sale to 3rd parties of the voting stock of the converted insurance company or any intermediate stock holding company may be made without the approval of the commissioner under s. 611.31 (2) and without the approval of the commissioner and the members of the mutual holding company as follows:

AB773,27,14 1. If the mutual holding company plan includes a plan for the initial sale of voting stock, such approval shall be given at the time that the mutual holding company plan is approved under s. 644.07 (7) and (8).

AB773,27,19 2. If the mutual holding company plan does not include a plan for the initial sale of voting stock of the converted insurance company or any intermediate stock holding company, the board of the converted insurance company or any intermediate stock holding company, following the procedures under s. 644.07 (2) to (8), may adopt a plan for the initial sale of voting stock to 3rd parties at any future date.

AB773,27,24 (b) Prior to every issue of voting stock of the converted insurance company and any intermediate stock holding company, the commissioner, in addition to the approval required under s. 611.31 (2), shall approve the price of the stock, or the procedure for setting and determining the price of the stock, as fair and equitable to the company issuing the stock.

AB773,28,5 (2) No initial public offering of voting stock of the converted insurance company or any intermediate stock holding company may be conducted unless the persons who were members of the mutual holding company at the time such offering was approved by resolution of the board are afforded subscription rights in conjunction with the stock offering.

AB773,28,8 (3) If the converted insurance company is a life insurance company, before any approval for the initial sale of voting stock is granted the commissioner shall find the dividend plan fair and equitable to policyholders.

AB773,28,12 (4) Dividends and other distributions to the shareholders of the converted insurance company or any intermediate stock holding company of a converted insurance company may not be made except in compliance with ss. 617.22 and 617.225.

AB773,28,18 644.16 Board of directors, committees and records. (1) Board of directors. Subject to this section, ss. 181.18, 181.21, 611.51 (2), (3), (5) and (8) and 611.53 (1) and (3) apply to mutual holding companies. Section 181.22 applies to the board of a mutual holding company except as modified by s. 181.225. The board shall manage the business and affairs of the corporation and may not delegate its power or responsibility to do so, except to the extent authorized by ss. 181.23 and 181.25 (2).

AB773,28,20 (2) Committees of directors. Section 181.23 applies to mutual holding companies.

AB773,28,22 (3) Records. (a) Section 611.51 (9) (a) and (b) applies to mutual holding companies.

AB773,29,7 (b) Any provision of this chapter or of the articles or bylaws of a mutual holding company that requires the keeping of records concerning the names and addresses of members entitled to vote shall be considered complied with by the keeping of a record of the names of policyholders of, and the names and addresses of insureds or persons paying premiums on the policies of, the converted insurance company. Any provision of this chapter or of the articles or bylaws of a mutual holding company that requires the mailing or sending of notices, reports, proposals, ballots or other materials to a member shall be considered complied with if such mailing is made to the insured or the person paying premiums on the policy of the converted insurance company, for delivery to the policyholder.

AB773,29,9 (4) Director conflicts of interest. Section 181.225 applies to mutual holding companies.

AB773,29,11 644.17 Removal of officers. Section 181.26 applies to mutual holding companies.

AB773,29,13 644.18 Directors' and officers' liability and indemnification. (1) Liability. Sections 181.283 to 181.29 apply to mutual holding companies.

AB773,29,15 (2) Indemnification. Sections 181.041 to 181.051 apply to mutual holding companies.

AB773,29,16 (3) Insurance. Section 181.053 applies to mutual holding companies.

AB773,29,17 (4) Derivative actions. Section 181.295 applies to mutual holding companies.

AB773,29,19 644.19 Executive compensation. (1) General. Sections 181.19 and 611.63 (4) and (5) apply to mutual holding companies.

AB773,30,2 (2) Approval by members. A benefit plan or amendment to a benefit plan that proposes to provide benefits in the form of stock or stock options of a converted insurance company or any intermediate stock holding company to the directors or officers of the converted insurance company, intermediate stock holding company or mutual holding company may not take effect unless it is submitted to a vote of the members of the mutual holding company and approved by a majority of the members voting.

AB773,30,6 (3) Notice to commissioner. The commissioner may by rule require that any action taken by the board of a mutual holding company, or the board of any intermediate stock holding company, on any of the subjects specified in ss. 181.04 (15) and 181.19 be reported to the commissioner within 30 days after the action is taken.

AB773,30,10 644.20 Management contract services. A mutual holding company may not be a party to a contract that has the effect of delegating to a person, to the substantial exclusion of the board, the authority to exercise any management control of the mutual holding company or of any of its major corporate functions.

AB773,30,13 644.21 Annual report of domestic mutual holding company. Each mutual holding company domiciled in this state shall file such annual report as may be prescribed by the commissioner by rule.

AB773,30,15 644.22 Securities regulation. A membership interest in a domestic mutual holding company shall not constitute a security, as defined in s. 551.02 (13).

AB773,30,20 644.23 Authority to issue mutual bonds and contribution notes. Section 611.33 (2) (a), (b), (c) and (e) applies to mutual holding companies. In the event of dissolution under this chapter, unpaid amounts of principal and interest on contribution notes shall be subordinated to the payment of principal and interest on any mutual bonds issued by the mutual holding company at any time.

AB773,31,2 644.24 Subsequent restructuring. A mutual holding company, in conjunction with the converted insurance company and any intermediate stock holding company, may merge together and convert into a mutual insurance company if the requirements of ss. 611.72 and 611.75 are met and the members of the mutual holding company vote to approve the merger and conversion into a mutual insurance company.

AB773,31,7 644.25 Conversion of domestic mutual holding company into a stock corporation. (1) Conversion permitted and procedures. A mutual holding company formed by a converted insurance company under this chapter may convert into a stock corporation organized under ch.180. Subject to this section, s. 611.76 (1) to (3) and (5) to (11) applies to mutual holding companies.

AB773,31,9 (2) Plan of conversion. (a) In this subsection, "net premium" means gross premium less return premium and dividends paid.

AB773,31,11 (b) The board of a domestic mutual holding company may adopt a plan of conversion that specifies all of the following:

AB773,31,15 1. The number of shares proposed to be authorized for the new stock corporation, their par value and the price at which they will be offered to members, which price may not exceed 50% of the median equitable share of all members under subd. 2.

AB773,31,21 2. That each member who has been a policyholder of a converted insurance company and has paid premiums within 5 years prior to the resolution passed by the board related to the conversion under this section shall be entitled without additional payment to so much common stock of the new stock corporation as his or her equitable share of the value of the converting mutual holding company will purchase.

AB773,32,2 3. That each member's equitable share shall be determined by the ratio that the net premium paid by such member to the converted insurance company during the 5 years immediately preceding the resolution specified in subd. 2. bears to the total net premium received by the converted insurance company during the same period.

AB773,32,6 4. That, if a member's equitable share is sufficient only for the purchase of a fraction of a share of stock, the member shall have the option either to receive the value of the fractional share in cash or to purchase a full share by paying the balance in cash.

AB773,32,13 5. That, notwithstanding subds. 2. to 4., each member who was a policyholder of a converted life insurance company on the date of the resolution specified in subd. 2. or within 5 years prior to that date shall be entitled to an equitable share based on a formula that fairly reflects the policyholder's interest in the company and the policies and contracts issued by the company to the policyholder, and that takes into account premiums paid, cash surrender values, policy loans, reserves, surplus benefits payable and other relevant factors.

AB773,32,16 6. That a member's equitable share shall be provided to the member on a uniform basis approved by the commissioner in the form of common stock, cash, increased benefits or lower premiums or a combination of those forms.

AB773,32,19 7. The procedure for stock subscriptions, which shall include a written offer to each such member indicating his or her individual equitable share and the terms of subscription.