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90_SB1901ham001
LRB9011659JSmgam
1 AMENDMENT TO SENATE BILL 1901
2 AMENDMENT NO. . Amend Senate Bill 1901 on page 1,
3 lines 2 and 6, by replacing "Section 4" each time it appears
4 with "Sections 4 and 57 and adding Section 59.2"; and
5 on page 9 by inserting immediately below line 20 the
6 following:
7 "(215 ILCS 5/57) (from Ch. 73, par. 669)
8 Sec. 57. Amendment of articles of incorporation.
9 (1) A company subject to the provisions of this Article
10 may amend its articles of incorporation in any respect not in
11 violation of law, but may not amend such articles to insert
12 any provision prohibited, or to delete any provision
13 required, in original articles of incorporation for a similar
14 domestic company organized under this Code except as
15 otherwise provided in Section 59.1 or 59.2 of this Code.
16 (2) Amendments to the articles of incorporation for the
17 various classes of companies shall be made in the following
18 manner:
19 (a) Class 1. The board of directors or trustees
20 shall adopt a resolution setting forth the proposed
21 amendment and directing that it be submitted to a vote of
22 the policyholders at either an annual or special meeting.
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1 Written or printed notice shall be given to policyholders
2 in the same manner as is required in the case of notices
3 to shareholders of stock companies by Section 29. The
4 proposed amendment shall be adopted upon receiving the
5 affirmative vote of 2/3 of the policyholders present in
6 person or by proxy at such meeting. Restated articles of
7 incorporation setting forth the articles of incorporation
8 as amended shall thereupon be executed in duplicate by
9 the company or its president or vice president, and its
10 secretary or assistant secretary, and duplicate originals
11 of such restated articles of incorporation and an
12 affidavit of the secretary of the company setting forth
13 the facts to show that this section has been fully
14 complied with shall be delivered to the Director.
15 (b) Classes 2 and 3. The board of directors or
16 trustees shall adopt the amendment and deliver to the
17 Director duplicate original restated articles of
18 incorporation setting forth the articles of incorporation
19 as amended and a copy of the resolution of the board of
20 directors or trustees adopting such an amendment
21 certified to by the secretary of the company.
22 (3) The restated articles of incorporation of any
23 company subject to the provisions of this article so
24 delivered to the Director may be approved or disapproved by
25 the Director in the same manner as the original articles of
26 incorporation. If approved, the Director shall place on file
27 in his office all of the documents so delivered to him except
28 one of the duplicate originals of the restated articles of
29 incorporation, and shall endorse upon such duplicate original
30 his approval thereof and the month, day and year of such
31 approval, and deliver it to the company. The amendment shall
32 be effective as of the date of the approval thereof by the
33 Director. Such duplicate original shall be filed for record,
34 within 15 days after it has been delivered to the company, in
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1 the office of the recorder of the county where the principal
2 office of the company is located.
3 (Source: P.A. 88-662, eff. 9-16-94.)
4 (215 ILCS 5/59.2 new)
5 Sec. 59.2. Formation of mutual insurance holding company
6 and conversion of mutual company to stock company.
7 (1) Definitions. For the purposes of this Section, the
8 following terms shall have the meanings indicated:
9 (a) "Converted company" means an Illinois domiciled
10 stock insurance company subject to the provisions of
11 Article II, except as otherwise provided in this Section,
12 that continues in existence after a reorganization under
13 this Section in connection with the formation of a mutual
14 holding company.
15 (b) "Converted mutual holding company" means the
16 stock corporation into which a mutual holding company has
17 been converted in accordance with Section 59.1 and
18 subsection (13) of this Section.
19 (c) "Eligible member" means a member as of the date
20 the board of directors adopts a plan of MHC conversion
21 under this Section. For the conversion of a mutual
22 holding company, "eligible member" means a member of the
23 mutual holding company who is of record as of the date
24 the mutual holding company board of directors adopts a
25 plan of conversion under Section 59.1.
26 (d) "Intermediate holding company" means a
27 corporation authorized to issue one or more classes of
28 capital stock, the corporate purposes of which include
29 holding directly or indirectly the voting stock of a
30 converted company.
31 (e) "Member" means a person who, on the records of
32 the mutual company and pursuant to its articles of
33 incorporation or bylaws, is deemed to be a holder of a
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1 membership interest in the mutual company and shall also
2 include a person or persons insured under a group policy,
3 subject to the following conditions:
4 (i) the person is insured or covered under a
5 group life policy or group annuity contract under
6 which funds are accumulated and allocated to the
7 respective covered persons;
8 (ii) the person has the right to direct the
9 application of the funds so allocated;
10 (iii) the group policyholder makes no
11 contribution to the premiums or deposits for the
12 policy or contract; and
13 (iv) the mutual company has the names and
14 addresses of the persons covered under the group
15 life policy or group annuity contract.
16 On and after the effective date of a plan of MHC
17 conversion under this Section, the term "member" shall mean a
18 member of the mutual holding company created thereby.
19 (f) "Mutual holding company" or "MHC" means a
20 corporation resulting from a reorganization of a mutual
21 company under this Section. A mutual holding company
22 shall be subject to the provisions of this Article and to
23 any other provisions of this Code applicable to mutual
24 companies, except as otherwise provided in this Section.
25 The articles of incorporation of a mutual holding company
26 shall include provisions setting forth the following:
27 (i) that it is a mutual holding company
28 organized under this Article;
29 (ii) that the mutual holding company may hold
30 not less than a majority of the shares of voting
31 stock of a converted company or an intermediate
32 holding company, which in turn holds directly or
33 indirectly all of the voting stock of a converted
34 company;
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1 (iii) that it is not authorized to issue any
2 capital stock except pursuant to a conversion in
3 accordance with the provisions of Section 59.1 and
4 subsection (13) of this Section;
5 (iv) that its members shall have the rights
6 specified in this Section and in its articles of
7 incorporation and bylaws; and
8 (v) that its assets shall be subject to
9 inclusion in the estate of the converted company in
10 any proceedings initiated by the Director against
11 the converted company under Article XIII.
12 (g) "Mutual company" means for purposes of this
13 Section a mutual life insurer or mutual property-casualty
14 insurer that may convert pursuant to a plan of MHC
15 conversion under this Section.
16 (h) "Plan of MHC conversion," or "plan" when used
17 in this Section means a plan adopted pursuant to this
18 Section by the board of directors of an Illinois domestic
19 mutual company for the conversion of the mutual company
20 into a direct or indirect stock subsidiary of a mutual
21 holding company.
22 (i) "Policy" includes any group or individual
23 insurance policy or contract issued by a mutual company,
24 including an annuity contract. The term policy does not
25 include a certificate of insurance issued in connection
26 with a group policy or contract.
27 (j) "Policyholder" means the holder of a policy
28 other than a reinsurance contract.
29 (2) Formation of mutual holding company and conversion
30 of mutual company. A mutual company, upon approval of the
31 Director, may reorganize by forming a mutual holding company
32 and continue the corporate existence of the reorganizing
33 mutual company as a stock insurance company in accordance
34 with this Section. Upon effectiveness of a plan of MHC
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1 conversion, and without any further action:
2 (a) The mutual company shall become a stock
3 corporation, the membership interests of the
4 policyholders in the mutual company shall be deemed
5 extinguished and all eligible members of the mutual
6 company shall be and become members of the mutual holding
7 company, in accordance with the articles of incorporation
8 and bylaws of the mutual holding company and the
9 applicable provisions of this Section and Article III;
10 and
11 (b) all of the shares of the capital stock of the
12 converted company shall be issued to the mutual holding
13 company, which at all times shall own a majority of the
14 shares of the voting stock of the converted company,
15 except that either at the time of conversion, or at a
16 later time with the approval of the Director, an
17 intermediate holding company or companies may be created,
18 so long as the mutual holding company at all times owns
19 directly or indirectly a majority of the shares of the
20 voting stock of the converted company.
21 (3) MHC membership interests.
22 (a) No member of a mutual holding company may
23 transfer membership in the mutual holding company or any
24 right arising from the membership.
25 (b) A member of a mutual holding company shall not,
26 as a member, be personally liable for the acts, debts,
27 liabilities, or obligations of the company.
28 (c) No assessments of any kind may be imposed upon
29 the members of a mutual holding company by the directors
30 or members, or because of any liability of any company
31 owned or controlled by the mutual holding company or
32 because of any act, debt, liability, or obligation of the
33 mutual holding company itself.
34 (d) A membership interest in a domestic mutual
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1 holding company shall not constitute a security under any
2 law of this State.
3 (4) Adoption of the plan of MHC conversion by the board
4 of directors.
5 (a) A mutual company seeking to convert to a mutual
6 holding company structure shall, by the affirmative vote
7 of two-thirds of its board of directors, adopt a plan of
8 MHC conversion consistent with the requirements of
9 subsection (8) of this Section.
10 (b) At any time before approval of a plan by
11 eligible members, the mutual company, by the affirmative
12 vote of two-thirds of its board of directors, may amend
13 or withdraw the plan of MHC conversion.
14 (5) Approval of the plan of MHC conversion by the
15 Director.
16 (a) Required findings. After adoption or amendment
17 of the plan by the mutual company's board of directors,
18 the plan of MHC conversion shall be submitted to the
19 Director for review and approval. The Director shall
20 hold a public hearing on the plan. The Director shall
21 approve the plan upon finding that:
22 (i) the provisions of this Section have been
23 complied with; and
24 (ii) the plan is fair and equitable as it
25 relates to the interests of the members.
26 (b) Documents to be filed.
27 (i) Prior to the members' approval of the plan
28 of MHC conversion, a mutual company seeking the
29 Director's approval of a plan shall file the
30 following documents with the Director for review and
31 approval:
32 (A) the plan of MHC conversion;
33 (B) the form of notice required by item
34 (b) of subsection (6) of this Section for
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1 eligible members to vote on the plan;
2 (C) any proxies to be solicited from
3 eligible members and any other soliciting
4 materials;
5 (D) the proposed articles of
6 incorporation and bylaws of the mutual holding
7 company, each intermediate holding company, if
8 any, and the revised articles of incorporation
9 and bylaws of the converted company.
10 Once filed, these documents shall be approved
11 or disapproved by the Director within a reasonable
12 time.
13 (ii) After the members have approved the plan,
14 the converted company shall file the following
15 documents with the Director:
16 (A) the minutes of the meeting of the
17 members at which the plan of MHC conversion was
18 voted upon; and
19 (B) the articles and bylaws of the mutual
20 holding company and each intermediate holding
21 company, if any, and the revised articles of
22 incorporation and bylaws of the converted
23 company.
24 (c) The Director's approval of a plan pursuant to
25 this subsection (5) may be made conditional at the sole
26 discretion of the Director whenever he determines that
27 such conditions are reasonably necessary to protect
28 policyholder interests. Such conditions may include, but
29 shall not be limited to, limitations, requirements, or
30 prohibitions as follows:
31 (i) prior approval of any acquisition or
32 formation of affiliate entities of the MHC;
33 (ii) prior approval of the capital structure
34 of any intermediate holding company or any changes
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1 thereto;
2 (iii) prior approval of any initial public
3 offering or other issuance of equity or debt
4 securities of an intermediate holding company or the
5 converted company in a private sale or public
6 offering;
7 (iv) prior approval of the expansion of the
8 mutual holding company system into lines of
9 business, industries, or operations not presented at
10 the time of the conversion;
11 (v) limitations on dividends and distributions
12 if the effect would be to reduce capital and surplus
13 of the converted company, in addition to any
14 limitations which may otherwise be authorized by
15 law; and
16 (vi) limitations on the pledge, incumbrance,
17 or transfer of the stock of the converted company.
18 (d) Consultant. The Director may retain, at the
19 mutual company's expense, any qualified expert not
20 otherwise a part of the Director's staff to assist in
21 reviewing the plan of MHC conversion.
22 (6) Approval of the plan by the members.
23 (a) Members entitled to notice of and to vote on
24 the plan. All eligible members shall be given notice of
25 and an opportunity to vote upon the plan of MHC
26 conversion.
27 (b) Notice required. All eligible members shall be
28 given notice of the members' meeting to vote upon the
29 plan of MHC conversion. The notice shall identify in
30 reasonable detail the benefits and risks of the MHC
31 conversion. A copy of the plan of MHC conversion or a
32 summary of the plan, if so authorized by the Director,
33 shall accompany the notice. If a summary of the plan
34 accompanies the notice, a copy of the plan shall be made
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1 available without charge to any eligible member upon
2 request. The notice shall state that approval by the
3 Director does not constitute a recommendation that
4 eligible members approve the plan. The notice shall be
5 mailed to each member's last known address, as shown on
6 the mutual company's records, within 45 days of the
7 Director's approval of the plan. The meeting to vote upon
8 the plan shall not be set for a date less than 60 days
9 after the date when the notice of the meeting is mailed
10 by the mutual company. If the meeting to vote upon the
11 plan is held coincident with the mutual company's annual
12 meeting of policyholders, only one combined notice of
13 meeting is required.
14 (c) Vote required for approval.
15 (i) After approval by the Director, the plan
16 of MHC conversion shall be adopted, at an annual or
17 special meeting of policyholders at which a quorum
18 is present, upon receiving the affirmative vote of
19 at least two-thirds of the votes cast by eligible
20 members.
21 (ii) Members entitled to vote upon the
22 proposed plan may vote in person or by proxy. Any
23 proxies to be solicited from eligible members,
24 together with the related proxy statement and any
25 other soliciting materials, shall be filed with and
26 approved by the Director.
27 (iii) The number of votes each eligible member
28 may cast shall be determined by the mutual company's
29 bylaws. If the bylaws are silent, each eligible
30 member may cast one vote.
31 (7) Adoption of articles of incorporation. Adoption of
32 articles of incorporation for the mutual holding company,
33 each intermediate holding company, if any, and revised
34 articles of incorporation for the converted company is
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1 necessary to implement the plan of MHC conversion.
2 Procedures for adoption or revision of such articles shall be
3 governed by the applicable provisions of this Code or, in the
4 case of an intermediate holding company, the business
5 corporation law of the state in which the intermediate
6 holding company is incorporated. For a Class I mutual
7 company, the members may adopt revised articles of
8 incorporation at the same meeting at which the members
9 approve the plan. For a Class 2 or 3 mutual company, the
10 articles of incorporation may be adopted solely by the board
11 of directors or trustees, as provided in Section 57 of this
12 Code.
13 (8) Required provisions in a plan of MHC conversion.
14 The following provisions shall be included in the plan of MHC
15 conversion:
16 (a) The plan shall set forth the reasons for the
17 proposed conversion.
18 (b) Effect of MHC conversion on existing policies.
19 (i) The plan shall provide that all policies
20 of the converted company in force on the effective
21 date of conversion shall continue to remain in force
22 under the terms of those policies, except that any
23 voting or other membership rights of the
24 policyholders provided for under the policies or
25 under this Code and any contingent liability policy
26 provisions of the type described in Section 55 of
27 this Code shall be extinguished on the effective
28 date of the conversion.
29 (ii) The plan shall further provide that
30 holders of participating policies in effect on the
31 date of conversion shall continue to have the right
32 to receive dividends as provided in the
33 participating policies, if any.
34 (iii) Except for a mutual company's life
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1 policies, guaranteed renewable accident and health
2 policies, and non-cancelable accident and health
3 policies, the converted stock company may issue the
4 insured a nonparticipating policy as a substitute
5 for the participating policy upon the renewal date
6 of a participating policy.
7 (iv) The plan shall provide that a Class I
8 mutual company's participating life policies in
9 force on the effective date of the conversion shall
10 be operated by the converted company for dividend
11 purposes as a closed block of participating business
12 except that any or all classes of group
13 participating policies may be excluded from the
14 closed block. The plan shall establish one or more
15 segregated accounts for the benefit of the closed
16 block of business and shall allocate to those
17 segregated accounts enough assets of the mutual
18 company so that the assets together with the revenue
19 from the closed block of business are sufficient to
20 support the closed block including, but not limited
21 to, the payment of claims, expenses, taxes, and any
22 dividends that are provided for under the terms of
23 the participating policies with appropriate
24 adjustments in the dividends for experience changes.
25 The plan shall be accompanied by an opinion of a
26 qualified actuary or an appointed actuary who meets
27 the standards set forth in the insurance laws or
28 regulations for the submission of actuarial opinions
29 as to the adequacy of reserves or assets. The
30 opinion shall relate to the adequacy of the assets
31 allocated to the segregated accounts in support of
32 the closed block of business. The actuarial opinion
33 shall be based on methods of analysis deemed
34 appropriate for those purposes by the Actuarial
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1 Standards Board. The amount of assets allocated to
2 the segregated accounts of the closed block shall be
3 based upon the mutual company's last annual
4 statement that is updated to the effective date of
5 the conversion. The converted stock company shall
6 keep a separate accounting for the closed block and
7 shall make and include in the annual statement to be
8 filed with the Director each year a separate
9 statement showing the gains, losses, and expenses
10 properly attributable to the closed block.
11 Periodically, upon the Director's approval, those
12 assets allocated to the closed block as provided
13 herein that are in excess of the amount of assets
14 necessary to support the remaining policies in the
15 closed block shall revert to the benefit of the
16 converted company. The Director may waive the
17 requirement for the establishment of a closed block
18 of business if the Director deems it to be in the
19 best interests of the participating policyholders of
20 the mutual company to do so.
21 (c) The plan shall set forth the requirements for
22 granting membership interests to future policyholders of
23 the converted company.
24 (d) The plan shall include information sufficient
25 to demonstrate that the financial condition of the
26 converted company will not be diminished by the plan of
27 MHC conversion.
28 (e) The plan shall include a description of any
29 current proposal to issue shares of an intermediate
30 holding company or the converted company to the public or
31 to other persons who are not direct or indirect
32 subsidiaries of the mutual holding company.
33 (f) The plan shall include the identity of the
34 proposed officers and directors of the mutual holding
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1 company and each intermediate holding company, if any,
2 together with such other biographical information as the
3 Director may request.
4 (g) The plan shall include such other information
5 as the Director may request or may prescribe by rule.
6 (9) Effective date of the plan of MHC conversion. A
7 plan shall become effective when the Director has approved
8 the plan, the members have approved the plan and the articles
9 of incorporation of the mutual holding company, each
10 intermediate holding company, if any, and the revised
11 articles of incorporation of the converted company have been
12 adopted and filed with the Director.
13 (10) Corporate existence.
14 (a) Upon the conversion of a mutual company to a
15 converted company according to the provisions of this
16 Section, the corporate existence of the mutual company
17 shall be continued in the converted company with the
18 original date of incorporation of the mutual company.
19 All the rights, franchises, and interests of the mutual
20 company in and to every type of property, real, personal,
21 and mixed, and things in action thereunto belonging, is
22 deemed transferred to and vested in the converted company
23 without any deed or transfer. Simultaneously, the
24 converted company is deemed to have assumed all the
25 obligations and liabilities of the mutual company.
26 (b) The directors and officers of the mutual
27 company, unless otherwise specified in the plan of
28 conversion shall serve as directors and officers of the
29 converted company until new directors and officers of the
30 converted company are duly elected pursuant to the
31 articles of incorporation and bylaws of the converted
32 company.
33 (11) Regulation and authority of mutual holding company.
34 (a) A mutual holding company shall have the same
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1 powers granted to domestic mutual companies and be
2 subject to the same requirements and provisions of
3 Article III and any other provisions of this Code
4 applicable to mutual companies that are not inconsistent
5 with the provisions of this Section, provided however
6 that a mutual holding company shall not have the
7 authority to transact insurance pursuant to Section
8 39(l).
9 (b) Neither the mutual holding company nor any
10 intermediate holding company shall issue or reinsure
11 policies of insurance.
12 (c) A mutual holding company may enter into an
13 affiliation agreement or a merger agreement either at the
14 time of conversion, or at some later time with the
15 approval of the Director, with any mutual insurance
16 company authorized to do business in this State or
17 another mutual holding company. Any such merger
18 agreement may authorize members of the mutual insurance
19 company or other mutual holding company to become members
20 of the mutual holding company. Any such affiliation
21 agreement or merger agreement shall be subject to the
22 insurance laws of this State relating to such
23 transactions entered into by a domestic mutual company.
24 (d) The assets of the MHC shall be held in trust,
25 under such arrangements and on such terms as the Director
26 may approve, for the benefit of the policyholders of the
27 converted company. Any residual rights of the MHC in
28 such assets or any assets of the MHC determined not to be
29 held in trust shall be subject to a lien in favor of the
30 policyholders of the converted company under such terms
31 as the Director may approve. Upon conversion of the
32 mutual holding company as provided for in subsection (13)
33 of this Section, such assets shall be released from trust
34 in accordance with the plan of conversion approved by the
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1 Director.
2 (12) Diversion of business to affiliates. Without prior
3 approval of the Director, neither the converted company nor
4 any other person affiliated with or controlling the converted
5 company shall divert business from the converted company to
6 any insurance company affiliate if the purpose or effect
7 would be to significantly reduce the number of members of the
8 mutual holding company.
9 (13) Conversion of mutual holding company. A mutual
10 holding company created pursuant to this Section may
11 reorganize by complying with the applicable provisions of
12 Section 59. For purposes of effecting a conversion under
13 that Section, the mutual holding company shall be deemed a
14 "mutual company" and the converted mutual holding company
15 shall be deemed a "converted stock company," as such terms
16 are defined in Section 59.1.
17 (14) Conflict of interest. No director, officer, agent,
18 or employee of the mutual company or any other person shall
19 receive any fee, commission, or other valuable consideration,
20 other than his or her usual regular salary and compensation,
21 for in any manner aiding, promoting, or assisting in the
22 conversion except as set forth in the plan of MHC conversion
23 approved by the Director. This provision does not prohibit
24 the payment of reasonable fees and compensation to attorneys,
25 accountants, and actuaries for services performed in the
26 independent practice of their professions, even if the
27 attorney, accountant, or actuary is also a director of the
28 mutual company.
29 (15) Costs and expenses. All the costs and expenses
30 connected with a plan of MHC conversion shall be paid for or
31 reimbursed by the mutual company or the converted company.
32 (16) Failure to give notice. If the mutual company
33 complies substantially and in good faith with the notice
34 requirements of this Section, the mutual company's failure to
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1 give any member or members any required notice does not
2 impair the validity of any action taken under this Section.
3 (17) Limitation of actions. Any action challenging the
4 validity of or arising out of acts taken or proposed to be
5 taken under this Section shall be commenced within 30 days
6 after the effective date of the plan of MHC conversion.".