|
(iv) the mutual company has the names and addresses |
of the persons
covered under the group life policy or |
group annuity contract.
|
A person whose policy is issued after the board of |
directors adopts the
plan but before the plan's effective |
date is not an eligible member but shall
have those rights |
set forth in subsection (10) of this Section.
|
(b) "Converted stock company" is an Illinois domiciled |
stock company that
converted from an Illinois domiciled |
mutual company under this Section.
|
(c) "Plan of conversion" or "plan" is a plan adopted by |
an Illinois
domestic mutual company's board of directors |
under this Section to convert the
mutual company into an |
Illinois domiciled stock company.
|
(d) "Policy" includes an annuity contract.
|
(e) "Member" means a person who, on the records of the |
mutual company
and pursuant to its articles of |
incorporation or bylaws, is deemed to be a
holder of a |
membership interest in the mutual company.
|
(2) Adoption of the plan of conversion by the board of |
directors.
|
(a) A mutual company seeking to convert to a stock |
company shall, by the
affirmative vote of two-thirds of its |
board of directors, adopt a plan of
conversion consistent |
with the requirements of subsection (6) of this Section.
|
(b) At any time before approval of a plan by the |
|
Director, the mutual
company by the affirmative vote of |
two-thirds of its board of directors, may
amend or withdraw |
the plan.
|
(3) Approval of the plan of conversion by the Director of |
Insurance.
|
(a) Required findings. After adoption by the mutual |
company's board of
directors, the plan shall be submitted |
to the Director for review and approval.
The Director shall |
approve the plan upon finding that:
|
(i) the provisions of this Section have been |
complied with;
|
(ii) the plan will not prejudice the interests of |
the members; and
|
(iii) the plan's method of allocating subscription |
rights is fair and
equitable.
|
(b) Documents to be filed.
|
(i) Prior to the members' approval of the plan, a |
mutual company seeking
the Director's approval of a |
plan shall file the following documents with the
|
Director for review and approval:
|
(A) the plan of conversion, including the |
independent evaluation of
pro forma market value |
required by item (f) of subsection (6) of this |
Section;
|
(B) the form of notice required by item (b) of |
subsection (4) of this
Section for eligible |
|
members of the meeting to vote on the plan;
|
(C) any proxies to be solicited from eligible |
members pursuant to
subitem (ii) of item (c) of |
subsection (4) of this Section;
|
(D) the form of notice required by item (a) of |
subsection (10) of this
Section for persons whose |
policies are issued after adoption of the plan but
|
before its effective date; and
|
(E) the proposed articles of incorporation and |
bylaws of the converted
stock company.
|
Once filed, these documents shall be approved or |
disapproved by the
Director within a reasonable time.
|
(ii) After the members have approved the plan, the |
converted stock
company shall file the following |
documents with the Director:
|
(A) the minutes of the meeting of the members |
at which the plan was
voted upon; and
|
(B) the revised articles of incorporation and |
bylaws of the converted
stock company.
|
(c) Consultant. The Director may retain, at the mutual |
company's expense,
any qualified expert not otherwise a |
part of the Director's staff to assist in
reviewing the |
plan and the independent evaluation of the pro forma market |
value
which is required by item (f) of subsection (6) of |
this Section.
|
(4) Approval of the plan by the members.
|
|
(a) Members entitled to notice of and to vote on the |
plan. All eligible
members shall be given notice of and an |
opportunity to vote upon the plan.
|
(b) Notice required. All eligible members shall be |
given notice of the
members' meeting to vote upon the plan. |
A copy of the plan or a summary of the
plan shall accompany |
the notice. The notice shall be mailed to each member's
|
last known address, as shown on the mutual company's |
records, within 45 days of
the Director's approval of the |
plan. The meeting to vote upon the plan shall
not be set |
for a date less than 30 60 days after the date when the |
notice of the
meeting is mailed by the mutual company. If |
the meeting to vote upon the plan
is held coincident with |
the mutual company's annual meeting of policyholders,
only |
one combined notice of meeting is required.
|
(c) Vote required for approval.
|
(i) After approval by the Director, the plan shall |
be adopted upon
receiving the affirmative vote of at |
least two-thirds of the votes cast by
eligible members.
|
(ii) Members entitled to vote upon the proposed |
plan may vote in person
or by proxy. Any proxies to be |
solicited from eligible members shall be filed
with and |
approved by the Director.
|
(iii) The number of votes each eligible member may |
cast shall be
determined by the mutual company's |
bylaws. If the bylaws are silent, each
eligible member |
|
may cast one vote.
|
(5) Adoption of revised articles of incorporation. |
Adoption of the revised
articles of incorporation of the |
converted stock company is necessary to
implement the plan and |
shall be governed by the applicable provisions of
Section 57 of |
this Code. For a Class 1 mutual company, the members may adopt
|
the revised articles of incorporation at the same meeting at |
which the members
approve the plan. For a Class 2 or 3 mutual |
company, the revised articles of
incorporation may be adopted |
solely by the board of directors or trustees, as
provided in |
Section 57 of this Code.
|
(5.5) Prior to the completion of a plan of conversion filed |
by a mutual
company with the Director, no person shall |
knowingly acquire, make any offer,
or make any announcement of |
an offer for any security issued or to be issued by
the |
converting mutual company in connection with its plan of |
conversion or for
any security issued or to be issued by any |
other company authorized in
item(c)(i) of subsection (6) of |
this Section and organized for purposes of
effecting the |
conversion, except in compliance with the maximum purchase
|
limitations imposed by item (i) of subsection (6) of this |
Section or the terms
of the plan of conversion as approved by |
the Director.
|
(6) Required provisions in a plan of conversion. The |
following provisions
shall be included in the plan:
|
(a) Reasons for conversion. The plan shall set forth |
|
the reasons for the
proposed conversion.
|
(b) Effect of conversion on existing policies.
|
(i) The plan shall provide that all policies in |
force on the effective
date of conversion shall |
continue to remain in force under the terms of those
|
policies, except that any voting rights of the |
policyholders provided for under
the policies or under |
this Code and any contingent liability policy |
provisions
of the type described in Section 55 of this |
Code shall be extinguished on the
effective date of the |
conversion.
|
(ii) The plan shall further provide that holders of |
participating
policies in effect on the date of |
conversion shall continue to have the right
to receive |
dividends as provided in the participating policies, |
if any.
|
(iii) Except for a mutual company's participating |
life policies,
guaranteed renewable
accident and |
health policies, and non-cancelable accident and |
health policies,
the converted stock company may issue |
the insured a nonparticipating policy as
a substitute |
for the participating policy upon the renewal date of a
|
participating policy.
|
(c) Subscription rights to eligible members.
|
(i) The plan shall provide that each eligible |
member is to receive,
without payment, nontransferable |
|
subscription rights to purchase a portion of
the |
capital stock of the converted stock company. As an |
alternative to
subscription rights in the converted |
stock company, the plan may provide that
each eligible |
member is to receive, without payment, nontransferable
|
subscription rights to purchase a portion of the |
capital stock of: (A) a
corporation organized and owned |
by the mutual company for the purpose of
acquiring or |
holding all the stock of the converted
stock company; |
or (B) a
stock insurance company owned by the mutual |
company into which the mutual
company will be merged.
|
(ii) The subscription rights shall be allocated in |
whole shares among
the eligible members using a fair |
and equitable formula. This formula may but
need not |
take into account how the different classes of policies |
of the
eligible members contributed to the surplus of |
the mutual company.
|
(d) Oversubscription. The plan shall provide a fair and |
equitable means
for the allocation of shares of capital |
stock in the event of an
oversubscription to shares by |
eligible members exercising subscription rights
received |
pursuant to item (c) of subsection (6) of this Section.
|
(e) Undersubscription. The plan shall provide that any |
shares of capital
stock not subscribed to by eligible |
members exercising subscription rights
received under item |
(c) of subsection (6) of this Section shall be sold in a
|
|
public offering through an underwriter. If the number of |
shares of capital
stock not
subscribed by eligible members |
is so small
or the additional time or expense required for |
a public offering of those
shares would be otherwise |
unwarranted under the circumstances, the plan of |
conversion may provide for the
purchase of the unsubscribed |
shares by a private placement or other alternative
method |
approved by the Director that is fair and equitable to the |
eligible
members.
|
(f) Total price of stock. The plan shall set the total |
price of the
capital stock equal to the estimated pro forma |
market value of the converted
stock company based upon an |
independent evaluation by a qualified person. The
pro forma |
market value may be the value that is estimated to be |
necessary to
attract full subscription for the shares as |
indicated by the independent
evaluation.
|
(g) Purchase price of each share. The plan shall set |
the purchase price of
each share of capital stock equal to |
any reasonable amount that will not
inhibit the purchase of |
shares by members. The purchase price of each share
shall |
be uniform for all purchasers except the price may be |
modified by the
Director by reason of his consideration of |
a plan for the purchase of
unsubscribed stock pursuant to |
item (e) of subsection (6) of this Section.
|
(h) Closed block of business for participating life |
policies of a Class 1
mutual company.
|
|
(i) The plan shall provide that a Class 1 mutual |
company's participating
life policies in force on the |
effective date of the conversion shall be
operated by |
the converted stock company for dividend purposes as a |
closed block
of participating business except that any |
or all classes of group participating
policies may be |
excluded from the closed block.
|
(ii) The plan shall establish one or more |
segregated accounts for the
benefit of the closed block |
of business and shall allocate to those segregated
|
accounts enough assets of the mutual company so that |
the assets together with
the revenue from the closed |
block of business are sufficient to support the
closed |
block including, but not limited to, the payment of |
claims, expenses,
taxes, and any dividends that are |
provided for under the terms of the
participating |
policies with appropriate adjustments in the dividends |
for
experience changes. The plan shall be accompanied |
by an opinion of a qualified
actuary or an appointed |
actuary who meets the standards set forth in the
|
insurance laws or regulations for the submission of |
actuarial opinions as to
the adequacy of reserves or |
assets. The opinion shall relate to the adequacy
of the |
assets allocated to the segregated accounts in support |
of the closed
block of business. The actuarial opinion |
shall be based on methods of analysis
deemed |
|
appropriate for those purposes by the Actuarial |
Standards Board.
|
(iii) The amount of assets allocated to the |
segregated accounts of the
closed block shall be based |
upon the mutual company's last annual statement
that is |
updated to the effective date of the conversion.
|
(iv) The converted stock company shall keep a |
separate accounting for
the closed block and shall make |
and include in the annual statement to be filed
with |
the Director each year a separate statement showing the |
gains, losses, and
expenses properly attributable to |
the closed block.
|
(v) Periodically, upon the Director's approval, |
those assets allocated
to the closed block as provided |
in subitem (ii) of item (h) of subsection (6)
of this |
Section that are in excess of the amount of assets |
necessary to support
the remaining policies polices in |
the closed block shall revert to the benefit of the
|
converted stock company.
|
(vi) The Director may waive the requirement for the |
establishment of a
closed block of business if the |
Director deems it to be in the best interests
of the |
participating policyholders of the mutual insurer to |
do so.
|
(i) Limitations on acquisition of control. The plan |
shall provide that any
one person or group of persons |
|
acting in concert may not acquire, through
public offering |
or subscription rights, more than 5% of the capital stock |
of
the converted stock company for a period of 5 years from |
the effective date of
the plan except with the approval of |
the Director. This limitation does not
apply to any entity |
that is to purchase 100% of the capital stock of the
|
converted company as part of the plan of conversion |
approved by the Director or
to a purchase of stock by a |
tax-qualified employee benefit plan pursuant to
|
subscription grants granted to that plan as authorized |
under item (b) of
subsection (7) of this Section and to a |
purchase of unsubscribed stock pursuant
to item (e) of |
subsection (6) of this Section.
|
(7) Optional provisions in a plan of conversion. The |
following provisions
may be included in the plan:
|
(a) Directors and officers subscription rights.
|
(i) The plan may provide that the directors and |
officers of the mutual
company shall receive, without |
payment, nontransferable subscription rights to
|
purchase capital stock of the converted stock company |
or the stock of another
corporation that is |
participating in the conversion plan as provided in |
subitem
(i) of item (c) of subsection (6) of this |
Section. Those subscription rights
shall be allocated |
among the directors and officers by a fair and |
equitable
formula.
|
|
(ii) The total number of shares that may be |
purchased under subitem (i)
of item (a) of subsection |
(7) of this Section may not exceed 35% of the total
|
number of shares to be issued in the case of a mutual |
company with total assets
of less than $50 million or |
25% of the total shares to be issued in the case of
a |
mutual company with total assets of more than $500 |
million. For mutual
companies with total assets |
between $50 million and $500 million, the total
number |
of shares that may be purchased shall be interpolated.
|
(iii) Stock purchased by a director or officer |
under subitem (i) of item
(a) of subsection (7) of this |
Section may not be sold within one year following
the |
effective date of the conversion.
|
(iv) The plan may also provide that a director or |
officer or person
acting in concert with a director or |
officer of the mutual company may not
acquire any |
capital stock of the converted stock company for 3 |
years after the
effective date of the plan, except |
through a broker or dealer, without the
permission of |
the Director. That provision may not apply to prohibit |
the
directors and officers from purchasing stock |
through subscription rights
received in the plan under |
subitem (i) of item (a) of subsection (7) of this
|
Section.
|
(b) Tax-qualified employee stock benefit plan. The |
|
plan may allocate to a
tax-qualified employee benefit plan |
nontransferable subscription rights to
purchase up to 10% |
of the capital stock of the converted stock company or the
|
stock of another corporation that is participating in the |
conversion plan as
provided in subitem (i) of item (c) of |
subsection (6) of this Section. That
employee benefit plan |
shall be entitled to exercise its subscription rights
|
regardless of the amount of shares purchased by other |
persons.
|
(8) Alternative plan of conversion. The board of directors |
may adopt a plan
of conversion that does not rely in whole or |
in part upon the issuance to
members of non-transferable |
subscription rights to purchase stock of the
converted stock |
company if the Director finds that the plan does not prejudice
|
the interests of the members, is fair and equitable, and is |
based upon an
independent appraisal of the market value of the |
mutual company by a qualified
person and a fair and equitable |
allocation of any consideration to be given
eligible members. |
The Director may retain, at the mutual company's expense,
any |
qualified expert not otherwise a part of the Director's staff |
to assist in
reviewing whether the plan may be approved by the |
Director.
|
(9) Effective date of the plan. A plan shall become |
effective when the
Director has approved the plan, the members |
have approved the plan, and the
revised articles of |
incorporation have been adopted.
|
|
(10) Rights of members whose policies are issued after |
adoption of the plan
and before its effective date.
|
(a) Notice. All members whose policies are issued after |
the proposed plan
has been adopted by the board of |
directors and before the effective date of the
plan shall |
be given written notice of the plan of conversion. The |
notice shall
specify the member's right to rescind that |
policy as provided in item (b) of
subsection (10) of this |
Section within 45 days after the effective date of the
|
plan. A copy of the plan or a summary of the plan shall |
accompany the notice.
The form of the notice shall be filed |
with and approved by the Director.
|
(b) Option to rescind. Any member entitled to receive |
the notice described
in item (a) of subsection (10) of this |
Section shall be entitled to rescind his
or her policy and |
receive a full refund of any amounts paid for the policy or
|
contract within 10 days after the receipt of the notice.
|
(11) Corporate existence.
|
(a) Upon the conversion of a mutual company to a |
converted stock company
according to the provisions of this |
Section, the corporate existence of the
mutual company |
shall be continued in the converted stock company. All the
|
rights, franchises, and interests of the mutual company in |
and to every type of
property, real, personal, and mixed, |
and things in action thereunto belonging,
is deemed |
transferred to and vested in the converted stock company |
|
without any
deed or transfer. Simultaneously, the |
converted stock company is deemed to
have assumed all the |
obligations and liabilities of the mutual company.
|
(b) The directors and officers of the mutual company, |
unless otherwise
specified in the plan of conversion, shall |
serve as directors and officers of
the converted stock |
company until new directors and officers of the converted
|
stock company are duly elected pursuant to the articles of |
incorporation and
bylaws of the converted stock company.
|
(12) Conflict of interest. No director, officer, agent, or |
employee of the
mutual company or any other person shall |
receive any fee, commission, or other
valuable consideration, |
other than his or her usual regular salary and
compensation, |
for in any manner aiding, promoting, or assisting in the
|
conversion except as set forth in the plan approved by the |
Director. This
provision does not prohibit the payment of |
reasonable fees and compensation to
attorneys, accountants, |
and actuaries for services performed in the independent
|
practice of their professions, even if the attorney, |
accountant, or actuary is
also a Director of the mutual |
company.
|
(13) Costs and expenses. All the costs and expenses |
connected with a plan of
conversion shall be paid for or |
reimbursed by the mutual company or the
converted stock company |
except where the plan provides either for a holding
company to |
acquire the stock of the converted stock company or for the |
|
merger
of the mutual company into a stock insurance company as |
provided in subitem (i)
of item (c) of subsection (6) of this |
Section. In those cases, the acquiring
holding company or the |
stock insurance company shall pay for or reimburse all
the |
costs and expenses connected with the plan.
|
(14) Failure to give notice. If the mutual company complies |
substantially
and in good faith with the notice requirements of |
this Section, the mutual
company's failure to give any member |
or members any required notice does not
impair the validity of |
any action taken under this Section.
|
(15) Limitation of actions. Any action challenging the |
validity of or
arising out of acts taken or proposed to be |
taken under this Section
shall be commenced within 30 days |
after the effective date of the plan.
|
(Source: P.A. 90-381, eff. 8-14-97.)
|
Section 99. Effective date. This Act takes effect upon |
becoming law.
|