1550. This article shall apply only to domestic reciprocal insurers
organized after 1974 to provide medical malpractice insurance.
1551. By following the procedure specified in this article, any
domestic reciprocal insurer described in this article may merge,
consolidate, or otherwise unite with or become a part of, or may
reinsure all of its policies with, and, upon assumption of all of its
liabilities, may transfer all of its assets to, any other domestic
reciprocal insurer or an incorporated insurer, domestic or foreign.
If an insurer not admitted in California is the surviving entity in
the transaction, the plan and agreement shall provide either for that
insurer to be admitted to transact insurance in California or for
any nonsurviving insurer admitted in California to withdraw from the
state. The plan and agreement by which the transaction is to be
effected shall be approved by a resolution of a majority of the body
exercising the subscribers' rights selected pursuant to Section 1308
for each domestic reciprocal insurer that is a party to the
transaction or by such higher number as may be required by the
documents governing the reciprocal, before it is submitted to the
subscribers for their consideration. The resolution shall specify the
reasons for and the purposes of the proposed transaction and the
manner in which the transaction is expected to benefit and serve the
best interests of the domestic reciprocal insurer and its
subscribers. The plan and agreement shall be approved on behalf of
each constituent other party by those persons required to approve
those transactions by the laws under which that other party is
organized or is otherwise governed.
1552. The plan and agreement by which the transaction is to be
effected shall be submitted to the commissioner, who shall examine it
and require those provisions to be inserted in the agreement and any
actions to be taken in connection with the transaction, including,
but not limited to, (a) the terms and conditions of the transaction,
(b) any fee, commission, right, option, benefit, or other valuable
consideration paid or offered to or for the benefit of any director,
officer, employee, subscriber, agent, or broker of each domestic
reciprocal insurer or the insurer's attorney-in-fact in connection
with the transaction, (c) the contents of the notice of the vote on
the transaction by the subscribers of each domestic reciprocal
insurer that is a party thereto, (d) the manner and form of voting
thereon by the subscribers of each domestic reciprocal insurer, and
(e) any other change, that he or she may deem necessary in order that
the transaction may be fair, just, and equitable to the subscribers
of each domestic reciprocal insurer that is a party to the
transaction, and the transaction is otherwise fair, just, and
equitable to the parties to the transaction and their respective
policyholders, owners, creditors, and the public. The commissioner
shall not approve any transaction if the bylaws, rules, regulations,
power of attorney, or instrument affecting the voting or distribution
rights of subscribers of a domestic reciprocal insurer have been
amended to change those rights within one year prior to the date of
filing of the plan and agreement with the commissioner. The
subscribers of a domestic reciprocal insurer who shall be eligible to
participate in the transaction shall be those persons who are
current subscribers of the domestic reciprocal insurer at the date
the commissioner approves the plan and agreement for submission to
the subscribers for approval pursuant to Section 1553, or at another
date determined by the commissioner. No director, officer, agent, or
employee of the domestic reciprocal insurer or the insurer's
attorney-in-fact shall receive any fee, commission, or other valuable
consideration whatsoever, other than regular salary and
compensation, for in any manner aiding, promoting, or assisting in
the transaction, except as set forth in the plan and agreement
approved by the commissioner. This provision shall not be deemed to
prohibit the payment of reasonable fees and compensation to attorneys
at law, accountants, and actuaries for services performed in the
independent practice of their professions, even though they may also
be directors of the insurer.
1553. When the plan and agreement has been approved by the
commissioner, with any changes required by him or her, it shall
require the approval of each domestic reciprocal insurer that is a
party to the transaction by not less than two-thirds of the votes
cast by its subscribers represented in person or by proxy at a
meeting called to consider the plan and agreement. At least 30 days
before the day fixed for the meeting, notice of the meeting and its
purpose shall be given to the subscribers at their addresses
appearing on the books maintained at the home office of the insurer.
With respect to subscribers whose addresses do not appear on the
books of the insurer, notice shall be deemed to have been given if
published at least once in some newspaper of general circulation in
the county in which the principal office of the insurer is located.
At the meeting, the presence in person or by proxy of 10 percent of
the subscribers of the insurer shall constitute a quorum. In the
absence of a quorum, the subscribers present at the meeting in person
or by proxy may adjourn the meeting to a later date. If the meeting
is adjourned to the next business day, no further notice need be
given of the date to which the meeting is adjourned. If the meeting
is adjourned to a date later than the next business day, notice of
the date to which the meeting is adjourned shall be given to the
subscribers at least 15 days prior to the adjourned meeting date.
1554. If one of the insurers that is a party to the transaction is
a domestic incorporated insurer, Section 1109 of the Corporations
Code shall apply if the transaction is a merger or consolidation, and
Section 1113 of the Corporations Code shall also apply if the
transaction is a merger.
1555. (a) If the vote is in the affirmative, a certified copy of
all proceedings relating to the proposed transaction shall be filed
with the commissioner. If one of the insurers that is a party to the
transaction is a foreign incorporated insurer, there shall also be
filed with the commissioner evidence of that approval, consent, or
authorization that is required by the laws of the state of
incorporation of the foreign insurer. If the commissioner finds that
the proceedings have been in accordance with the law and his or her
requirements, the commissioner shall issue a certificate approving
the plan and agreement and the transaction shall become effective (1)
in the case of a merger, when the certificate, the agreement of
merger, or the certificate of merger, as applicable, and any other
documents required by law have been filed with the Secretary of
State, unless a future effective date or time is provided in the
agreement of merger or certificate of merger, in which event the
merger shall be effective at that future effective date or time, (2)
in the case of a consolidation, when any documents required by the
commissioner have been filed with and approved by the commissioner,
unless a future effective date or time is provided in the agreement
of consolidation, in which event the consolidation shall be effective
at that future effective date or time, or (3) in the case of another
form of transaction, when determined by the commissioner.
(b) The fee of the commissioner for considering the proposed
transaction and issuing a certificate approving the transaction shall
be four thousand two hundred fifty dollars ($4,250), payable in
advance with the filing with the commissioner of the first papers
relating to the proposed transaction. Five dollars ($5) shall be
charged for each signed and sealed or certified copy of the
certificate issued as part of the same transaction in which the
original certificate is issued.
1556. (a) If the surviving entity is a domestic incorporated
insurer in a merger in which a domestic reciprocal insurer is a
constituent party, after approval of the merger by the constituent
reciprocal insurer and constituent incorporated insurer, the
surviving incorporated insurer shall file in the office of the
Secretary of State a copy of the agreement of merger and attachments
required under paragraph (1) of subdivision (g) of Section 1113 of
the Corporations Code.
(b) If the surviving entity is a domestic reciprocal insurer in a
merger in which a domestic incorporated insurer is a constituent
party, after approval of the merger by the constituent disappearing
domestic incorporated insurer and constituent reciprocal insurer, the
surviving reciprocal insurer shall file in the office of the
Secretary of State a copy of the agreement of merger and attachments
required under paragraph (2) of subdivision (g) of Section 1113 of
the Corporations Code.
1557. (a) Any plan of merger, consolidation, or other unification
under this article shall provide that all rights and properties of
the parties to the plan of merger, consolidation, or other
unification shall accrue to, and become the rights and properties of,
the surviving or consolidated or continuing insurer which shall
succeed to and assume all the obligations and liabilities of the
merged, consolidating, or transferring insurer in the same manner as
if incurred or contracted by the surviving, consolidated, or
continuing insurer.
(b) All rights of creditors and all liens upon the property of
each of the constituent incorporated insurers and constituent
reciprocal insurers shall be preserved unimpaired, provided that
those liens upon property of a disappearing incorporated insurer or
disappearing reciprocal insurer shall be limited to the property
affected thereby immediately prior to the time the merger is
effective.
(c) Any action or proceeding pending by or against any
disappearing incorporated insurer or disappearing reciprocal insurer
may be prosecuted to judgment, which shall bind the surviving
incorporated insurer or surviving reciprocal insurer, or the
surviving incorporated insurer or surviving reciprocal insurer may be
proceeded against or substituted in its place.
1558. In the event a domestic reciprocal insurer is merged, is
consolidated, or is part of a reorganization pursuant to the
procedures specified in this article and the surviving, consolidated,
or continuing company is a stock incorporated insurer, the plan
shall provide for the manner of converting or exchanging the equity
interests of current subscribers in the reciprocal insurer's equity
into (a) shares, interests, or other securities of the surviving
corporation, and (b) if any interests of the subscribers are not to
be converted solely into shares, interests, or other securities of
the surviving corporation, cash, property rights, interests,
warrants, options, premium credits, or securities that may be in
addition to, or in lieu of, shares, interests, or other securities of
the surviving corporation. However, notwithstanding the foregoing,
the equity interests of current subscribers in the reciprocal insurer'
s equity may be converted or exchanged solely into premium credits if
the plan and agreement so provide but only at the subscriber's
election. The conversion or exchange of the equity interests of
subscribers shall be on terms fair, just, and equitable to the
parties to the transaction, their subscribers, shareholders, owners,
and creditors, as approved by the commissioner, and the commissioner
shall require an opinion as to the fairness of those terms and an
appraisal of the fair value of the domestic reciprocal insurer,
together with the respective equity interests therein, by one or more
qualified disinterested persons appointed by the reciprocal insurer
with the approval of the commissioner, unless the commissioner finds
that such an opinion or appraisal is not necessary to protect the
interest of current subscribers of the reciprocal insurer. The
expense of any such opinion and appraisal shall be borne by the
reciprocal insurer. Any person holding a subscription note or other
debt instrument evidencing a capital contribution to the domestic
reciprocal insurer shall be entitled upon demand to have redeemed
that note or debt instrument for cash or securities if securities are
offered to current policyholders as part of the transaction. The
plan may authorize the sale of securities to members of the governing
board, officers, or employees of the domestic reciprocal insurer or
its attorney-in-fact, or to subscribers or former subscribers of the
domestic reciprocal insurer, in accordance with the provisions of
Article 8 (commencing with Section 820) of Chapter 1 of Part 2 of
Division 1. Nothing in this section shall preclude the issuance of
different securities, subject to the approval of the commissioner,
provided that comparable securities shall be issued at prices not
less than the conversion or exchange values of any such securities
distributed to current subscribers. The conversion or exchange shall
constitute full payment and discharge of the subscribers' equity
interests in the domestic reciprocal insurer, and the subscribers
shall have no other rights with respect thereto, except for rights
relating to a continuing debt or equity interest that a former
subscriber holds in the surviving insurer.
1559. (a) For all purposes for a merger in which the surviving
entity is a domestic reciprocal insurer and a domestic incorporated
insurer is not a constituent corporation as that term is defined
under Section 161 of the Corporations Code, a copy of the certificate
of merger duly certified by the commissioner is conclusive evidence
of the merger of the constituent reciprocal insurers, either by
themselves or together with any foreign incorporated insurers, into
the surviving reciprocal insurer.
(b) For all purposes for a merger in which the surviving entity is
a domestic reciprocal insurer and a domestic incorporated insurer is
a "constituent corporation" as that term is defined under Section
161 of the Corporations Code, a copy of the certificate of merger
duly certified by the Secretary of State is conclusive evidence of
the merger of the constituent reciprocal insurers, either by
themselves or together with constituent incorporated insurers, into
the surviving reciprocal insurers.
(c) For all purposes for a merger in which the surviving entity is
a domestic incorporated insurer and the disappearing entity is a
domestic reciprocal insurer, a copy of the certificate of merger duly
certified by the Secretary of State is conclusive evidence of the
merger of the constituent insurers.
1550. This article shall apply only to domestic reciprocal insurers
organized after 1974 to provide medical malpractice insurance.
1551. By following the procedure specified in this article, any
domestic reciprocal insurer described in this article may merge,
consolidate, or otherwise unite with or become a part of, or may
reinsure all of its policies with, and, upon assumption of all of its
liabilities, may transfer all of its assets to, any other domestic
reciprocal insurer or an incorporated insurer, domestic or foreign.
If an insurer not admitted in California is the surviving entity in
the transaction, the plan and agreement shall provide either for that
insurer to be admitted to transact insurance in California or for
any nonsurviving insurer admitted in California to withdraw from the
state. The plan and agreement by which the transaction is to be
effected shall be approved by a resolution of a majority of the body
exercising the subscribers' rights selected pursuant to Section 1308
for each domestic reciprocal insurer that is a party to the
transaction or by such higher number as may be required by the
documents governing the reciprocal, before it is submitted to the
subscribers for their consideration. The resolution shall specify the
reasons for and the purposes of the proposed transaction and the
manner in which the transaction is expected to benefit and serve the
best interests of the domestic reciprocal insurer and its
subscribers. The plan and agreement shall be approved on behalf of
each constituent other party by those persons required to approve
those transactions by the laws under which that other party is
organized or is otherwise governed.
1552. The plan and agreement by which the transaction is to be
effected shall be submitted to the commissioner, who shall examine it
and require those provisions to be inserted in the agreement and any
actions to be taken in connection with the transaction, including,
but not limited to, (a) the terms and conditions of the transaction,
(b) any fee, commission, right, option, benefit, or other valuable
consideration paid or offered to or for the benefit of any director,
officer, employee, subscriber, agent, or broker of each domestic
reciprocal insurer or the insurer's attorney-in-fact in connection
with the transaction, (c) the contents of the notice of the vote on
the transaction by the subscribers of each domestic reciprocal
insurer that is a party thereto, (d) the manner and form of voting
thereon by the subscribers of each domestic reciprocal insurer, and
(e) any other change, that he or she may deem necessary in order that
the transaction may be fair, just, and equitable to the subscribers
of each domestic reciprocal insurer that is a party to the
transaction, and the transaction is otherwise fair, just, and
equitable to the parties to the transaction and their respective
policyholders, owners, creditors, and the public. The commissioner
shall not approve any transaction if the bylaws, rules, regulations,
power of attorney, or instrument affecting the voting or distribution
rights of subscribers of a domestic reciprocal insurer have been
amended to change those rights within one year prior to the date of
filing of the plan and agreement with the commissioner. The
subscribers of a domestic reciprocal insurer who shall be eligible to
participate in the transaction shall be those persons who are
current subscribers of the domestic reciprocal insurer at the date
the commissioner approves the plan and agreement for submission to
the subscribers for approval pursuant to Section 1553, or at another
date determined by the commissioner. No director, officer, agent, or
employee of the domestic reciprocal insurer or the insurer's
attorney-in-fact shall receive any fee, commission, or other valuable
consideration whatsoever, other than regular salary and
compensation, for in any manner aiding, promoting, or assisting in
the transaction, except as set forth in the plan and agreement
approved by the commissioner. This provision shall not be deemed to
prohibit the payment of reasonable fees and compensation to attorneys
at law, accountants, and actuaries for services performed in the
independent practice of their professions, even though they may also
be directors of the insurer.
1553. When the plan and agreement has been approved by the
commissioner, with any changes required by him or her, it shall
require the approval of each domestic reciprocal insurer that is a
party to the transaction by not less than two-thirds of the votes
cast by its subscribers represented in person or by proxy at a
meeting called to consider the plan and agreement. At least 30 days
before the day fixed for the meeting, notice of the meeting and its
purpose shall be given to the subscribers at their addresses
appearing on the books maintained at the home office of the insurer.
With respect to subscribers whose addresses do not appear on the
books of the insurer, notice shall be deemed to have been given if
published at least once in some newspaper of general circulation in
the county in which the principal office of the insurer is located.
At the meeting, the presence in person or by proxy of 10 percent of
the subscribers of the insurer shall constitute a quorum. In the
absence of a quorum, the subscribers present at the meeting in person
or by proxy may adjourn the meeting to a later date. If the meeting
is adjourned to the next business day, no further notice need be
given of the date to which the meeting is adjourned. If the meeting
is adjourned to a date later than the next business day, notice of
the date to which the meeting is adjourned shall be given to the
subscribers at least 15 days prior to the adjourned meeting date.
1554. If one of the insurers that is a party to the transaction is
a domestic incorporated insurer, Section 1109 of the Corporations
Code shall apply if the transaction is a merger or consolidation, and
Section 1113 of the Corporations Code shall also apply if the
transaction is a merger.
1555. (a) If the vote is in the affirmative, a certified copy of
all proceedings relating to the proposed transaction shall be filed
with the commissioner. If one of the insurers that is a party to the
transaction is a foreign incorporated insurer, there shall also be
filed with the commissioner evidence of that approval, consent, or
authorization that is required by the laws of the state of
incorporation of the foreign insurer. If the commissioner finds that
the proceedings have been in accordance with the law and his or her
requirements, the commissioner shall issue a certificate approving
the plan and agreement and the transaction shall become effective (1)
in the case of a merger, when the certificate, the agreement of
merger, or the certificate of merger, as applicable, and any other
documents required by law have been filed with the Secretary of
State, unless a future effective date or time is provided in the
agreement of merger or certificate of merger, in which event the
merger shall be effective at that future effective date or time, (2)
in the case of a consolidation, when any documents required by the
commissioner have been filed with and approved by the commissioner,
unless a future effective date or time is provided in the agreement
of consolidation, in which event the consolidation shall be effective
at that future effective date or time, or (3) in the case of another
form of transaction, when determined by the commissioner.
(b) The fee of the commissioner for considering the proposed
transaction and issuing a certificate approving the transaction shall
be four thousand two hundred fifty dollars ($4,250), payable in
advance with the filing with the commissioner of the first papers
relating to the proposed transaction. Five dollars ($5) shall be
charged for each signed and sealed or certified copy of the
certificate issued as part of the same transaction in which the
original certificate is issued.
1556. (a) If the surviving entity is a domestic incorporated
insurer in a merger in which a domestic reciprocal insurer is a
constituent party, after approval of the merger by the constituent
reciprocal insurer and constituent incorporated insurer, the
surviving incorporated insurer shall file in the office of the
Secretary of State a copy of the agreement of merger and attachments
required under paragraph (1) of subdivision (g) of Section 1113 of
the Corporations Code.
(b) If the surviving entity is a domestic reciprocal insurer in a
merger in which a domestic incorporated insurer is a constituent
party, after approval of the merger by the constituent disappearing
domestic incorporated insurer and constituent reciprocal insurer, the
surviving reciprocal insurer shall file in the office of the
Secretary of State a copy of the agreement of merger and attachments
required under paragraph (2) of subdivision (g) of Section 1113 of
the Corporations Code.
1557. (a) Any plan of merger, consolidation, or other unification
under this article shall provide that all rights and properties of
the parties to the plan of merger, consolidation, or other
unification shall accrue to, and become the rights and properties of,
the surviving or consolidated or continuing insurer which shall
succeed to and assume all the obligations and liabilities of the
merged, consolidating, or transferring insurer in the same manner as
if incurred or contracted by the surviving, consolidated, or
continuing insurer.
(b) All rights of creditors and all liens upon the property of
each of the constituent incorporated insurers and constituent
reciprocal insurers shall be preserved unimpaired, provided that
those liens upon property of a disappearing incorporated insurer or
disappearing reciprocal insurer shall be limited to the property
affected thereby immediately prior to the time the merger is
effective.
(c) Any action or proceeding pending by or against any
disappearing incorporated insurer or disappearing reciprocal insurer
may be prosecuted to judgment, which shall bind the surviving
incorporated insurer or surviving reciprocal insurer, or the
surviving incorporated insurer or surviving reciprocal insurer may be
proceeded against or substituted in its place.
1558. In the event a domestic reciprocal insurer is merged, is
consolidated, or is part of a reorganization pursuant to the
procedures specified in this article and the surviving, consolidated,
or continuing company is a stock incorporated insurer, the plan
shall provide for the manner of converting or exchanging the equity
interests of current subscribers in the reciprocal insurer's equity
into (a) shares, interests, or other securities of the surviving
corporation, and (b) if any interests of the subscribers are not to
be converted solely into shares, interests, or other securities of
the surviving corporation, cash, property rights, interests,
warrants, options, premium credits, or securities that may be in
addition to, or in lieu of, shares, interests, or other securities of
the surviving corporation. However, notwithstanding the foregoing,
the equity interests of current subscribers in the reciprocal insurer'
s equity may be converted or exchanged solely into premium credits if
the plan and agreement so provide but only at the subscriber's
election. The conversion or exchange of the equity interests of
subscribers shall be on terms fair, just, and equitable to the
parties to the transaction, their subscribers, shareholders, owners,
and creditors, as approved by the commissioner, and the commissioner
shall require an opinion as to the fairness of those terms and an
appraisal of the fair value of the domestic reciprocal insurer,
together with the respective equity interests therein, by one or more
qualified disinterested persons appointed by the reciprocal insurer
with the approval of the commissioner, unless the commissioner finds
that such an opinion or appraisal is not necessary to protect the
interest of current subscribers of the reciprocal insurer. The
expense of any such opinion and appraisal shall be borne by the
reciprocal insurer. Any person holding a subscription note or other
debt instrument evidencing a capital contribution to the domestic
reciprocal insurer shall be entitled upon demand to have redeemed
that note or debt instrument for cash or securities if securities are
offered to current policyholders as part of the transaction. The
plan may authorize the sale of securities to members of the governing
board, officers, or employees of the domestic reciprocal insurer or
its attorney-in-fact, or to subscribers or former subscribers of the
domestic reciprocal insurer, in accordance with the provisions of
Article 8 (commencing with Section 820) of Chapter 1 of Part 2 of
Division 1. Nothing in this section shall preclude the issuance of
different securities, subject to the approval of the commissioner,
provided that comparable securities shall be issued at prices not
less than the conversion or exchange values of any such securities
distributed to current subscribers. The conversion or exchange shall
constitute full payment and discharge of the subscribers' equity
interests in the domestic reciprocal insurer, and the subscribers
shall have no other rights with respect thereto, except for rights
relating to a continuing debt or equity interest that a former
subscriber holds in the surviving insurer.
1559. (a) For all purposes for a merger in which the surviving
entity is a domestic reciprocal insurer and a domestic incorporated
insurer is not a constituent corporation as that term is defined
under Section 161 of the Corporations Code, a copy of the certificate
of merger duly certified by the commissioner is conclusive evidence
of the merger of the constituent reciprocal insurers, either by
themselves or together with any foreign incorporated insurers, into
the surviving reciprocal insurer.
(b) For all purposes for a merger in which the surviving entity is
a domestic reciprocal insurer and a domestic incorporated insurer is
a "constituent corporation" as that term is defined under Section
161 of the Corporations Code, a copy of the certificate of merger
duly certified by the Secretary of State is conclusive evidence of
the merger of the constituent reciprocal insurers, either by
themselves or together with constituent incorporated insurers, into
the surviving reciprocal insurers.
(c) For all purposes for a merger in which the surviving entity is
a domestic incorporated insurer and the disappearing entity is a
domestic reciprocal insurer, a copy of the certificate of merger duly
certified by the Secretary of State is conclusive evidence of the
merger of the constituent insurers.
1550. This article shall apply only to domestic reciprocal insurers
organized after 1974 to provide medical malpractice insurance.
1551. By following the procedure specified in this article, any
domestic reciprocal insurer described in this article may merge,
consolidate, or otherwise unite with or become a part of, or may
reinsure all of its policies with, and, upon assumption of all of its
liabilities, may transfer all of its assets to, any other domestic
reciprocal insurer or an incorporated insurer, domestic or foreign.
If an insurer not admitted in California is the surviving entity in
the transaction, the plan and agreement shall provide either for that
insurer to be admitted to transact insurance in California or for
any nonsurviving insurer admitted in California to withdraw from the
state. The plan and agreement by which the transaction is to be
effected shall be approved by a resolution of a majority of the body
exercising the subscribers' rights selected pursuant to Section 1308
for each domestic reciprocal insurer that is a party to the
transaction or by such higher number as may be required by the
documents governing the reciprocal, before it is submitted to the
subscribers for their consideration. The resolution shall specify the
reasons for and the purposes of the proposed transaction and the
manner in which the transaction is expected to benefit and serve the
best interests of the domestic reciprocal insurer and its
subscribers. The plan and agreement shall be approved on behalf of
each constituent other party by those persons required to approve
those transactions by the laws under which that other party is
organized or is otherwise governed.
1552. The plan and agreement by which the transaction is to be
effected shall be submitted to the commissioner, who shall examine it
and require those provisions to be inserted in the agreement and any
actions to be taken in connection with the transaction, including,
but not limited to, (a) the terms and conditions of the transaction,
(b) any fee, commission, right, option, benefit, or other valuable
consideration paid or offered to or for the benefit of any director,
officer, employee, subscriber, agent, or broker of each domestic
reciprocal insurer or the insurer's attorney-in-fact in connection
with the transaction, (c) the contents of the notice of the vote on
the transaction by the subscribers of each domestic reciprocal
insurer that is a party thereto, (d) the manner and form of voting
thereon by the subscribers of each domestic reciprocal insurer, and
(e) any other change, that he or she may deem necessary in order that
the transaction may be fair, just, and equitable to the subscribers
of each domestic reciprocal insurer that is a party to the
transaction, and the transaction is otherwise fair, just, and
equitable to the parties to the transaction and their respective
policyholders, owners, creditors, and the public. The commissioner
shall not approve any transaction if the bylaws, rules, regulations,
power of attorney, or instrument affecting the voting or distribution
rights of subscribers of a domestic reciprocal insurer have been
amended to change those rights within one year prior to the date of
filing of the plan and agreement with the commissioner. The
subscribers of a domestic reciprocal insurer who shall be eligible to
participate in the transaction shall be those persons who are
current subscribers of the domestic reciprocal insurer at the date
the commissioner approves the plan and agreement for submission to
the subscribers for approval pursuant to Section 1553, or at another
date determined by the commissioner. No director, officer, agent, or
employee of the domestic reciprocal insurer or the insurer's
attorney-in-fact shall receive any fee, commission, or other valuable
consideration whatsoever, other than regular salary and
compensation, for in any manner aiding, promoting, or assisting in
the transaction, except as set forth in the plan and agreement
approved by the commissioner. This provision shall not be deemed to
prohibit the payment of reasonable fees and compensation to attorneys
at law, accountants, and actuaries for services performed in the
independent practice of their professions, even though they may also
be directors of the insurer.
1553. When the plan and agreement has been approved by the
commissioner, with any changes required by him or her, it shall
require the approval of each domestic reciprocal insurer that is a
party to the transaction by not less than two-thirds of the votes
cast by its subscribers represented in person or by proxy at a
meeting called to consider the plan and agreement. At least 30 days
before the day fixed for the meeting, notice of the meeting and its
purpose shall be given to the subscribers at their addresses
appearing on the books maintained at the home office of the insurer.
With respect to subscribers whose addresses do not appear on the
books of the insurer, notice shall be deemed to have been given if
published at least once in some newspaper of general circulation in
the county in which the principal office of the insurer is located.
At the meeting, the presence in person or by proxy of 10 percent of
the subscribers of the insurer shall constitute a quorum. In the
absence of a quorum, the subscribers present at the meeting in person
or by proxy may adjourn the meeting to a later date. If the meeting
is adjourned to the next business day, no further notice need be
given of the date to which the meeting is adjourned. If the meeting
is adjourned to a date later than the next business day, notice of
the date to which the meeting is adjourned shall be given to the
subscribers at least 15 days prior to the adjourned meeting date.
1554. If one of the insurers that is a party to the transaction is
a domestic incorporated insurer, Section 1109 of the Corporations
Code shall apply if the transaction is a merger or consolidation, and
Section 1113 of the Corporations Code shall also apply if the
transaction is a merger.
1555. (a) If the vote is in the affirmative, a certified copy of
all proceedings relating to the proposed transaction shall be filed
with the commissioner. If one of the insurers that is a party to the
transaction is a foreign incorporated insurer, there shall also be
filed with the commissioner evidence of that approval, consent, or
authorization that is required by the laws of the state of
incorporation of the foreign insurer. If the commissioner finds that
the proceedings have been in accordance with the law and his or her
requirements, the commissioner shall issue a certificate approving
the plan and agreement and the transaction shall become effective (1)
in the case of a merger, when the certificate, the agreement of
merger, or the certificate of merger, as applicable, and any other
documents required by law have been filed with the Secretary of
State, unless a future effective date or time is provided in the
agreement of merger or certificate of merger, in which event the
merger shall be effective at that future effective date or time, (2)
in the case of a consolidation, when any documents required by the
commissioner have been filed with and approved by the commissioner,
unless a future effective date or time is provided in the agreement
of consolidation, in which event the consolidation shall be effective
at that future effective date or time, or (3) in the case of another
form of transaction, when determined by the commissioner.
(b) The fee of the commissioner for considering the proposed
transaction and issuing a certificate approving the transaction shall
be four thousand two hundred fifty dollars ($4,250), payable in
advance with the filing with the commissioner of the first papers
relating to the proposed transaction. Five dollars ($5) shall be
charged for each signed and sealed or certified copy of the
certificate issued as part of the same transaction in which the
original certificate is issued.
1556. (a) If the surviving entity is a domestic incorporated
insurer in a merger in which a domestic reciprocal insurer is a
constituent party, after approval of the merger by the constituent
reciprocal insurer and constituent incorporated insurer, the
surviving incorporated insurer shall file in the office of the
Secretary of State a copy of the agreement of merger and attachments
required under paragraph (1) of subdivision (g) of Section 1113 of
the Corporations Code.
(b) If the surviving entity is a domestic reciprocal insurer in a
merger in which a domestic incorporated insurer is a constituent
party, after approval of the merger by the constituent disappearing
domestic incorporated insurer and constituent reciprocal insurer, the
surviving reciprocal insurer shall file in the office of the
Secretary of State a copy of the agreement of merger and attachments
required under paragraph (2) of subdivision (g) of Section 1113 of
the Corporations Code.
1557. (a) Any plan of merger, consolidation, or other unification
under this article shall provide that all rights and properties of
the parties to the plan of merger, consolidation, or other
unification shall accrue to, and become the rights and properties of,
the surviving or consolidated or continuing insurer which shall
succeed to and assume all the obligations and liabilities of the
merged, consolidating, or transferring insurer in the same manner as
if incurred or contracted by the surviving, consolidated, or
continuing insurer.
(b) All rights of creditors and all liens upon the property of
each of the constituent incorporated insurers and constituent
reciprocal insurers shall be preserved unimpaired, provided that
those liens upon property of a disappearing incorporated insurer or
disappearing reciprocal insurer shall be limited to the property
affected thereby immediately prior to the time the merger is
effective.
(c) Any action or proceeding pending by or against any
disappearing incorporated insurer or disappearing reciprocal insurer
may be prosecuted to judgment, which shall bind the surviving
incorporated insurer or surviving reciprocal insurer, or the
surviving incorporated insurer or surviving reciprocal insurer may be
proceeded against or substituted in its place.
1558. In the event a domestic reciprocal insurer is merged, is
consolidated, or is part of a reorganization pursuant to the
procedures specified in this article and the surviving, consolidated,
or continuing company is a stock incorporated insurer, the plan
shall provide for the manner of converting or exchanging the equity
interests of current subscribers in the reciprocal insurer's equity
into (a) shares, interests, or other securities of the surviving
corporation, and (b) if any interests of the subscribers are not to
be converted solely into shares, interests, or other securities of
the surviving corporation, cash, property rights, interests,
warrants, options, premium credits, or securities that may be in
addition to, or in lieu of, shares, interests, or other securities of
the surviving corporation. However, notwithstanding the foregoing,
the equity interests of current subscribers in the reciprocal insurer'
s equity may be converted or exchanged solely into premium credits if
the plan and agreement so provide but only at the subscriber's
election. The conversion or exchange of the equity interests of
subscribers shall be on terms fair, just, and equitable to the
parties to the transaction, their subscribers, shareholders, owners,
and creditors, as approved by the commissioner, and the commissioner
shall require an opinion as to the fairness of those terms and an
appraisal of the fair value of the domestic reciprocal insurer,
together with the respective equity interests therein, by one or more
qualified disinterested persons appointed by the reciprocal insurer
with the approval of the commissioner, unless the commissioner finds
that such an opinion or appraisal is not necessary to protect the
interest of current subscribers of the reciprocal insurer. The
expense of any such opinion and appraisal shall be borne by the
reciprocal insurer. Any person holding a subscription note or other
debt instrument evidencing a capital contribution to the domestic
reciprocal insurer shall be entitled upon demand to have redeemed
that note or debt instrument for cash or securities if securities are
offered to current policyholders as part of the transaction. The
plan may authorize the sale of securities to members of the governing
board, officers, or employees of the domestic reciprocal insurer or
its attorney-in-fact, or to subscribers or former subscribers of the
domestic reciprocal insurer, in accordance with the provisions of
Article 8 (commencing with Section 820) of Chapter 1 of Part 2 of
Division 1. Nothing in this section shall preclude the issuance of
different securities, subject to the approval of the commissioner,
provided that comparable securities shall be issued at prices not
less than the conversion or exchange values of any such securities
distributed to current subscribers. The conversion or exchange shall
constitute full payment and discharge of the subscribers' equity
interests in the domestic reciprocal insurer, and the subscribers
shall have no other rights with respect thereto, except for rights
relating to a continuing debt or equity interest that a former
subscriber holds in the surviving insurer.
1559. (a) For all purposes for a merger in which the surviving
entity is a domestic reciprocal insurer and a domestic incorporated
insurer is not a constituent corporation as that term is defined
under Section 161 of the Corporations Code, a copy of the certificate
of merger duly certified by the commissioner is conclusive evidence
of the merger of the constituent reciprocal insurers, either by
themselves or together with any foreign incorporated insurers, into
the surviving reciprocal insurer.
(b) For all purposes for a merger in which the surviving entity is
a domestic reciprocal insurer and a domestic incorporated insurer is
a "constituent corporation" as that term is defined under Section
161 of the Corporations Code, a copy of the certificate of merger
duly certified by the Secretary of State is conclusive evidence of
the merger of the constituent reciprocal insurers, either by
themselves or together with constituent incorporated insurers, into
the surviving reciprocal insurers.
(c) For all purposes for a merger in which the surviving entity is
a domestic incorporated insurer and the disappearing entity is a
domestic reciprocal insurer, a copy of the certificate of merger duly
certified by the Secretary of State is conclusive evidence of the
merger of the constituent insurers.
