State Codes and Statutes

Statutes > Utah > Title-31a > Chapter-05 > 31a-5-506

31A-5-506. Conversion of a domestic mutual into a stock corporation.
(1) (a) Except as provided in Subsection (1)(b), a domestic mutual may be converted intoa domestic stock corporation under Subsections (2) through (11).
(b) A domestic mutual that is affiliated with other mutuals may not be converted into astock corporation, unless all the affiliated mutuals are converted at the same time, or thecommissioner finds that the interests of the policyholders of the remaining mutuals can bepermanently protected by limitations on the corporate powers of the new stock corporation or onits authority to do business, or otherwise.
(2) The board shall pass a resolution stating that the conversion is in the best interests ofthe policyholders. The resolution shall specify the reasons for and the purposes of the proposedconversion, and how the conversion is expected to benefit policyholders.
(3) (a) Chapter 16, Insurance Holding Companies, applies to the conversion of adomestic mutual into a stock corporation. In addition, the commissioner shall order theexamination and appraisal of the corporation, unless the commissioner finds that:
(i) the resolution is defective upon its face; or
(ii) the basis or the purposes of the proposed conversion are contrary to law, to theinterests of the policyholders, or to the public.
(b) The commissioner shall examine the company and all of its controlled affiliates underSection 31A-2-203 to determine their financial condition and whether they are operating inaccordance with law.
(c) The commissioner shall appoint an appraisal committee, consisting of at least threequalified and disinterested persons with differing expertise, to determine the value of thecorporation on the date of the resolution required by Subsection (2). Members of the appraisalcommittee shall receive reasonable compensation and shall be reimbursed for reasonableexpenses in discharging their duties. They may employ consultants to advise them on technicalproblems of the appraisal, if necessary. The appraisal committee shall consider the assets andliabilities of the corporation, adjusting liabilities to take account of:
(i) the amounts of any reserves in excess of or below realistic estimates;
(ii) the value of the marketing organization;
(iii) the value of goodwill;
(iv) the going-concern value; and
(v) any other factor having an influence on the value of the corporation.
(4) When the examination and appraisal reports have been made to the commissioner,the commissioner shall make copies available to the board. The board shall then prepare andadopt by resolution a plan of conversion. The plan shall be consistent with Subsections (4)(a)through (e) and shall state how the requirements of those subsections are satisfied.
(a) The plan of conversion shall state the number of shares proposed to be authorized forthe new stock corporation, their par value, if any, and the price per share at which they will beoffered to policyholders. The price per share may not exceed 1/2 of the median equitable shareof all policyholders under Subsection (4)(b).
(b) (i) When an insurer has the type of policies with no investment value to thepolicyholders, each person who has been a policyholder and has paid premiums within five yearsprior to the resolution under Subsection (2) is entitled, without additional payment, to as muchcommon stock of the new stock corporation as that person's equitable share of the value of theconverting corporation will purchase. The equitable share is determined by the ratio which the

net premium that person has paid to the corporation during the five years immediately precedingthe resolution required by Subsection (2) bears to the total net premiums received by thecorporation during the same period. The net premium is the gross premium less the returnpremium and dividends paid. If the equitable share would only purchase a fraction of a share ofstock, the policyholder has the option of either receiving the value of the fractional share in cashor purchasing a full share by paying the balance in cash.
(ii) When an insurer has the type of policies with specifically attributable investmentvalue to the policyholders, each policyholder is entitled, without additional payment, to as muchcommon stock of the new stock corporation as the policyholder's investment value in theconverting corporation will purchase, determined by the proportion of the policyholder'sinvestment value to the aggregate investment values of all policyholders. If the policyholder'sshare would only purchase a fraction of a share of stock, the policyholder has the option of eitherreceiving the value of the fractional share in cash or purchasing a full share by paying the balancein cash.
(c) A written offer shall be sent to each policyholder indicating the policyholder'sindividual equitable share and the terms upon which the policyholder may subscribe for stock.
(d) Common shares may not be subscribed by or issued to persons other thanpolicyholders, until all subscriptions by the policyholders have been filled. After thosesubscriptions have been filled, any new issue of stock for five years after the conversion shallfirst be offered to the persons who have become shareholders under Subsection (4)(b) inproportion to their interests under Subsection (4)(b).
(e) A policyholder in a nonlife mutual may not receive a distribution of shares valuedunder Subsection (4)(b)(i), which distribution is greater than the amount the policyholder isentitled to under Section 31A-27a-701. Any excess over the policyholder's entitlement underSection 31A-27a-701 shall be distributed in accordance with Section 31A-27a-705.
(5) The plan of conversion shall be submitted to the commissioner for approval, togetherwith:
(a) the proposed articles and bylaws of the new stock corporation which comply withSection 31A-5-203;
(b) any information specified under Subsection 31A-5-204(2), which the commissionerreasonably requires; and
(c) a projection of the planned or anticipated financial situation of the new corporationfor five years after the conversion.
(6) The commissioner shall then hold a hearing. The notice of the hearing shall bemailed to each person who was a policyholder of the corporation on the date of the resolutionrequired by Subsection (2). This notice shall include a copy of the plan of conversion and anycomments the commissioner considers necessary to adequately inform the policyholders.
(7) The commissioner shall approve the plan of conversion unless the commissionerfinds that the plan violates the law or is contrary to the interests of policyholders or the public.
(8) After approval under Subsection (7), the conversion plan shall be submitted to a voteof:
(a) for mutuals subject to Subsection (4)(b)(i), those persons who were policyholders ofthe mutual on the date of the resolution required by Subsection (2); or
(b) for mutuals subject to Subsection (4)(b)(ii), those persons who had investment valuesin their policies as of the date of the resolution required by Subsection (2).

(9) If the policyholders approve the conversion under Subsection (8), the commissionershall issue a new certificate of authority. The issuance of the certificate is the conversion of themutual to a stock corporation. This stock corporation is considered as being organized at thetime the converted mutual was organized. Subject to the plan of conversion, the directors,officers, agents, and employees of the mutual shall continue in their same positions with thestock corporation.
(10) In the proposed conversion, the corporation may not pay any person compensationother than regular salaries to existing personnel and compensation for clerical and mailingexpenses. With the commissioner's approval, the corporation may pay, at reasonable rates, forprinting costs and for legal and other professional fees for services actually rendered. Allexpenses of the conversion, including the expenses incurred by the commissioner and theprorated salaries of any department staff members involved, shall be paid by the corporationbeing converted.
(11) The commissioner's approval of the plan of conversion satisfies the registrationrequirement of Section 31A-5-302.

Amended by Chapter 309, 2007 General Session

State Codes and Statutes

Statutes > Utah > Title-31a > Chapter-05 > 31a-5-506

31A-5-506. Conversion of a domestic mutual into a stock corporation.
(1) (a) Except as provided in Subsection (1)(b), a domestic mutual may be converted intoa domestic stock corporation under Subsections (2) through (11).
(b) A domestic mutual that is affiliated with other mutuals may not be converted into astock corporation, unless all the affiliated mutuals are converted at the same time, or thecommissioner finds that the interests of the policyholders of the remaining mutuals can bepermanently protected by limitations on the corporate powers of the new stock corporation or onits authority to do business, or otherwise.
(2) The board shall pass a resolution stating that the conversion is in the best interests ofthe policyholders. The resolution shall specify the reasons for and the purposes of the proposedconversion, and how the conversion is expected to benefit policyholders.
(3) (a) Chapter 16, Insurance Holding Companies, applies to the conversion of adomestic mutual into a stock corporation. In addition, the commissioner shall order theexamination and appraisal of the corporation, unless the commissioner finds that:
(i) the resolution is defective upon its face; or
(ii) the basis or the purposes of the proposed conversion are contrary to law, to theinterests of the policyholders, or to the public.
(b) The commissioner shall examine the company and all of its controlled affiliates underSection 31A-2-203 to determine their financial condition and whether they are operating inaccordance with law.
(c) The commissioner shall appoint an appraisal committee, consisting of at least threequalified and disinterested persons with differing expertise, to determine the value of thecorporation on the date of the resolution required by Subsection (2). Members of the appraisalcommittee shall receive reasonable compensation and shall be reimbursed for reasonableexpenses in discharging their duties. They may employ consultants to advise them on technicalproblems of the appraisal, if necessary. The appraisal committee shall consider the assets andliabilities of the corporation, adjusting liabilities to take account of:
(i) the amounts of any reserves in excess of or below realistic estimates;
(ii) the value of the marketing organization;
(iii) the value of goodwill;
(iv) the going-concern value; and
(v) any other factor having an influence on the value of the corporation.
(4) When the examination and appraisal reports have been made to the commissioner,the commissioner shall make copies available to the board. The board shall then prepare andadopt by resolution a plan of conversion. The plan shall be consistent with Subsections (4)(a)through (e) and shall state how the requirements of those subsections are satisfied.
(a) The plan of conversion shall state the number of shares proposed to be authorized forthe new stock corporation, their par value, if any, and the price per share at which they will beoffered to policyholders. The price per share may not exceed 1/2 of the median equitable shareof all policyholders under Subsection (4)(b).
(b) (i) When an insurer has the type of policies with no investment value to thepolicyholders, each person who has been a policyholder and has paid premiums within five yearsprior to the resolution under Subsection (2) is entitled, without additional payment, to as muchcommon stock of the new stock corporation as that person's equitable share of the value of theconverting corporation will purchase. The equitable share is determined by the ratio which the

net premium that person has paid to the corporation during the five years immediately precedingthe resolution required by Subsection (2) bears to the total net premiums received by thecorporation during the same period. The net premium is the gross premium less the returnpremium and dividends paid. If the equitable share would only purchase a fraction of a share ofstock, the policyholder has the option of either receiving the value of the fractional share in cashor purchasing a full share by paying the balance in cash.
(ii) When an insurer has the type of policies with specifically attributable investmentvalue to the policyholders, each policyholder is entitled, without additional payment, to as muchcommon stock of the new stock corporation as the policyholder's investment value in theconverting corporation will purchase, determined by the proportion of the policyholder'sinvestment value to the aggregate investment values of all policyholders. If the policyholder'sshare would only purchase a fraction of a share of stock, the policyholder has the option of eitherreceiving the value of the fractional share in cash or purchasing a full share by paying the balancein cash.
(c) A written offer shall be sent to each policyholder indicating the policyholder'sindividual equitable share and the terms upon which the policyholder may subscribe for stock.
(d) Common shares may not be subscribed by or issued to persons other thanpolicyholders, until all subscriptions by the policyholders have been filled. After thosesubscriptions have been filled, any new issue of stock for five years after the conversion shallfirst be offered to the persons who have become shareholders under Subsection (4)(b) inproportion to their interests under Subsection (4)(b).
(e) A policyholder in a nonlife mutual may not receive a distribution of shares valuedunder Subsection (4)(b)(i), which distribution is greater than the amount the policyholder isentitled to under Section 31A-27a-701. Any excess over the policyholder's entitlement underSection 31A-27a-701 shall be distributed in accordance with Section 31A-27a-705.
(5) The plan of conversion shall be submitted to the commissioner for approval, togetherwith:
(a) the proposed articles and bylaws of the new stock corporation which comply withSection 31A-5-203;
(b) any information specified under Subsection 31A-5-204(2), which the commissionerreasonably requires; and
(c) a projection of the planned or anticipated financial situation of the new corporationfor five years after the conversion.
(6) The commissioner shall then hold a hearing. The notice of the hearing shall bemailed to each person who was a policyholder of the corporation on the date of the resolutionrequired by Subsection (2). This notice shall include a copy of the plan of conversion and anycomments the commissioner considers necessary to adequately inform the policyholders.
(7) The commissioner shall approve the plan of conversion unless the commissionerfinds that the plan violates the law or is contrary to the interests of policyholders or the public.
(8) After approval under Subsection (7), the conversion plan shall be submitted to a voteof:
(a) for mutuals subject to Subsection (4)(b)(i), those persons who were policyholders ofthe mutual on the date of the resolution required by Subsection (2); or
(b) for mutuals subject to Subsection (4)(b)(ii), those persons who had investment valuesin their policies as of the date of the resolution required by Subsection (2).

(9) If the policyholders approve the conversion under Subsection (8), the commissionershall issue a new certificate of authority. The issuance of the certificate is the conversion of themutual to a stock corporation. This stock corporation is considered as being organized at thetime the converted mutual was organized. Subject to the plan of conversion, the directors,officers, agents, and employees of the mutual shall continue in their same positions with thestock corporation.
(10) In the proposed conversion, the corporation may not pay any person compensationother than regular salaries to existing personnel and compensation for clerical and mailingexpenses. With the commissioner's approval, the corporation may pay, at reasonable rates, forprinting costs and for legal and other professional fees for services actually rendered. Allexpenses of the conversion, including the expenses incurred by the commissioner and theprorated salaries of any department staff members involved, shall be paid by the corporationbeing converted.
(11) The commissioner's approval of the plan of conversion satisfies the registrationrequirement of Section 31A-5-302.

Amended by Chapter 309, 2007 General Session


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State Codes and Statutes

Statutes > Utah > Title-31a > Chapter-05 > 31a-5-506

31A-5-506. Conversion of a domestic mutual into a stock corporation.
(1) (a) Except as provided in Subsection (1)(b), a domestic mutual may be converted intoa domestic stock corporation under Subsections (2) through (11).
(b) A domestic mutual that is affiliated with other mutuals may not be converted into astock corporation, unless all the affiliated mutuals are converted at the same time, or thecommissioner finds that the interests of the policyholders of the remaining mutuals can bepermanently protected by limitations on the corporate powers of the new stock corporation or onits authority to do business, or otherwise.
(2) The board shall pass a resolution stating that the conversion is in the best interests ofthe policyholders. The resolution shall specify the reasons for and the purposes of the proposedconversion, and how the conversion is expected to benefit policyholders.
(3) (a) Chapter 16, Insurance Holding Companies, applies to the conversion of adomestic mutual into a stock corporation. In addition, the commissioner shall order theexamination and appraisal of the corporation, unless the commissioner finds that:
(i) the resolution is defective upon its face; or
(ii) the basis or the purposes of the proposed conversion are contrary to law, to theinterests of the policyholders, or to the public.
(b) The commissioner shall examine the company and all of its controlled affiliates underSection 31A-2-203 to determine their financial condition and whether they are operating inaccordance with law.
(c) The commissioner shall appoint an appraisal committee, consisting of at least threequalified and disinterested persons with differing expertise, to determine the value of thecorporation on the date of the resolution required by Subsection (2). Members of the appraisalcommittee shall receive reasonable compensation and shall be reimbursed for reasonableexpenses in discharging their duties. They may employ consultants to advise them on technicalproblems of the appraisal, if necessary. The appraisal committee shall consider the assets andliabilities of the corporation, adjusting liabilities to take account of:
(i) the amounts of any reserves in excess of or below realistic estimates;
(ii) the value of the marketing organization;
(iii) the value of goodwill;
(iv) the going-concern value; and
(v) any other factor having an influence on the value of the corporation.
(4) When the examination and appraisal reports have been made to the commissioner,the commissioner shall make copies available to the board. The board shall then prepare andadopt by resolution a plan of conversion. The plan shall be consistent with Subsections (4)(a)through (e) and shall state how the requirements of those subsections are satisfied.
(a) The plan of conversion shall state the number of shares proposed to be authorized forthe new stock corporation, their par value, if any, and the price per share at which they will beoffered to policyholders. The price per share may not exceed 1/2 of the median equitable shareof all policyholders under Subsection (4)(b).
(b) (i) When an insurer has the type of policies with no investment value to thepolicyholders, each person who has been a policyholder and has paid premiums within five yearsprior to the resolution under Subsection (2) is entitled, without additional payment, to as muchcommon stock of the new stock corporation as that person's equitable share of the value of theconverting corporation will purchase. The equitable share is determined by the ratio which the

net premium that person has paid to the corporation during the five years immediately precedingthe resolution required by Subsection (2) bears to the total net premiums received by thecorporation during the same period. The net premium is the gross premium less the returnpremium and dividends paid. If the equitable share would only purchase a fraction of a share ofstock, the policyholder has the option of either receiving the value of the fractional share in cashor purchasing a full share by paying the balance in cash.
(ii) When an insurer has the type of policies with specifically attributable investmentvalue to the policyholders, each policyholder is entitled, without additional payment, to as muchcommon stock of the new stock corporation as the policyholder's investment value in theconverting corporation will purchase, determined by the proportion of the policyholder'sinvestment value to the aggregate investment values of all policyholders. If the policyholder'sshare would only purchase a fraction of a share of stock, the policyholder has the option of eitherreceiving the value of the fractional share in cash or purchasing a full share by paying the balancein cash.
(c) A written offer shall be sent to each policyholder indicating the policyholder'sindividual equitable share and the terms upon which the policyholder may subscribe for stock.
(d) Common shares may not be subscribed by or issued to persons other thanpolicyholders, until all subscriptions by the policyholders have been filled. After thosesubscriptions have been filled, any new issue of stock for five years after the conversion shallfirst be offered to the persons who have become shareholders under Subsection (4)(b) inproportion to their interests under Subsection (4)(b).
(e) A policyholder in a nonlife mutual may not receive a distribution of shares valuedunder Subsection (4)(b)(i), which distribution is greater than the amount the policyholder isentitled to under Section 31A-27a-701. Any excess over the policyholder's entitlement underSection 31A-27a-701 shall be distributed in accordance with Section 31A-27a-705.
(5) The plan of conversion shall be submitted to the commissioner for approval, togetherwith:
(a) the proposed articles and bylaws of the new stock corporation which comply withSection 31A-5-203;
(b) any information specified under Subsection 31A-5-204(2), which the commissionerreasonably requires; and
(c) a projection of the planned or anticipated financial situation of the new corporationfor five years after the conversion.
(6) The commissioner shall then hold a hearing. The notice of the hearing shall bemailed to each person who was a policyholder of the corporation on the date of the resolutionrequired by Subsection (2). This notice shall include a copy of the plan of conversion and anycomments the commissioner considers necessary to adequately inform the policyholders.
(7) The commissioner shall approve the plan of conversion unless the commissionerfinds that the plan violates the law or is contrary to the interests of policyholders or the public.
(8) After approval under Subsection (7), the conversion plan shall be submitted to a voteof:
(a) for mutuals subject to Subsection (4)(b)(i), those persons who were policyholders ofthe mutual on the date of the resolution required by Subsection (2); or
(b) for mutuals subject to Subsection (4)(b)(ii), those persons who had investment valuesin their policies as of the date of the resolution required by Subsection (2).

(9) If the policyholders approve the conversion under Subsection (8), the commissionershall issue a new certificate of authority. The issuance of the certificate is the conversion of themutual to a stock corporation. This stock corporation is considered as being organized at thetime the converted mutual was organized. Subject to the plan of conversion, the directors,officers, agents, and employees of the mutual shall continue in their same positions with thestock corporation.
(10) In the proposed conversion, the corporation may not pay any person compensationother than regular salaries to existing personnel and compensation for clerical and mailingexpenses. With the commissioner's approval, the corporation may pay, at reasonable rates, forprinting costs and for legal and other professional fees for services actually rendered. Allexpenses of the conversion, including the expenses incurred by the commissioner and theprorated salaries of any department staff members involved, shall be paid by the corporationbeing converted.
(11) The commissioner's approval of the plan of conversion satisfies the registrationrequirement of Section 31A-5-302.

Amended by Chapter 309, 2007 General Session


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