State Codes and Statutes

Statutes > Utah > Title-31a > Chapter-16 > 31a-16-103

31A-16-103. Acquisition of control of or merger with domestic insurer.
(1) (a) A person may not take the actions described in Subsections (1)(b) or (c) unless, atthe time any offer, request, or invitation is made or any such agreement is entered into, or prior tothe acquisition of securities if no offer or agreement is involved:
(i) the person files with the commissioner a statement containing the informationrequired by this section;
(ii) the person provides a copy of the statement described in Subsection (1)(a)(i) to theinsurer; and
(iii) the commissioner approves the offer, request, invitation, agreement, or acquisition.
(b) Unless the person complies with Subsection (1)(a), a person other than the issuer maynot make a tender offer for, a request or invitation for tenders of, or enter into any agreement toexchange securities, or seek to acquire or acquire in the open market or otherwise, any votingsecurity of a domestic insurer if after the acquisition, the person would directly, indirectly, byconversion, or by exercise of any right to acquire be in control of the insurer.
(c) Unless the person complies with Subsection (1)(a), a person may not enter into anagreement to merge with or otherwise to acquire control of:
(i) a domestic insurer; or
(ii) any person controlling a domestic insurer.
(d) (i) For purposes of this section, a domestic insurer includes any person controlling adomestic insurer unless the person as determined by the commissioner is either directly orthrough its affiliates primarily engaged in business other than the business of insurance.
(ii) The controlling person described in Subsection (1)(d)(i) shall file with thecommissioner a preacquisition notification containing the information required in Subsection (2)30 calendar days before the proposed effective date of the acquisition.
(iii) For the purposes of this section, "person" does not include any securities broker thatin the usual and customary brokers function holds less than 20% of:
(A) the voting securities of an insurance company; or
(B) any person that controls an insurance company.
(iv) This section applies to all domestic insurers and other entities licensed underChapters 5, 7, 8, 9, and 11.
(e) (i) An agreement for acquisition of control or merger as contemplated by thisSubsection (1) is not valid or enforceable unless the agreement:
(A) is in writing; and
(B) includes a provision that the agreement is subject to the approval of thecommissioner upon the filing of any applicable statement required under this chapter.
(ii) A written agreement for acquisition or control that includes the provision describedin Subsection (1)(e)(i) satisfies the requirements of this Subsection (1).
(2) The statement to be filed with the commissioner under Subsection (1) shall be madeunder oath or affirmation and shall contain the following information:
(a) the name and address of the "acquiring party," which means each person by whom oron whose behalf the merger or other acquisition of control referred to in Subsection (1) is to beeffected; and
(i) if the person is an individual:
(A) the person's principal occupation;
(B) a listing of all offices and positions held by the person during the past five years; and

(C) any conviction of crimes other than minor traffic violations during the past 10 years;and
(ii) if the person is not an individual:
(A) a report of the nature of its business operations during:
(I) the past five years; or
(II) for any lesser period as the person and any of its predecessors has been in existence;
(B) an informative description of the business intended to be done by the person and theperson's subsidiaries;
(C) a list of all individuals who are or who have been selected to become directors orexecutive officers of the person, or individuals who perform, or who will perform functionsappropriate to such positions; and
(D) for each individual described in Subsection (2)(a)(ii)(C), the information required bySubsection (2)(a)(i) for each individual;
(b) (i) the source, nature, and amount of the consideration used or to be used in effectingthe merger or acquisition of control;
(ii) a description of any transaction in which funds were or are to be obtained for thepurpose of effecting the merger or acquisition of control, including any pledge of:
(A) the insurer's stock; or
(B) the stock of any of the insurer's subsidiaries or controlling affiliates; and
(iii) the identity of persons furnishing the consideration;
(c) (i) fully audited financial information, or other financial information consideredacceptable by the commissioner, of the earnings and financial condition of each acquiring partyfor:
(A) the preceding five fiscal years of each acquiring party; or
(B) any lesser period the acquiring party and any of its predecessors shall have been inexistence; and
(ii) unaudited information:
(A) similar to the information described in Subsection (2)(c)(i); and
(B) prepared within the 90 days prior to the filing of the statement;
(d) any plans or proposals which each acquiring party may have to:
(i) liquidate the insurer;
(ii) sell its assets;
(iii) merge or consolidate the insurer with any person; or
(iv) make any other material change in the insurer's:
(A) business;
(B) corporate structure; or
(C) management;
(e) (i) the number of shares of any security referred to in Subsection (1) that eachacquiring party proposes to acquire;
(ii) the terms of the offer, request, invitation, agreement, or acquisition referred to inSubsection (1); and
(iii) a statement as to the method by which the fairness of the proposal was arrived at;
(f) the amount of each class of any security referred to in Subsection (1) that:
(i) is beneficially owned; or
(ii) concerning which there is a right to acquire beneficial ownership by each acquiring

party;
(g) a full description of any contract, arrangement, or understanding with respect to anysecurity referred to in Subsection (1) in which any acquiring party is involved, including:
(i) the transfer of any of the securities;
(ii) joint ventures;
(iii) loan or option arrangements;
(iv) puts or calls;
(v) guarantees of loans;
(vi) guarantees against loss or guarantees of profits;
(vii) division of losses or profits; or
(viii) the giving or withholding of proxies;
(h) a description of the purchase by any acquiring party of any security referred to inSubsection (1) during the 12 calendar months preceding the filing of the statement including:
(i) the dates of purchase;
(ii) the names of the purchasers; and
(iii) the consideration paid or agreed to be paid for the purchase;
(i) a description of:
(i) any recommendations to purchase by any acquiring party any security referred to inSubsection (1) made during the 12 calendar months preceding the filing of the statement; or
(ii) any recommendations made by anyone based upon interviews or at the suggestion ofthe acquiring party;
(j) (i) copies of all tender offers for, requests for, or invitations for tenders of, exchangeoffers for, and agreements to acquire or exchange any securities referred to in Subsection (1); and
(ii) if distributed, copies of additional soliciting material relating to the transactionsdescribed in Subsection (2)(j)(i);
(k) (i) the term of any agreement, contract, or understanding made with, or proposed tobe made with, any broker-dealer as to solicitation of securities referred to in Subsection (1) fortender; and
(ii) the amount of any fees, commissions, or other compensation to be paid tobroker-dealers with regard to any agreement, contract, or understanding described in Subsection(2)(k)(i); and
(l) any additional information the commissioner requires by rule, which thecommissioner determines to be:
(i) necessary or appropriate for the protection of policyholders of the insurer; or
(ii) in the public interest.
(3) The department may request:
(a) (i) criminal background information maintained pursuant to Title 53, Chapter 10, Part2, from the Bureau of Criminal Identification; and
(ii) complete Federal Bureau of Investigation criminal background checks through thenational criminal history system.
(b) Information obtained by the department from the review of criminal history recordsreceived under Subsection (3)(a) shall be used by the department for the purpose of:
(i) verifying the information in Subsection (2)(a)(i);
(ii) determining the integrity of persons who would control the operation of an insurer;and

(iii) preventing persons who violate 18 U.S.C. Sections 1033 and 1034 from engaging inthe business of insurance in the state.
(c) If the department requests the criminal background information, the department shall:
(i) pay to the Department of Public Safety the costs incurred by the Department of PublicSafety in providing the department criminal background information under Subsection (3)(a)(i);
(ii) pay to the Federal Bureau of Investigation the costs incurred by the Federal Bureau ofInvestigation in providing the department criminal background information under Subsection(3)(a)(ii); and
(iii) charge the person required to file the statement referred to in Subsection (1) a feeequal to the aggregate of Subsections (3)(c)(i) and (ii).
(4) (a) If the source of the consideration under Subsection (2)(b)(i) is a loan made in thelender's ordinary course of business, the identity of the lender shall remain confidential, if theperson filing the statement so requests.
(b) (i) Under Subsection (2)(e), the commissioner may require a statement of the adjustedbook value assigned by the acquiring party to each security in arriving at the terms of the offer.
(ii) For purposes of this Subsection (4)(b), "adjusted book value" means each security'sproportional interest in the capital and surplus of the insurer with adjustments that reflect:
(A) market conditions;
(B) business in force; and
(C) other intangible assets or liabilities of the insurer.
(c) The description required by Subsection (2)(g) shall identify the persons with whomthe contracts, arrangements, or understandings have been entered into.
(5) (a) If the person required to file the statement referred to in Subsection (1) is apartnership, limited partnership, syndicate, or other group, the commissioner may require that allthe information called for by Subsections (2), (3), or (4) shall be given with respect to each:
(i) partner of the partnership or limited partnership;
(ii) member of the syndicate or group; and
(iii) person who controls the partner or member.
(b) If any partner, member, or person referred to in Subsection (5)(a) is a corporation, orif the person required to file the statement referred to in Subsection (1) is a corporation, thecommissioner may require that the information called for by Subsection (2) shall be given withrespect to:
(i) the corporation;
(ii) each officer and director of the corporation; and
(iii) each person who is directly or indirectly the beneficial owner of more than 10% ofthe outstanding voting securities of the corporation.
(6) If any material change occurs in the facts set forth in the statement filed with thecommissioner and sent to the insurer pursuant to Subsection (2), an amendment setting forth thechange, together with copies of all documents and other material relevant to the change, shall befiled with the commissioner and sent to the insurer within two business days after the filingperson learns of such change.
(7) If any offer, request, invitation, agreement, or acquisition referred to in Subsection (1)is proposed to be made by means of a registration statement under the Securities Act of 1933, orunder circumstances requiring the disclosure of similar information under the SecuritiesExchange Act of 1934, or under a state law requiring similar registration or disclosure, a person

required to file the statement referred to in Subsection (1) may use copies of any registration ordisclosure documents in furnishing the information called for by the statement.
(8) (a) The commissioner shall approve any merger or other acquisition of controlreferred to in Subsection (1) unless, after a public hearing on the merger or acquisition, thecommissioner finds that:
(i) after the change of control, the domestic insurer referred to in Subsection (1) wouldnot be able to satisfy the requirements for the issuance of a license to write the line or lines ofinsurance for which it is presently licensed;
(ii) the effect of the merger or other acquisition of control would:
(A) substantially lessen competition in insurance in this state; or
(B) tend to create a monopoly in insurance;
(iii) the financial condition of any acquiring party might:
(A) jeopardize the financial stability of the insurer; or
(B) prejudice the interest of:
(I) its policyholders; or
(II) any remaining securityholders who are unaffiliated with the acquiring party;
(iv) the terms of the offer, request, invitation, agreement, or acquisition referred to inSubsection (1) are unfair and unreasonable to the securityholders of the insurer;
(v) the plans or proposals which the acquiring party has to liquidate the insurer, sell itsassets, or consolidate or merge it with any person, or to make any other material change in itsbusiness or corporate structure or management, are:
(A) unfair and unreasonable to policyholders of the insurer; and
(B) not in the public interest; or
(vi) the competence, experience, and integrity of those persons who would control theoperation of the insurer are such that it would not be in the interest of the policyholders of theinsurer and the public to permit the merger or other acquisition of control.
(b) For purposes of Subsection (8)(a)(iv), the offering price for each security may not beconsidered unfair if the adjusted book values under Subsection (2)(e):
(i) are disclosed to the securityholders; and
(ii) determined by the commissioner to be reasonable.
(9) (a) The public hearing referred to in Subsection (8) shall be held within 30 days afterthe statement required by Subsection (1) is filed.
(b) (i) At least 20 days notice of the hearing shall be given by the commissioner to theperson filing the statement.
(ii) Affected parties may waive the notice required by this Subsection (9)(b).
(iii) Not less than seven days notice of the public hearing shall be given by the personfiling the statement to:
(A) the insurer; and
(B) any person designated by the commissioner.
(c) The commissioner shall make a determination within 30 days after the conclusion ofthe hearing.
(d) At the hearing, the person filing the statement, the insurer, any person to whom noticeof hearing was sent, and any other person whose interest may be affected by the hearing may:
(i) present evidence;
(ii) examine and cross-examine witnesses; and

(iii) offer oral and written arguments.
(e) (i) A person or insurer described in Subsection (9)(d) may conduct discoveryproceedings in the same manner as is presently allowed in the district courts of this state.
(ii) All discovery proceedings shall be concluded not later than three days before thecommencement of the public hearing.
(10) (a) The commissioner may retain technical experts to assist in reviewing all, or aportion of, information filed in connection with a proposed merger or other acquisition of controlreferred to in Subsection (1).
(b) In determining whether any of the conditions in Subsection (8) exist, thecommissioner may consider the findings of technical experts employed to review applicablefilings.
(c) (i) A technical expert employed under Subsection (10)(a) shall present to thecommissioner a statement of all expenses incurred by the technical expert in conjunction with thetechnical expert's review of a proposed merger or other acquisition of control.
(ii) At the commissioner's direction the acquiring person shall compensate the technicalexpert at customary rates for time and expenses:
(A) necessarily incurred; and
(B) approved by the commissioner.
(iii) The acquiring person shall:
(A) certify the consolidated account of all charges and expenses incurred for the reviewby technical experts;
(B) retain a copy of the consolidated account described in Subsection (10)(c)(iii)(A); and
(C) file with the department as a public record a copy of the consolidated accountdescribed in Subsection (10)(c)(iii)(A).
(11) (a) (i) If a domestic insurer proposes to merge into another insurer, anysecurityholder electing to exercise a right of dissent may file with the insurer a written request forpayment of the adjusted book value given in the statement required by Subsection (1) andapproved under Subsection (8), in return for the surrender of the security holder's securities.
(ii) The request described in Subsection (11)(a)(i) shall be filed not later than 10 daysafter the day of the securityholders' meeting where the corporate action is approved.
(b) The dissenting securityholder is entitled to and the insurer is required to pay to thedissenting securityholder the specified value within 60 days of receipt of the dissenting securityholder's security.
(c) Persons electing under this Subsection (11) to receive cash for their securities waivethe dissenting shareholder and appraisal rights otherwise applicable under Title 16, Chapter 10a,Part 13, Dissenters' Rights.
(d) (i) This Subsection (11) provides an elective procedure for dissenting securityholdersto resolve their objections to the plan of merger.
(ii) This section does not restrict the rights of dissenting securityholders under Title 16,Chapter 10a, Utah Revised Business Corporation Act, unless this election is made under thisSubsection (11).
(12) (a) All statements, amendments, or other material filed under Subsection (1), and allnotices of public hearings held under Subsection (8), shall be mailed by the insurer to itssecurityholders within five business days after the insurer has received the statements,amendments, other material, or notices.

(b) (i) Mailing expenses shall be paid by the person making the filing.
(ii) As security for the payment of mailing expenses, that person shall file with thecommissioner an acceptable bond or other deposit in an amount determined by thecommissioner.
(13) This section does not apply to any offer, request, invitation, agreement, oracquisition that the commissioner by order exempts from the requirements of this section as:
(a) not having been made or entered into for the purpose of, and not having the effect of,changing or influencing the control of a domestic insurer; or
(b) as otherwise not comprehended within the purposes of this section.
(14) The following are violations of this section:
(a) the failure to file any statement, amendment, or other material required to be filedpursuant to Subsections (1), (2), and (5); or
(b) the effectuation, or any attempt to effectuate, an acquisition of control of or mergerwith a domestic insurer unless the commissioner has given the commissioner's approval to theacquisition or merger.
(15) (a) The courts of this state are vested with jurisdiction over:
(i) a person who:
(A) files a statement with the commissioner under this section; and
(B) is not resident, domiciled, or authorized to do business in this state; and
(ii) overall actions involving persons described in Subsection (15)(a)(i) arising out of aviolation of this section.
(b) A person described in Subsection (15)(a) is considered to have performed actsequivalent to and constituting an appointment of the commissioner by that person, to be thatperson's lawful agent upon whom may be served all lawful process in any action, suit, orproceeding arising out of a violation of this section.
(c) A copy of a lawful process described in Subsection (15)(b) shall be:
(i) served on the commissioner; and
(ii) transmitted by registered or certified mail by the commissioner to the person at thatperson's last-known address.

Amended by Chapter 2, 2004 General Session

State Codes and Statutes

Statutes > Utah > Title-31a > Chapter-16 > 31a-16-103

31A-16-103. Acquisition of control of or merger with domestic insurer.
(1) (a) A person may not take the actions described in Subsections (1)(b) or (c) unless, atthe time any offer, request, or invitation is made or any such agreement is entered into, or prior tothe acquisition of securities if no offer or agreement is involved:
(i) the person files with the commissioner a statement containing the informationrequired by this section;
(ii) the person provides a copy of the statement described in Subsection (1)(a)(i) to theinsurer; and
(iii) the commissioner approves the offer, request, invitation, agreement, or acquisition.
(b) Unless the person complies with Subsection (1)(a), a person other than the issuer maynot make a tender offer for, a request or invitation for tenders of, or enter into any agreement toexchange securities, or seek to acquire or acquire in the open market or otherwise, any votingsecurity of a domestic insurer if after the acquisition, the person would directly, indirectly, byconversion, or by exercise of any right to acquire be in control of the insurer.
(c) Unless the person complies with Subsection (1)(a), a person may not enter into anagreement to merge with or otherwise to acquire control of:
(i) a domestic insurer; or
(ii) any person controlling a domestic insurer.
(d) (i) For purposes of this section, a domestic insurer includes any person controlling adomestic insurer unless the person as determined by the commissioner is either directly orthrough its affiliates primarily engaged in business other than the business of insurance.
(ii) The controlling person described in Subsection (1)(d)(i) shall file with thecommissioner a preacquisition notification containing the information required in Subsection (2)30 calendar days before the proposed effective date of the acquisition.
(iii) For the purposes of this section, "person" does not include any securities broker thatin the usual and customary brokers function holds less than 20% of:
(A) the voting securities of an insurance company; or
(B) any person that controls an insurance company.
(iv) This section applies to all domestic insurers and other entities licensed underChapters 5, 7, 8, 9, and 11.
(e) (i) An agreement for acquisition of control or merger as contemplated by thisSubsection (1) is not valid or enforceable unless the agreement:
(A) is in writing; and
(B) includes a provision that the agreement is subject to the approval of thecommissioner upon the filing of any applicable statement required under this chapter.
(ii) A written agreement for acquisition or control that includes the provision describedin Subsection (1)(e)(i) satisfies the requirements of this Subsection (1).
(2) The statement to be filed with the commissioner under Subsection (1) shall be madeunder oath or affirmation and shall contain the following information:
(a) the name and address of the "acquiring party," which means each person by whom oron whose behalf the merger or other acquisition of control referred to in Subsection (1) is to beeffected; and
(i) if the person is an individual:
(A) the person's principal occupation;
(B) a listing of all offices and positions held by the person during the past five years; and

(C) any conviction of crimes other than minor traffic violations during the past 10 years;and
(ii) if the person is not an individual:
(A) a report of the nature of its business operations during:
(I) the past five years; or
(II) for any lesser period as the person and any of its predecessors has been in existence;
(B) an informative description of the business intended to be done by the person and theperson's subsidiaries;
(C) a list of all individuals who are or who have been selected to become directors orexecutive officers of the person, or individuals who perform, or who will perform functionsappropriate to such positions; and
(D) for each individual described in Subsection (2)(a)(ii)(C), the information required bySubsection (2)(a)(i) for each individual;
(b) (i) the source, nature, and amount of the consideration used or to be used in effectingthe merger or acquisition of control;
(ii) a description of any transaction in which funds were or are to be obtained for thepurpose of effecting the merger or acquisition of control, including any pledge of:
(A) the insurer's stock; or
(B) the stock of any of the insurer's subsidiaries or controlling affiliates; and
(iii) the identity of persons furnishing the consideration;
(c) (i) fully audited financial information, or other financial information consideredacceptable by the commissioner, of the earnings and financial condition of each acquiring partyfor:
(A) the preceding five fiscal years of each acquiring party; or
(B) any lesser period the acquiring party and any of its predecessors shall have been inexistence; and
(ii) unaudited information:
(A) similar to the information described in Subsection (2)(c)(i); and
(B) prepared within the 90 days prior to the filing of the statement;
(d) any plans or proposals which each acquiring party may have to:
(i) liquidate the insurer;
(ii) sell its assets;
(iii) merge or consolidate the insurer with any person; or
(iv) make any other material change in the insurer's:
(A) business;
(B) corporate structure; or
(C) management;
(e) (i) the number of shares of any security referred to in Subsection (1) that eachacquiring party proposes to acquire;
(ii) the terms of the offer, request, invitation, agreement, or acquisition referred to inSubsection (1); and
(iii) a statement as to the method by which the fairness of the proposal was arrived at;
(f) the amount of each class of any security referred to in Subsection (1) that:
(i) is beneficially owned; or
(ii) concerning which there is a right to acquire beneficial ownership by each acquiring

party;
(g) a full description of any contract, arrangement, or understanding with respect to anysecurity referred to in Subsection (1) in which any acquiring party is involved, including:
(i) the transfer of any of the securities;
(ii) joint ventures;
(iii) loan or option arrangements;
(iv) puts or calls;
(v) guarantees of loans;
(vi) guarantees against loss or guarantees of profits;
(vii) division of losses or profits; or
(viii) the giving or withholding of proxies;
(h) a description of the purchase by any acquiring party of any security referred to inSubsection (1) during the 12 calendar months preceding the filing of the statement including:
(i) the dates of purchase;
(ii) the names of the purchasers; and
(iii) the consideration paid or agreed to be paid for the purchase;
(i) a description of:
(i) any recommendations to purchase by any acquiring party any security referred to inSubsection (1) made during the 12 calendar months preceding the filing of the statement; or
(ii) any recommendations made by anyone based upon interviews or at the suggestion ofthe acquiring party;
(j) (i) copies of all tender offers for, requests for, or invitations for tenders of, exchangeoffers for, and agreements to acquire or exchange any securities referred to in Subsection (1); and
(ii) if distributed, copies of additional soliciting material relating to the transactionsdescribed in Subsection (2)(j)(i);
(k) (i) the term of any agreement, contract, or understanding made with, or proposed tobe made with, any broker-dealer as to solicitation of securities referred to in Subsection (1) fortender; and
(ii) the amount of any fees, commissions, or other compensation to be paid tobroker-dealers with regard to any agreement, contract, or understanding described in Subsection(2)(k)(i); and
(l) any additional information the commissioner requires by rule, which thecommissioner determines to be:
(i) necessary or appropriate for the protection of policyholders of the insurer; or
(ii) in the public interest.
(3) The department may request:
(a) (i) criminal background information maintained pursuant to Title 53, Chapter 10, Part2, from the Bureau of Criminal Identification; and
(ii) complete Federal Bureau of Investigation criminal background checks through thenational criminal history system.
(b) Information obtained by the department from the review of criminal history recordsreceived under Subsection (3)(a) shall be used by the department for the purpose of:
(i) verifying the information in Subsection (2)(a)(i);
(ii) determining the integrity of persons who would control the operation of an insurer;and

(iii) preventing persons who violate 18 U.S.C. Sections 1033 and 1034 from engaging inthe business of insurance in the state.
(c) If the department requests the criminal background information, the department shall:
(i) pay to the Department of Public Safety the costs incurred by the Department of PublicSafety in providing the department criminal background information under Subsection (3)(a)(i);
(ii) pay to the Federal Bureau of Investigation the costs incurred by the Federal Bureau ofInvestigation in providing the department criminal background information under Subsection(3)(a)(ii); and
(iii) charge the person required to file the statement referred to in Subsection (1) a feeequal to the aggregate of Subsections (3)(c)(i) and (ii).
(4) (a) If the source of the consideration under Subsection (2)(b)(i) is a loan made in thelender's ordinary course of business, the identity of the lender shall remain confidential, if theperson filing the statement so requests.
(b) (i) Under Subsection (2)(e), the commissioner may require a statement of the adjustedbook value assigned by the acquiring party to each security in arriving at the terms of the offer.
(ii) For purposes of this Subsection (4)(b), "adjusted book value" means each security'sproportional interest in the capital and surplus of the insurer with adjustments that reflect:
(A) market conditions;
(B) business in force; and
(C) other intangible assets or liabilities of the insurer.
(c) The description required by Subsection (2)(g) shall identify the persons with whomthe contracts, arrangements, or understandings have been entered into.
(5) (a) If the person required to file the statement referred to in Subsection (1) is apartnership, limited partnership, syndicate, or other group, the commissioner may require that allthe information called for by Subsections (2), (3), or (4) shall be given with respect to each:
(i) partner of the partnership or limited partnership;
(ii) member of the syndicate or group; and
(iii) person who controls the partner or member.
(b) If any partner, member, or person referred to in Subsection (5)(a) is a corporation, orif the person required to file the statement referred to in Subsection (1) is a corporation, thecommissioner may require that the information called for by Subsection (2) shall be given withrespect to:
(i) the corporation;
(ii) each officer and director of the corporation; and
(iii) each person who is directly or indirectly the beneficial owner of more than 10% ofthe outstanding voting securities of the corporation.
(6) If any material change occurs in the facts set forth in the statement filed with thecommissioner and sent to the insurer pursuant to Subsection (2), an amendment setting forth thechange, together with copies of all documents and other material relevant to the change, shall befiled with the commissioner and sent to the insurer within two business days after the filingperson learns of such change.
(7) If any offer, request, invitation, agreement, or acquisition referred to in Subsection (1)is proposed to be made by means of a registration statement under the Securities Act of 1933, orunder circumstances requiring the disclosure of similar information under the SecuritiesExchange Act of 1934, or under a state law requiring similar registration or disclosure, a person

required to file the statement referred to in Subsection (1) may use copies of any registration ordisclosure documents in furnishing the information called for by the statement.
(8) (a) The commissioner shall approve any merger or other acquisition of controlreferred to in Subsection (1) unless, after a public hearing on the merger or acquisition, thecommissioner finds that:
(i) after the change of control, the domestic insurer referred to in Subsection (1) wouldnot be able to satisfy the requirements for the issuance of a license to write the line or lines ofinsurance for which it is presently licensed;
(ii) the effect of the merger or other acquisition of control would:
(A) substantially lessen competition in insurance in this state; or
(B) tend to create a monopoly in insurance;
(iii) the financial condition of any acquiring party might:
(A) jeopardize the financial stability of the insurer; or
(B) prejudice the interest of:
(I) its policyholders; or
(II) any remaining securityholders who are unaffiliated with the acquiring party;
(iv) the terms of the offer, request, invitation, agreement, or acquisition referred to inSubsection (1) are unfair and unreasonable to the securityholders of the insurer;
(v) the plans or proposals which the acquiring party has to liquidate the insurer, sell itsassets, or consolidate or merge it with any person, or to make any other material change in itsbusiness or corporate structure or management, are:
(A) unfair and unreasonable to policyholders of the insurer; and
(B) not in the public interest; or
(vi) the competence, experience, and integrity of those persons who would control theoperation of the insurer are such that it would not be in the interest of the policyholders of theinsurer and the public to permit the merger or other acquisition of control.
(b) For purposes of Subsection (8)(a)(iv), the offering price for each security may not beconsidered unfair if the adjusted book values under Subsection (2)(e):
(i) are disclosed to the securityholders; and
(ii) determined by the commissioner to be reasonable.
(9) (a) The public hearing referred to in Subsection (8) shall be held within 30 days afterthe statement required by Subsection (1) is filed.
(b) (i) At least 20 days notice of the hearing shall be given by the commissioner to theperson filing the statement.
(ii) Affected parties may waive the notice required by this Subsection (9)(b).
(iii) Not less than seven days notice of the public hearing shall be given by the personfiling the statement to:
(A) the insurer; and
(B) any person designated by the commissioner.
(c) The commissioner shall make a determination within 30 days after the conclusion ofthe hearing.
(d) At the hearing, the person filing the statement, the insurer, any person to whom noticeof hearing was sent, and any other person whose interest may be affected by the hearing may:
(i) present evidence;
(ii) examine and cross-examine witnesses; and

(iii) offer oral and written arguments.
(e) (i) A person or insurer described in Subsection (9)(d) may conduct discoveryproceedings in the same manner as is presently allowed in the district courts of this state.
(ii) All discovery proceedings shall be concluded not later than three days before thecommencement of the public hearing.
(10) (a) The commissioner may retain technical experts to assist in reviewing all, or aportion of, information filed in connection with a proposed merger or other acquisition of controlreferred to in Subsection (1).
(b) In determining whether any of the conditions in Subsection (8) exist, thecommissioner may consider the findings of technical experts employed to review applicablefilings.
(c) (i) A technical expert employed under Subsection (10)(a) shall present to thecommissioner a statement of all expenses incurred by the technical expert in conjunction with thetechnical expert's review of a proposed merger or other acquisition of control.
(ii) At the commissioner's direction the acquiring person shall compensate the technicalexpert at customary rates for time and expenses:
(A) necessarily incurred; and
(B) approved by the commissioner.
(iii) The acquiring person shall:
(A) certify the consolidated account of all charges and expenses incurred for the reviewby technical experts;
(B) retain a copy of the consolidated account described in Subsection (10)(c)(iii)(A); and
(C) file with the department as a public record a copy of the consolidated accountdescribed in Subsection (10)(c)(iii)(A).
(11) (a) (i) If a domestic insurer proposes to merge into another insurer, anysecurityholder electing to exercise a right of dissent may file with the insurer a written request forpayment of the adjusted book value given in the statement required by Subsection (1) andapproved under Subsection (8), in return for the surrender of the security holder's securities.
(ii) The request described in Subsection (11)(a)(i) shall be filed not later than 10 daysafter the day of the securityholders' meeting where the corporate action is approved.
(b) The dissenting securityholder is entitled to and the insurer is required to pay to thedissenting securityholder the specified value within 60 days of receipt of the dissenting securityholder's security.
(c) Persons electing under this Subsection (11) to receive cash for their securities waivethe dissenting shareholder and appraisal rights otherwise applicable under Title 16, Chapter 10a,Part 13, Dissenters' Rights.
(d) (i) This Subsection (11) provides an elective procedure for dissenting securityholdersto resolve their objections to the plan of merger.
(ii) This section does not restrict the rights of dissenting securityholders under Title 16,Chapter 10a, Utah Revised Business Corporation Act, unless this election is made under thisSubsection (11).
(12) (a) All statements, amendments, or other material filed under Subsection (1), and allnotices of public hearings held under Subsection (8), shall be mailed by the insurer to itssecurityholders within five business days after the insurer has received the statements,amendments, other material, or notices.

(b) (i) Mailing expenses shall be paid by the person making the filing.
(ii) As security for the payment of mailing expenses, that person shall file with thecommissioner an acceptable bond or other deposit in an amount determined by thecommissioner.
(13) This section does not apply to any offer, request, invitation, agreement, oracquisition that the commissioner by order exempts from the requirements of this section as:
(a) not having been made or entered into for the purpose of, and not having the effect of,changing or influencing the control of a domestic insurer; or
(b) as otherwise not comprehended within the purposes of this section.
(14) The following are violations of this section:
(a) the failure to file any statement, amendment, or other material required to be filedpursuant to Subsections (1), (2), and (5); or
(b) the effectuation, or any attempt to effectuate, an acquisition of control of or mergerwith a domestic insurer unless the commissioner has given the commissioner's approval to theacquisition or merger.
(15) (a) The courts of this state are vested with jurisdiction over:
(i) a person who:
(A) files a statement with the commissioner under this section; and
(B) is not resident, domiciled, or authorized to do business in this state; and
(ii) overall actions involving persons described in Subsection (15)(a)(i) arising out of aviolation of this section.
(b) A person described in Subsection (15)(a) is considered to have performed actsequivalent to and constituting an appointment of the commissioner by that person, to be thatperson's lawful agent upon whom may be served all lawful process in any action, suit, orproceeding arising out of a violation of this section.
(c) A copy of a lawful process described in Subsection (15)(b) shall be:
(i) served on the commissioner; and
(ii) transmitted by registered or certified mail by the commissioner to the person at thatperson's last-known address.

Amended by Chapter 2, 2004 General Session


State Codes and Statutes


Back To Homepage

State Codes and Statutes

Statutes > Utah > Title-31a > Chapter-16 > 31a-16-103

31A-16-103. Acquisition of control of or merger with domestic insurer.
(1) (a) A person may not take the actions described in Subsections (1)(b) or (c) unless, atthe time any offer, request, or invitation is made or any such agreement is entered into, or prior tothe acquisition of securities if no offer or agreement is involved:
(i) the person files with the commissioner a statement containing the informationrequired by this section;
(ii) the person provides a copy of the statement described in Subsection (1)(a)(i) to theinsurer; and
(iii) the commissioner approves the offer, request, invitation, agreement, or acquisition.
(b) Unless the person complies with Subsection (1)(a), a person other than the issuer maynot make a tender offer for, a request or invitation for tenders of, or enter into any agreement toexchange securities, or seek to acquire or acquire in the open market or otherwise, any votingsecurity of a domestic insurer if after the acquisition, the person would directly, indirectly, byconversion, or by exercise of any right to acquire be in control of the insurer.
(c) Unless the person complies with Subsection (1)(a), a person may not enter into anagreement to merge with or otherwise to acquire control of:
(i) a domestic insurer; or
(ii) any person controlling a domestic insurer.
(d) (i) For purposes of this section, a domestic insurer includes any person controlling adomestic insurer unless the person as determined by the commissioner is either directly orthrough its affiliates primarily engaged in business other than the business of insurance.
(ii) The controlling person described in Subsection (1)(d)(i) shall file with thecommissioner a preacquisition notification containing the information required in Subsection (2)30 calendar days before the proposed effective date of the acquisition.
(iii) For the purposes of this section, "person" does not include any securities broker thatin the usual and customary brokers function holds less than 20% of:
(A) the voting securities of an insurance company; or
(B) any person that controls an insurance company.
(iv) This section applies to all domestic insurers and other entities licensed underChapters 5, 7, 8, 9, and 11.
(e) (i) An agreement for acquisition of control or merger as contemplated by thisSubsection (1) is not valid or enforceable unless the agreement:
(A) is in writing; and
(B) includes a provision that the agreement is subject to the approval of thecommissioner upon the filing of any applicable statement required under this chapter.
(ii) A written agreement for acquisition or control that includes the provision describedin Subsection (1)(e)(i) satisfies the requirements of this Subsection (1).
(2) The statement to be filed with the commissioner under Subsection (1) shall be madeunder oath or affirmation and shall contain the following information:
(a) the name and address of the "acquiring party," which means each person by whom oron whose behalf the merger or other acquisition of control referred to in Subsection (1) is to beeffected; and
(i) if the person is an individual:
(A) the person's principal occupation;
(B) a listing of all offices and positions held by the person during the past five years; and

(C) any conviction of crimes other than minor traffic violations during the past 10 years;and
(ii) if the person is not an individual:
(A) a report of the nature of its business operations during:
(I) the past five years; or
(II) for any lesser period as the person and any of its predecessors has been in existence;
(B) an informative description of the business intended to be done by the person and theperson's subsidiaries;
(C) a list of all individuals who are or who have been selected to become directors orexecutive officers of the person, or individuals who perform, or who will perform functionsappropriate to such positions; and
(D) for each individual described in Subsection (2)(a)(ii)(C), the information required bySubsection (2)(a)(i) for each individual;
(b) (i) the source, nature, and amount of the consideration used or to be used in effectingthe merger or acquisition of control;
(ii) a description of any transaction in which funds were or are to be obtained for thepurpose of effecting the merger or acquisition of control, including any pledge of:
(A) the insurer's stock; or
(B) the stock of any of the insurer's subsidiaries or controlling affiliates; and
(iii) the identity of persons furnishing the consideration;
(c) (i) fully audited financial information, or other financial information consideredacceptable by the commissioner, of the earnings and financial condition of each acquiring partyfor:
(A) the preceding five fiscal years of each acquiring party; or
(B) any lesser period the acquiring party and any of its predecessors shall have been inexistence; and
(ii) unaudited information:
(A) similar to the information described in Subsection (2)(c)(i); and
(B) prepared within the 90 days prior to the filing of the statement;
(d) any plans or proposals which each acquiring party may have to:
(i) liquidate the insurer;
(ii) sell its assets;
(iii) merge or consolidate the insurer with any person; or
(iv) make any other material change in the insurer's:
(A) business;
(B) corporate structure; or
(C) management;
(e) (i) the number of shares of any security referred to in Subsection (1) that eachacquiring party proposes to acquire;
(ii) the terms of the offer, request, invitation, agreement, or acquisition referred to inSubsection (1); and
(iii) a statement as to the method by which the fairness of the proposal was arrived at;
(f) the amount of each class of any security referred to in Subsection (1) that:
(i) is beneficially owned; or
(ii) concerning which there is a right to acquire beneficial ownership by each acquiring

party;
(g) a full description of any contract, arrangement, or understanding with respect to anysecurity referred to in Subsection (1) in which any acquiring party is involved, including:
(i) the transfer of any of the securities;
(ii) joint ventures;
(iii) loan or option arrangements;
(iv) puts or calls;
(v) guarantees of loans;
(vi) guarantees against loss or guarantees of profits;
(vii) division of losses or profits; or
(viii) the giving or withholding of proxies;
(h) a description of the purchase by any acquiring party of any security referred to inSubsection (1) during the 12 calendar months preceding the filing of the statement including:
(i) the dates of purchase;
(ii) the names of the purchasers; and
(iii) the consideration paid or agreed to be paid for the purchase;
(i) a description of:
(i) any recommendations to purchase by any acquiring party any security referred to inSubsection (1) made during the 12 calendar months preceding the filing of the statement; or
(ii) any recommendations made by anyone based upon interviews or at the suggestion ofthe acquiring party;
(j) (i) copies of all tender offers for, requests for, or invitations for tenders of, exchangeoffers for, and agreements to acquire or exchange any securities referred to in Subsection (1); and
(ii) if distributed, copies of additional soliciting material relating to the transactionsdescribed in Subsection (2)(j)(i);
(k) (i) the term of any agreement, contract, or understanding made with, or proposed tobe made with, any broker-dealer as to solicitation of securities referred to in Subsection (1) fortender; and
(ii) the amount of any fees, commissions, or other compensation to be paid tobroker-dealers with regard to any agreement, contract, or understanding described in Subsection(2)(k)(i); and
(l) any additional information the commissioner requires by rule, which thecommissioner determines to be:
(i) necessary or appropriate for the protection of policyholders of the insurer; or
(ii) in the public interest.
(3) The department may request:
(a) (i) criminal background information maintained pursuant to Title 53, Chapter 10, Part2, from the Bureau of Criminal Identification; and
(ii) complete Federal Bureau of Investigation criminal background checks through thenational criminal history system.
(b) Information obtained by the department from the review of criminal history recordsreceived under Subsection (3)(a) shall be used by the department for the purpose of:
(i) verifying the information in Subsection (2)(a)(i);
(ii) determining the integrity of persons who would control the operation of an insurer;and

(iii) preventing persons who violate 18 U.S.C. Sections 1033 and 1034 from engaging inthe business of insurance in the state.
(c) If the department requests the criminal background information, the department shall:
(i) pay to the Department of Public Safety the costs incurred by the Department of PublicSafety in providing the department criminal background information under Subsection (3)(a)(i);
(ii) pay to the Federal Bureau of Investigation the costs incurred by the Federal Bureau ofInvestigation in providing the department criminal background information under Subsection(3)(a)(ii); and
(iii) charge the person required to file the statement referred to in Subsection (1) a feeequal to the aggregate of Subsections (3)(c)(i) and (ii).
(4) (a) If the source of the consideration under Subsection (2)(b)(i) is a loan made in thelender's ordinary course of business, the identity of the lender shall remain confidential, if theperson filing the statement so requests.
(b) (i) Under Subsection (2)(e), the commissioner may require a statement of the adjustedbook value assigned by the acquiring party to each security in arriving at the terms of the offer.
(ii) For purposes of this Subsection (4)(b), "adjusted book value" means each security'sproportional interest in the capital and surplus of the insurer with adjustments that reflect:
(A) market conditions;
(B) business in force; and
(C) other intangible assets or liabilities of the insurer.
(c) The description required by Subsection (2)(g) shall identify the persons with whomthe contracts, arrangements, or understandings have been entered into.
(5) (a) If the person required to file the statement referred to in Subsection (1) is apartnership, limited partnership, syndicate, or other group, the commissioner may require that allthe information called for by Subsections (2), (3), or (4) shall be given with respect to each:
(i) partner of the partnership or limited partnership;
(ii) member of the syndicate or group; and
(iii) person who controls the partner or member.
(b) If any partner, member, or person referred to in Subsection (5)(a) is a corporation, orif the person required to file the statement referred to in Subsection (1) is a corporation, thecommissioner may require that the information called for by Subsection (2) shall be given withrespect to:
(i) the corporation;
(ii) each officer and director of the corporation; and
(iii) each person who is directly or indirectly the beneficial owner of more than 10% ofthe outstanding voting securities of the corporation.
(6) If any material change occurs in the facts set forth in the statement filed with thecommissioner and sent to the insurer pursuant to Subsection (2), an amendment setting forth thechange, together with copies of all documents and other material relevant to the change, shall befiled with the commissioner and sent to the insurer within two business days after the filingperson learns of such change.
(7) If any offer, request, invitation, agreement, or acquisition referred to in Subsection (1)is proposed to be made by means of a registration statement under the Securities Act of 1933, orunder circumstances requiring the disclosure of similar information under the SecuritiesExchange Act of 1934, or under a state law requiring similar registration or disclosure, a person

required to file the statement referred to in Subsection (1) may use copies of any registration ordisclosure documents in furnishing the information called for by the statement.
(8) (a) The commissioner shall approve any merger or other acquisition of controlreferred to in Subsection (1) unless, after a public hearing on the merger or acquisition, thecommissioner finds that:
(i) after the change of control, the domestic insurer referred to in Subsection (1) wouldnot be able to satisfy the requirements for the issuance of a license to write the line or lines ofinsurance for which it is presently licensed;
(ii) the effect of the merger or other acquisition of control would:
(A) substantially lessen competition in insurance in this state; or
(B) tend to create a monopoly in insurance;
(iii) the financial condition of any acquiring party might:
(A) jeopardize the financial stability of the insurer; or
(B) prejudice the interest of:
(I) its policyholders; or
(II) any remaining securityholders who are unaffiliated with the acquiring party;
(iv) the terms of the offer, request, invitation, agreement, or acquisition referred to inSubsection (1) are unfair and unreasonable to the securityholders of the insurer;
(v) the plans or proposals which the acquiring party has to liquidate the insurer, sell itsassets, or consolidate or merge it with any person, or to make any other material change in itsbusiness or corporate structure or management, are:
(A) unfair and unreasonable to policyholders of the insurer; and
(B) not in the public interest; or
(vi) the competence, experience, and integrity of those persons who would control theoperation of the insurer are such that it would not be in the interest of the policyholders of theinsurer and the public to permit the merger or other acquisition of control.
(b) For purposes of Subsection (8)(a)(iv), the offering price for each security may not beconsidered unfair if the adjusted book values under Subsection (2)(e):
(i) are disclosed to the securityholders; and
(ii) determined by the commissioner to be reasonable.
(9) (a) The public hearing referred to in Subsection (8) shall be held within 30 days afterthe statement required by Subsection (1) is filed.
(b) (i) At least 20 days notice of the hearing shall be given by the commissioner to theperson filing the statement.
(ii) Affected parties may waive the notice required by this Subsection (9)(b).
(iii) Not less than seven days notice of the public hearing shall be given by the personfiling the statement to:
(A) the insurer; and
(B) any person designated by the commissioner.
(c) The commissioner shall make a determination within 30 days after the conclusion ofthe hearing.
(d) At the hearing, the person filing the statement, the insurer, any person to whom noticeof hearing was sent, and any other person whose interest may be affected by the hearing may:
(i) present evidence;
(ii) examine and cross-examine witnesses; and

(iii) offer oral and written arguments.
(e) (i) A person or insurer described in Subsection (9)(d) may conduct discoveryproceedings in the same manner as is presently allowed in the district courts of this state.
(ii) All discovery proceedings shall be concluded not later than three days before thecommencement of the public hearing.
(10) (a) The commissioner may retain technical experts to assist in reviewing all, or aportion of, information filed in connection with a proposed merger or other acquisition of controlreferred to in Subsection (1).
(b) In determining whether any of the conditions in Subsection (8) exist, thecommissioner may consider the findings of technical experts employed to review applicablefilings.
(c) (i) A technical expert employed under Subsection (10)(a) shall present to thecommissioner a statement of all expenses incurred by the technical expert in conjunction with thetechnical expert's review of a proposed merger or other acquisition of control.
(ii) At the commissioner's direction the acquiring person shall compensate the technicalexpert at customary rates for time and expenses:
(A) necessarily incurred; and
(B) approved by the commissioner.
(iii) The acquiring person shall:
(A) certify the consolidated account of all charges and expenses incurred for the reviewby technical experts;
(B) retain a copy of the consolidated account described in Subsection (10)(c)(iii)(A); and
(C) file with the department as a public record a copy of the consolidated accountdescribed in Subsection (10)(c)(iii)(A).
(11) (a) (i) If a domestic insurer proposes to merge into another insurer, anysecurityholder electing to exercise a right of dissent may file with the insurer a written request forpayment of the adjusted book value given in the statement required by Subsection (1) andapproved under Subsection (8), in return for the surrender of the security holder's securities.
(ii) The request described in Subsection (11)(a)(i) shall be filed not later than 10 daysafter the day of the securityholders' meeting where the corporate action is approved.
(b) The dissenting securityholder is entitled to and the insurer is required to pay to thedissenting securityholder the specified value within 60 days of receipt of the dissenting securityholder's security.
(c) Persons electing under this Subsection (11) to receive cash for their securities waivethe dissenting shareholder and appraisal rights otherwise applicable under Title 16, Chapter 10a,Part 13, Dissenters' Rights.
(d) (i) This Subsection (11) provides an elective procedure for dissenting securityholdersto resolve their objections to the plan of merger.
(ii) This section does not restrict the rights of dissenting securityholders under Title 16,Chapter 10a, Utah Revised Business Corporation Act, unless this election is made under thisSubsection (11).
(12) (a) All statements, amendments, or other material filed under Subsection (1), and allnotices of public hearings held under Subsection (8), shall be mailed by the insurer to itssecurityholders within five business days after the insurer has received the statements,amendments, other material, or notices.

(b) (i) Mailing expenses shall be paid by the person making the filing.
(ii) As security for the payment of mailing expenses, that person shall file with thecommissioner an acceptable bond or other deposit in an amount determined by thecommissioner.
(13) This section does not apply to any offer, request, invitation, agreement, oracquisition that the commissioner by order exempts from the requirements of this section as:
(a) not having been made or entered into for the purpose of, and not having the effect of,changing or influencing the control of a domestic insurer; or
(b) as otherwise not comprehended within the purposes of this section.
(14) The following are violations of this section:
(a) the failure to file any statement, amendment, or other material required to be filedpursuant to Subsections (1), (2), and (5); or
(b) the effectuation, or any attempt to effectuate, an acquisition of control of or mergerwith a domestic insurer unless the commissioner has given the commissioner's approval to theacquisition or merger.
(15) (a) The courts of this state are vested with jurisdiction over:
(i) a person who:
(A) files a statement with the commissioner under this section; and
(B) is not resident, domiciled, or authorized to do business in this state; and
(ii) overall actions involving persons described in Subsection (15)(a)(i) arising out of aviolation of this section.
(b) A person described in Subsection (15)(a) is considered to have performed actsequivalent to and constituting an appointment of the commissioner by that person, to be thatperson's lawful agent upon whom may be served all lawful process in any action, suit, orproceeding arising out of a violation of this section.
(c) A copy of a lawful process described in Subsection (15)(b) shall be:
(i) served on the commissioner; and
(ii) transmitted by registered or certified mail by the commissioner to the person at thatperson's last-known address.

Amended by Chapter 2, 2004 General Session


Disclaimer
There is no confidential attorney-client relationship formed by using Laws.com website and information provided on this site is not legal advice. For legal advice, please contact your attorney. Attorneys listed on this website are not referred or endorsed by this website. By using Laws.com you agree to Laws.com Terms Of Use.
Copyright © 2017 Laws.com | All rights reserved

Loading..

Close Window

Loading, Please Wait!

This may take a second or two.