N.Y. Insurance Law § 7302: Conversion of stock life insurance companies into mutual companies

§ 7302. Conversion of stock life insurance companies into mutual

companies. (a) A domestic stock life insurance company may become a

mutual life insurance company, whether or not its policyholders have

become entitled to vote for directors pursuant to section four thousand

two hundred twelve of this chapter or the former insurance law, and to

that end may formulate and carry out a plan for the acquisition of its

outstanding shares, as follows:

(1) Such plan shall have been adopted by a vote of a majority of the

directors of the company.

(2) Such plan shall have been approved by a vote of shareholders

representing a majority of the outstanding shares at a meeting called

for that purpose.

(3) Such plan shall have been approved by the vote of a majority of

the policyholders eligible to vote who vote at a meeting called for that

purpose. Any policyholder who holds life insurance in such company in an

amount at least equal to one thousand dollars or an equivalent thereto

as hereinafter provided and whose insurance is then in force and has

been in force for at least one year prior to such shareholders' meeting,

shall be eligible to vote thereat, either in person or by proxy or by

mail. The aforementioned reference to life insurance in an amount at

least equal to one thousand dollars shall be deemed to include, as

equivalent thereto, an annuity contract which at normal date of maturity

requires the payment of one hundred dollars or more annually, a pure

endowment contract for the principal sum of one thousand dollars or

more, and a policy of accident or health insurance requiring the payment

of a premium of not less than twenty-five dollars annually. In the case

of every policy or contract of group insurance or group annuity

contract, issued by such company, the employer, or other person, firm,

corporation or association to whom or in whose name the master policy

shall have been issued and held, shall be deemed one policyholder within

the meaning of this paragraph. Notice of such meeting shall be given by

mailing such notice from the home office of such company at least thirty

days prior to such meeting, in a sealed envelope, postage prepaid,

addressed to each policyholder at his last known post office address.

Such meeting shall be conducted in such manner as may be provided for in

such plan, with the approval of the superintendent. The superintendent

shall supervise and direct the methods and procedure of such meeting

and, to conduct the voting, shall appoint an adequate number of

inspectors who shall have power to determine all questions concerning

the validity and verification of the ballots, the qualifications of the

voters and the canvass of the vote. Such inspectors, or any one thereof

designated by the superintendent, shall certify to the superintendent

and to such company the result of such vote, under such rules as shall

be prescribed by the superintendent. All necessary expenses incurred by

the superintendent or incurred with his approval by the inspectors

appointed by him shall be paid by such company upon the certificate of

the superintendent.

(4) Such plan may specify the purchase price to be paid by such

company for its shares, and in such case the price so specified shall be

adhered to. If such plan does not specify the price to be paid for such

shares, the company shall first obtain the approval of the

superintendent for every payment made for the acquisition of any shares.

(5) The plan shall name three trustees authorized to receive shares of

the company and hold them in trust for all policyholders until the

conversion process has been completed. The plan shall provide a method

for filling vacancies among the trustees.

(6) The plan shall have been submitted to the superintendent and

approved as conforming to the requirements of this chapter and as not

prejudicial to the policyholders of the company or to the insuring

public. Before approving any such plan or any such payment, the

superintendent shall be satisfied, by such investigation as he may make

or by such evidence as he may require, that such company, after

deducting the aggregate sum appropriated by such plan for the

acquisition of any or all of its shares, and in the case of any payment

not fixed by such plan, after deducting also the amount of such payment,

will be possessed of admitted assets in an amount equal to the sum of:

(A) its entire liabilities, including the net values of its

outstanding contracts computed in accordance with the provisions of this

chapter,

(B) the minimum surplus prescribed by this chapter for mutual life

insurance companies organized to do the same kinds of business, and

(C) an additional contingent surplus deemed by the superintendent

necessary to protect the company's policyholders and the insuring

public, in view of the past experience of such company, the character of

its assets, its present management, and its probable future earnings.

(7) No change shall be made in any such plan, adopted and approved as

aforesaid, except upon the formulation, adoption and approval of a new

plan in accordance with the foregoing requirements.

(8) In pursuance of any such plan to convert a domestic stock life

insurance company into a mutual life insurance company, such company

shall have power, and shall be privileged, to acquire any of its shares

by gift, bequest, or purchase. Until all of its outstanding shares are

acquired, any shares so acquired shall be taken and held in trust for

all the policyholders of such company, by the trustees named in such

plan. Before undertaking any of the duties of the appointment each

trustee shall file with the company an acceptance of the appointment and

a declaration that he will faithfully discharge his duties as trustee,

subscribed and affirmed by him as true under the penalties of perjury.

All shares held by the trustees shall be deemed admitted assets of the

company at their par value. The trustees shall have power to vote any

shares so acquired at all corporate meetings at which shareholders have

the right to vote. All dividends and other sums received by such

trustees on the shares acquired by them, after paying the necessary

expenses of the trust, shall be immediately repaid to such company for

the benefit of all who are or may become policyholders of such company

and entitled to participate in the profits thereof, and shall be added

to and become a part of the surplus earned by such company,

apportionable as a part of such surplus among such policyholders. The

provisions of section six hundred twenty-one of the business corporation

law and of section 9-1.1 of the estates, powers and trusts law shall not

apply to the trust hereinbefore authorized.

(b) (1) Whenever:

(A) a plan adopted and approved in accordance with subsection (a) of

this section shall have been in effect for more than ten years,

(B) the company shall have acquired and transferred to the trustees

under the plan at least ninety percent of its outstanding shares,

(C) the plan itself contains no provision for the compulsory

completion of the mutualization of the company inconsistent with the

terms of subsection (a) hereof, the directors by a vote of a majority

may offer to acquire by purchase all of the shares of the company not

theretofore acquired under the plan, at a specified price, uniform as to

class and series of shares, which the company considers to be their fair

value as of the date of making such offer. Before such offer shall be

made, it shall be submitted to the superintendent for approval. Before

approving any such offer the superintendent shall be satisfied, by such

investigation as he may make or by such evidence as he may require, that

the offer complies with the requirements of this chapter, that such

acquisition of such shares pursuant to such offer will not be

prejudicial to the policyholders of the company and that such company,

after deducting the sum required to acquire such shares at the price

stated in such offer, or any lesser price agreeable to shareholders,

will be possessed of admitted assets in an amount equal to the sum of:

(i) its entire liabilities, including the net values of all

outstanding contracts computed in accordance with the provisions of this

chapter;

(ii) the minimum surplus prescribed by this chapter for mutual life

insurance companies organized to do the same kind or kinds of business;

and

(iii) such additional contingent surplus based upon the past

experience of such company, its assets, its present management and its

probable future earnings as the superintendent deems necessary to

protect its policyholders.

(2) If the offer is approved by the superintendent, the company may

make a written offer, by registered mail, to each shareholder whose

shares have not theretofore been acquired by the company under the plan

or otherwise, to acquire all his shares at the specified price if

accepted in writing within thirty days after the mailing of such offer.

Such offer shall be accompanied by a copy of this subsection and by the

most current available balance sheet of the company, which shall be as

of a date not earlier than twelve months before the mailing of such

offer, and a profit and loss statement or statements for not less than a

twelve month period ended on the date of such balance sheet. Any

shareholder accepting such offer within the thirty day period shall,

within sixty days after his acceptance, transfer his shares and

surrender the certificates representing such shares, to the company and

shall thereupon be paid the offered price. All such shares shall be

assigned to the trustees referred to in paragraph five of subsection (a)

hereof and held by them as shares acquired pursuant to the plan.

(3) Each shareholder who does not accept such offer to acquire his

shares within such thirty day period shall within thirty days after the

expiration of such period apply to the supreme court, at any special

term thereof held in the district in which is situated the county in

which the company making the offer has its principal place of business,

upon at least eight days' notice to such company, for the appointment of

three disinterested persons to appraise the value of his shares as of

the date of making such offer, and the court shall appoint such

appraisers and designate the time and place of their first meeting, with

such directions in respect to their proceedings as shall be deemed

proper. The court may fill any vacancies in the board of appraisers

occurring by refusal to hold such office or neglect to act. The

appraisers shall meet at the time and place designated and, after being

duly sworn, shall hear the parties, faithfully and fairly discharge

their duties, estimate and certify in writing the fair value of such

shares as of the date of the offer, and deliver one copy of such

certificate to such company and another to each such shareholder. Within

twenty days after such delivery any party to the appraisal proceedings

may apply to the supreme court, at any such special term thereof upon at

least eight days' notice to all the parties to such appraisal

proceedings and to the superintendent, for approval of the report of the

board of appraisers. The court, after hearing the parties and the

superintendent, may approve the report and the value of the shares as

stated therein, or may itself, upon the evidence and proceedings before

the appraisers, determine the fair value of the shares as of the date of

such offer, or may refer the matter back to the same appraisers or other

appraisers to be so appointed by the court, to proceed in the same

manner. Whenever the court shall approve or determine the fair value of

such shares, it may also determine the terms of payment thereof by the

company. The charges and expenses of the appraisers, after approval by

the court, shall be paid by the company. Upon any such order approving

or determining the value of the shares and the method of the payment

thereof becoming final and from which no appeal is pending, or when the

time to appeal therefrom has expired, each shareholder party to the

proceeding shall transfer his shares and surrender the certificates

representing such shares to the company and the company shall make

payment therefor as provided in such order. Any shares so acquired by

the company shall be assigned and transferred to the trustees and held

by them as shares acquired pursuant to the plan.

(4) Any shareholder who does not make application to the court in the

manner and within the time prescribed in paragraph three hereof shall be

deemed to have accepted the offer referred to in paragraph two hereof,

effective, however, upon the expiration of the time prescribed in

paragraph three hereof for making such an application and such

shareholder's time for accepting such offer shall, for that purpose

only, be deemed to have been extended accordingly.

(5) Any offer to acquire shares made pursuant to this subsection

shall, except as otherwise provided in paragraphs two and four hereof

limiting the time for acceptance at the offered price, be irrevocable

until all proceedings upon such offer provided by this subsection have

been completed or all shares have otherwise been earlier acquired by the

company.

(6) Upon application by the company or by any aggrieved shareholder,

and upon at least eight days' notice to all persons to be affected

thereby and to the superintendent, the supreme court, at any special

term thereof held in the district in which is situated the county in

which the company has its principal place of business, may make any

order appropriate in the circumstances to implement or enforce the

provisions of this subsection. If any proceeding in respect of any of

the shares shall have been commenced pursuant to paragraph three hereof,

all subsequent applications pursuant to this subsection shall be made or

transferred to, and be heard and determined by, the court in which such

proceeding has been commenced.

(c) When all of the outstanding shares of the company have been

acquired, they shall be retired and cancelled, and thereupon the company

shall become a mutual life insurance company without shares.