N.Y. Insurance Law § 7308: Conversion of domestic reciprocal insurers into stock property/casualty insurance companies

§ 7308. Conversion of domestic reciprocal insurers into stock

property/casualty insurance companies. (a) Any domestic reciprocal

insurer doing business under the provisions of this article may, by the

affirmative vote of its subscribers holding two-thirds of its operating

reserve accumulations at the date of the meeting at which the proposal

to convert is voted upon, be converted into and licensed as a stock

property/casualty insurance company, in the manner prescribed by this

section and subject to any other requirements of law. The advisory

committee of any such reciprocal insurer proposing so to convert shall

cause the attorney-in-fact of such reciprocal insurer to give to each

subscriber of record at the close of business on the last day of the

quarter year next preceding the issue of such notice not less than

thirty days notice by mail of the meeting at which the proposed

conversion is to be voted upon and of a hearing of the subscribers

before the superintendent. At such hearing or any adjournment thereof,

the superintendent shall pass upon the fairness of the terms and

conditions of the proposed conversion and of the issuance of shares of

the corporation and he shall approve or disapprove the same. The

provisions of this chapter relative to a similar domestic insurance

company organized to do the same kinds of insurance business shall apply

to the organization and licensing of such corporation.

(b) If converted into a stock insurance corporation, subscriptions to

the capital shares may be made, in whole or in part, by the subscribers

of the reciprocal insurer, and their subscriptions may be paid in to the

extent of their operating reserve accumulations by a transfer thereof or

any portion thereof to such corporation. The contingent surplus of the

reciprocal insurer accumulated pursuant to subsection (a) of section six

thousand one hundred five of this chapter shall be included in the

capital and surplus of the corporation and shares representing the same

shall be issued to existing subscribers, at the rate determined as

provided in the next sentence for each dollar of par value of the shares

of such new corporation, in proportion to their shares in the aggregate

operating reserves at the time when the proposal to convert is adopted.

The rate of payment for each dollar of par value of the stock of such

new corporation shall be determined by agreement between the advisory

committee of the reciprocal insurer and the board of directors of the

stock insurance company. Every such subscriber shall be entitled in the

subscription to the capital shares of such corporation to a priority in

subscribing thereto for thirty days after the opening of the books of

subscription in proportion to his interest in such reciprocal insurer at

such date but at the rate of payment fixed by the board of directors. At

the expiration of such thirty days the board of directors may sell and

dispose of the capital shares which have not been taken or subscribed,

as aforesaid, but at not less than the same rate of payment.

(c) If after examination, the superintendent finds that the

proceedings for the conversion to a corporation of any such insurer have

been regularly taken in conformity with law, and that the corporation

meets with the requirements of this chapter, he may issue a license to

such insurer to do business under the provisions of this chapter.

Thereupon, the remaining assets shall be forthwith transferred to it,

and the predecessor reciprocal insurer or insurers shall cease to have

authority to do business as such and shall be deemed extinguished. Every

such new corporation formed by conversion shall assume and succeed to

all of the obligations and liabilities of the converting reciprocal

insurer and be held liable to pay and discharge all such debts and

liabilities in the same manner as if they had been incurred or

contracted by the corporation, but the subscribers of the reciprocal

insurer shall continue subject to all the liabilities, claims and

demands which shall then exist, or which may thereafter accrue against

them, or any of them, by reason of any obligations incurred by them or

in their behalf as such subscribers before the date of conversion. Upon

the conversion of any reciprocal insurer, dissenting subscribers,

meaning thereby subscribers who shall not within thirty days after the

opening of the books of subscription have subscribed to shares of the

corporation and applied their accumulated operating reserves to payment

therefor as provided in subsection (b) hereof, shall be entitled to the

conditional withdrawal of their accumulated operating reserves on

deposit with the reciprocal insurer as of the date of conversion but a

sufficient amount thereof shall be retained by the corporation as a

deposit until all of the obligations incurred on its behalf have been

extinguished. When all of such obligations have been paid, discharged or

terminated, and the superintendent after an examination shall have so

certified, the said subscribers' deposits or the balances thereof

remaining to their credit shall be returned and released, whereupon the

powers of the attorney-in-fact relating thereto shall cease and

terminate.