N.Y. Insurance Law § 7310: Reorganization of domestic guarantee capital life insurance companies into domestic stock life insurance companies

§ 7310. Reorganization of domestic guarantee capital life insurance

companies into domestic stock life insurance companies. (a) As used in

this section, the following terms shall have the following meanings:

(1) "Guarantee capital insurer" means a domestic life insurer with a

guarantee capital represented by shares.

(2) "Shareholder" means a record holder of shares of guarantee capital

of a guarantee capital insurer.

(3) "Policyholder" means a holder, as determined by the records of a

guarantee capital insurer, of an insurance contract issued by such

insurer which is of a type described in paragraph one, two, or three of

subsection (a) of section one thousand one hundred thirteen of this

chapter and which entitles the holder thereof, under the charter of the

guarantee capital insurer, to the policyholder equity interest defined

in this section. A person who, for purposes of subsection (a) of section

four thousand two hundred ten of this chapter would be deemed the

"policyholder" of any insurance contract is deemed to be the holder of

such contract for purposes of this section.

(4) "Policyholders' equity interest" means and includes all rights of

the policyholders as provided in or arising under the charter of the

guarantee capital insurer. The term "policyholders' equity interest"

includes the policyholders' right under the charter to vote and to

participate in distributions of profits and any right arising under the

charter to participate in any distribution of surplus whether such

distribution is made incident to a liquidation of the guarantee capital

insurer or otherwise. Anything in the foregoing sentence to the contrary

notwithstanding, the term "policyholders' equity interest" does not

include any right expressly conferred upon the policyholders by their

insurance contracts which is in addition to those rights provided in or

arising under the charter of the guarantee capital insurer.

(5) "Plan of reorganization" means a plan of conversion, a plan of

merger or a plan for amendment of charter adopted in accordance with

this section.

(6) "Reorganized insurer" means either (i) the domestic stock life

insurer into which a guarantee capital insurer has been converted in

accordance with this section, or (ii) the corporation surviving a merger

between a guarantee capital life insurer and a domestic stock life

insurer in accordance with this section, or (iii) the former guarantee

capital insurer as constituted after an amendment to its charter in

accordance with this section.

(b) Any other provision of this chapter to the contrary

notwithstanding, upon compliance with the requirements and completion of

the proceedings prescribed by this section, a guarantee capital insurer

may either (i) convert into a domestic stock life insurer, or (ii) merge

with a domestic stock life insurer, or (iii) amend its charter so as to

eliminate its policyholders' equity interest. The provisions of

paragraph four of subsection (a) of section one thousand two hundred six

of this chapter shall not apply to an amendment to the charter of a

guarantee capital insurer eliminating its policyholders' equity interest

made under and in accordance with the provisions of this section. In

case of a merger with a domestic stock insurer, the domestic stock

insurer shall comply with the provisions of this chapter applicable to

its participation in a merger.

(c) (1) The guarantee capital insurer shall adopt a plan of

reorganization by the vote of a majority of its entire board of

directors. The plan of reorganization shall set forth (i) the reasons

for and purposes of the proposed reorganization, (ii) the form of the

reorganization which shall be one of the forms of reorganization set

forth in subsection (b) of this section, (iii) the manner and basis by

which the reorganization shall take place, and (iv) the consideration to

be given to the shareholders in exchange for their shares of guarantee

capital and to the policyholders in exchange for their policyholders'

equity interest or the manner of converting the guarantee capital or the

policyholders' equity interests into other securities or other

consideration. If the reorganized insurer proposes to issue for delivery

in this state participating insurance policies or contracts, the plan of

reorganization shall so specify and shall be accompanied by such

information or agreements relative thereto as the superintendent may

require pursuant to section four thousand two hundred thirty-one of this

chapter and, in such event, upon the superintendent's approval of the

plan of reorganization pursuant to this section, the superintendent

shall, in accordance with said section four thousand two hundred

thirty-one, issue a revocable permit to the reorganized insurer

authorizing it to issue participating policies and contracts in this

state. The plan of reorganization may contain any other provisions which

the board of directors of the guarantee capital insurer may deem

necessary or advisable in connection with the proposed reorganization.

(2) The consideration to be given in exchange for the shares of

guarantee capital and the policyholders' equity interest or into which

such shares and equity interest are to be converted may consist of

securities of the reorganized insurer or securities of another

corporation or corporations or other consideration or any combination of

such forms of consideration. The consideration to be given in exchange

for shares of guarantee capital or into which such shares are to be

converted need not be the same as the consideration given in exchange

for the policyholders' equity interests or into which the policyholders'

equity interests are to be converted. The consideration given to any

class or category of policyholder need not be the same as the

consideration given to any other class or category of policyholder. In

the case of a charter amendment in which the shares of guarantee capital

remain outstanding and unchanged, the plan need not provide any

consideration to the holders of such shares.

(3) The plan of reorganization shall include the proposed charter of

the reorganized insurer set out in accordance with subsection (a) of

section one thousand two hundred one of this chapter and its proposed

by-laws, giving effect to any amendments to the charter or by-laws to be

effected by the plan of reorganization.

(4) The plan of reorganization shall specify one or more record dates

to be used for purposes of determining (i) the shareholders and

policyholders who shall be entitled to notice of and to vote at the

meeting called pursuant to this section to act upon a proposal to

approve the plan of reorganization, (ii) the shareholders and

policyholders who shall be entitled to receive notice of the public

hearing required by this section, and (iii) the shareholders and

policyholders who shall be entitled to receive the consideration

provided for by the plan. Each shareholder of record on the record date

specified pursuant to item (iii) of the immediately preceding sentence

shall be entitled to the consideration provided in the plan on the basis

of the number of shares held of record by him as of said record date.

Each policyholder of record as of such record date shall be entitled to

the consideration provided for him in the plan based on his

policyholder's equity interest as of the effective date of conversion,

merger or charter amendment pursuant to this section but only to the

extent that such policyholder's equity interest arose from insurance

contracts of which he was the holder as of such record date.

(5) Upon adoption of the plan of reorganization, it shall be duly

executed by the chairman of the board, the president or a vice president

and attested by the secretary or an assistant secretary of the guarantee

capital insurer under such insurer's corporate seal and shall be

submitted to the superintendent with a copy of the resolutions adopting

such plan accompanied by a certificate of adoption of such resolutions

subscribed by such officers and affirmed by them as true under penalties

of perjury and under the seal of the guarantee capital insurer.

(d) The guarantee capital insurer may, by action of a majority of the

entire board of directors, amend the plan of reorganization at any time

before the plan becomes effective as provided by this section. On

adoption of an amendment it shall be duly executed by the chairman of

the board, the president or a vice president and attested by the

secretary or an assistant secretary of the guarantee capital insurer

under such insurer's corporate seal and shall be submitted to the

superintendent with a copy of the resolutions adopting such amendment

subscribed by such officers and affirmed by them as true under penalties

of perjury and under the seal of the guarantee capital insurer. In case

of an amendment, all references in this section to the plan of

reorganization shall be deemed to refer to the plan as amended. No

amendment made after any public hearing required by this section or

after approval by the shareholders or policyholders as provided in this

section shall change the plan in a manner which the superintendent

determines is materially disadvantageous to the shareholders or any of

the policyholders unless a further public hearing is held on the plan as

amended if the amendment is made after the public hearing, or the plan

as amended is submitted for reconsideration by the shareholders or

policyholders, whichever is disadvantaged by the amendment, if the

amendment is made after the plan has been approved by the shareholders

or policyholders under the conditions and procedures determined by the

superintendent in accordance with this section.

(e) Upon submission to him of the plan of reorganization, the

superintendent may request any additional documents or information and

may examine the guarantee capital insurer or any of its affiliates, to

the extent he may determine to be necessary to enable him to make the

findings required by this section for the approval by him of the plan of

reorganization.

(f) The superintendent shall appoint one or more qualified

disinterested persons to appraise in writing the value of the

policyholders' equity interest and the value of the consideration to be

given to the policyholders in exchange for their equity interest or into

which such equity interest shall be converted. Such valuation shall be

made on a fair and equitable basis taking into account the latest filed

annual or quarterly statement of the guarantee capital insurer, and any

significant developments occurring subsequent to the date of such

statement. The appraisers may request of the guarantee capital insurer

access to its books and records and the furnishing by it of any other

information in its possession, to the extent they may reasonably deem

necessary to make the valuations contemplated by this subsection. They

shall report to the superintendent any instance in which the guarantee

capital insurer fails to provide any information requested by them. The

appraisers shall not, under judicial process or otherwise, be obligated

or permitted to divulge to anyone except the superintendent any

information not otherwise publicly available which is so obtained by

them. The appraisers shall receive reasonable compensation and shall be

reimbursed for reasonable expenses incurred in performing their duties.

They may, as necessary, employ consultants to advise them on technical

matters associated with the appraisal. The appraisal report shall be

made to the superintendent. In making the determinations contemplated by

this section, the superintendent shall not be bound by any findings,

conclusions or recommendations made by the appraisers. All information

obtained by the superintendent pursuant to this section, including

without limitation information obtained through examinations by him,

reports of appraisers and other information secured by appraisers and

turned over to the superintendent, are hereby specifically exempted, as

contemplated by paragraph (a) of subdivision two of section eighty-seven

of the public officers law, from disclosure by the superintendent under

said section eighty-seven. Such exemption shall not preclude or exempt

the superintendent from disclosure of such information pursuant to

judicial process under provisions of law other than said section

eighty-seven.

(g) The superintendent shall hold a public hearing upon the fairness

of the terms and conditions of the exchange of the policyholders' equity

interest for the securities or other consideration provided for by the

plan of reorganization and upon whether the reorganization is in the

public interest. Notice stating the time, place and purpose of the

hearing shall be mailed to each holder of guarantee capital and each

policyholder entitled under the plan to receive such consideration at

his address as shown on the records of the guarantee capital insurer at

least thirty days before the date of the hearing. Such notice shall be

preceded or accompanied by a true and complete copy of the plan or a

summary thereof approved by the superintendent and by such other

explanatory information as the superintendent shall approve or require.

In addition, the guarantee capital insurer shall give notice of the

time, place and purpose of the hearing by publication in a newspaper of

general circulation in the city in which the insurer has its principal

office and in two other newspapers of general circulation in other

cities within or without this state approved by the superintendent. Such

newspaper publications shall be made not less than fifteen days nor more

than sixty days before the hearing and shall be in form approved by the

superintendent.

(h) (1) A proposal to approve the plan of reorganization shall be

submitted to a meeting of shareholders and policyholders. Notice stating

the time, place and purpose of such meeting shall be mailed to each such

shareholder and policyholder of record as of the record date for the

meeting, at his address as shown on the records of the guarantee capital

insurer, at least thirty days before the date of the meeting. Such

notice may be combined with notice of the public hearing required by

this section. Such notice shall be preceded or accompanied by a true and

complete copy of the plan or a summary thereof approved by the

superintendent and by such other explanatory information as the

superintendent shall approve or require.

(2) Each shareholder of record as of the record date for the meeting

shall be entitled to cast one vote at such meeting, in person or by

proxy, for each share held of record by him on such record date. Each

policyholder of record as of the record date for the meeting shall be

entitled to cast one vote at such meeting, in person or by proxy,

irrespective of the number or amount of the policies he holds. Any proxy

shall be revocable at any time except to the extent that, at the time of

exercise, the power conferred thereby has been exercised. The presence

in person or by proxy of (i) the holders of record of two-thirds of the

outstanding shares of guarantee capital, and (ii) such number of

policyholders as attend in person or proxy shall constitute a quorum for

the meeting. All votes shall be by written ballot cast in person by

shareholders or policyholders entitled to vote or by proxy agents duly

appointed by shareholders or policyholders entitled to vote. The

proposal to approve the plan of reorganization may be adopted by the

affirmative vote of two-thirds of all guarantee capital shares issued

and outstanding as of the record date and the affirmative vote of

two-thirds of all votes cast by policyholders or record as of the record

date.

(3) The superintendent shall have power to supervise and direct and

prescribe rules governing the procedure for the conduct of the meeting

to such extent, consistent with the provisions of this section, as he

deems necessary to insure a fair and accurate vote. Such powers shall

include but not be limited to power to supervise and regulate (i) the

determination of the shareholders and policyholders entitled to notice

of and to vote at the meeting, (ii) the giving of notice, (iii) the

receipt, custody, safeguarding, verification and tabulation of proxy

forms and ballots, and (iv) the resolution of disputes.

(4) The superintendent shall appoint as inspectors an adequate number

of personnel of the department of financial services or other competent

and disinterested persons and may appoint if necessary, expert

accountants and other assistants and may authorize the procurement of

stationery and supplies necessary for conducting the election and

canvassing the votes. The inspectors shall have power to determine all

questions concerning the verification of the ballots and proxies, the

ascertainment of the validity thereof, the qualifications of the voters

and the canvass of the vote, and with respect thereto shall act under

such rules as shall be prescribed by the superintendent. Any

disagreement among the inspectors shall be reported to and shall be

resolved by the superintendent. Any determinations by the inspectors or

the superintendent shall be subject to judicial review.

(5) Representatives of the shareholders and of the policyholders,

including representatives of shareholders and policyholders favoring or

opposing the approval of the plan, shall be entitled to be present

during the filing, casting, verification and canvassing of the proxies

and ballots and shall be entitled to examine and object to any such

proxy or ballot. The superintendent or the inspectors may limit the

number of persons representing any interested person or group and may

specify fair and reasonable procedures for the examination of and

presentation of objections to the proxies and ballots. Costs incurred in

providing such representation shall not be a charge upon or paid from

the funds of the guarantee capital insurer.

(6) Neither the guarantee capital insurer nor any officer, agent or

employee thereof shall knowingly omit, from any list of policyholders

entitled to notice of the meeting, the name of any policyholders

required to be included therein, or shall knowingly omit to give the

correct name and address of any policyholder, or shall knowingly give a

wrong address. No person shall conceal or withhold or aid or abet any

other person in concealing or withholding any proxy or ballot from the

authorized custodians thereof or from the inspectors. No policyholder or

shareholder shall sell or offer to sell any vote or proxy for any sum of

money or anything of value other than the consideration provided for in

the plan of reorganization if said plan becomes effective.

(7) All ballots and proxies received by the inspectors shall

immediately upon the completion of the canvass be placed in sealed

packages and shall be preserved by the said inspectors for a period of

one year, subject to the order of any court having jurisdiction of any

proceedings relating thereto, and then shall be turned over to the

guarantee capital insurer, or the reorganized insurer, if the

reorganization has become effective.

(8) The meeting and the conduct thereof shall at all times, on

petition of the superintendent or of any person or persons whose rights

may be affected, be subject to the supervision and control of the

supreme court in the judicial district in which the guarantee capital

insurer has its home office.

(9) The inclusion by the guarantee capital insurer of the name of any

person in any list of policyholders required by this section shall not

be construed as an admission by such insurer of the validity of any

policy or contract and no such list shall be competent evidence against

such insurer in any action or proceeding in which the question of the

validity of any policy or contract or of any claim under it is involved.

(10) The provisions of section four thousand two hundred ten of this

chapter shall not apply to a meeting of shareholders and policyholders

held pursuant to this section.

(11) Upon the conclusion of the vote, the guarantee capital insurer

shall submit to the superintendent (i) a certified copy of the plan of

reorganization, subscribed by the chairman of the board, the president

or any vice president and attested by the secretary or an assistant

secretary of the guarantee capital insurer, (ii) a certificate,

subscribed by the chairman of the board, the president or any vice

president and attested by the secretary or assistant secretary of the

guarantee capital insurer, or subscribed by the person or persons, if

any, designated by the superintendent to supervise the giving of notice

of the meeting, to the effect that notice of the meeting was given in

accordance with this section to all persons entitled to such notice, and

(iii) a certificate subscribed by the inspectors of the attendance at

the meeting and of the results of the vote thereat, as evidenced by the

valid proxies and ballots filed thereat. Each such certificate shall be

affirmed as true under the penalties of perjury by the person or persons

subscribing the same and, in the case of a certificate signed by

officers of the guarantee capital insurer, shall be affirmed under the

corporate seal of the guarantee capital insurer.

(i) The superintendent shall approve the plan of reorganization in

writing if he finds that the proposed reorganization does not violate

this chapter and is fair and equitable to the shareholders and the

policyholders and the public, and that after giving effect to the

reorganization, the reorganized insurer would have capital and surplus

at least equal to the minimum capital and surplus required by the

superintendent for a newly organized stock insurer doing the same kind

or kinds of insurance business, or an amount of capital and surplus the

superintendent deems to be reasonably necessary for the solvency of the

reorganized insurer, whichever is the greater. If approval is denied,

the denial shall be in writing setting forth a statement of the reasons

therefor and the guarantee capital insurer shall have the right to a

hearing before the superintendent within thirty days of the date of such

denial. Unless otherwise agreed by the guarantee capital insurer, the

superintendent shall approve or disapprove the plan in writing on or

before a date which is the later of: (i) sixty days after submission to

him of the report of the appraiser or appraisers appointed pursuant to

subsection (f) of this section, (ii) sixty days after the conclusion of

the public hearing required by subsection (g) of this section, or (iii)

ten days after certification to him of the results of the vote at the

meeting held pursuant to subsection (h) of this section.

(j) When the superintendent has given his approval of the plan of

reorganization as provided in subsection (i) of this section and

certification of approval of the plan has been made to the

superintendent as provided in subsection (h) of this section, a copy of

the plan of reorganization with the superintendent's approval endorsed

thereon shall be filed in the office of the superintendent. In the case

of a merger, a copy of such plan shall also be filed in the office of

the clerk of the county where the principal office of the guarantee

capital insurer and the domestic stock insurer is located. The plan of

reorganization shall take effect in accordance with its terms on the

date when the filings required by this subsection have been made or on

such later date, if any, as may have been specified in such plan or

pursuant thereto.

(k) Upon the conversion of the guarantee capital insurer or merger in

the manner herein provided, all the rights, franchises and interests of

the former guarantee capital insurer, in and to every species of

property, real, personal and mixed, and things in action thereunto

belonging, shall be deemed transferred to and vested in the reorganized

insurer, without any other deed or transfer; and simultaneously

therewith such company shall be deemed to have assumed all of the

obligations and liabilities of the former guarantee capital insurer,

other than obligations and liabilities with respect to the

policyholders' equity interest eliminated by the plan of reorganization.

(l) No action or proceeding pending at the time of the conversion or

merger to which the guarantee capital insurer may be a party shall be

abated or discontinued by reason of such conversion or merger, but the

same may be prosecuted to final judgment in the same manner as if the

conversion or merger had not taken place, or the reorganized insurer may

be substituted in place of such guarantee capital insurer by order of

the court in which the action or proceeding may be pending.

(m) The directors and officers of the guarantee capital insurer shall

serve as directors and officers of the reorganized insurer until new

directors and officers have been duly elected and qualified pursuant to

the charter and by-laws of the reorganized insurer.

(n) The guarantee capital insurer shall deliver to the superintendent

at the time of submission of the plan of reorganization a written

undertaking in form and substance satisfactory to the superintendent and

signed by the guarantee capital insurer and by such other persons as the

superintendent may require, specifying the manner in which all costs and

expenses incurred in any manner in connection with the plan of

reorganization shall be paid or reimbursed. Such undertaking shall

provide for the payment or reimbursement of all expenses incurred by the

superintendent or the department of financial services in connection

with the plan of reorganization, other than normal operating expenses of

the department of financial services. Such undertaking shall provide to

the effect that no payment of expenses by the guarantee capital insurer

or the reorganized insurer shall, after giving effect to any

reimbursement or contribution received by such insurer with respect

thereto, have the effect of reducing the consideration to be paid to the

policyholders pursuant to the plan of reorganization or of reducing the

portion of the surplus of the reorganized insurer which is attributable

to policyholders. The said undertaking shall apply to expenses incurred

prior to the submission of the plan of reorganization as well as those

incurred thereafter and shall be binding whether or not the plan of

reorganization takes effect. The consideration to be paid to

policyholders pursuant to the plan shall not be subject to this

subsection nor to said undertaking.

(o) Notice of the pendency of the proposed reorganization and of the

effect thereof shall be given by the guarantee capital insurer or the

reorganized insurer in a manner satisfactory to the superintendent to

all persons to whom the guarantee capital insurer or the reorganized

insurer delivers insurance contracts which are issued after the record

date specified for policyholders entitled to receive any of the

consideration provided for in the plan of reorganization but are issued

on or before the date sixty days after such record date. Such persons

shall have the right to rescind such contracts, and to receive refund of

any amounts paid with respect thereto by written notice to such insurer

or its agent given within ten days of their receipt of the aforesaid

notice given by such insurer.

(p) If the plan of reorganization takes effect, the rights of all

policyholders thereafter shall be as specified in the charter of the

reorganized insurer and in their insurance contracts and they shall have

no rights under the charter of the guarantee capital insurer. The

reorganized insurer shall thereafter be subject to all laws, rules and

regulations applicable to domestic stock life insurers and shall not be

subject to any laws, rules or regulations of this state applicable to

domestic mutual insurers and not to domestic stock life insurers. If the

reorganized insurer has outstanding shares of guarantee capital after

the reorganization takes effect, the reorganization shall not affect the

rights of such shares as provided in the charter of the reorganized

insurer but for all other purposes of this chapter such shares shall be

deemed to constitute shares of stock.

(q) If the guarantee capital insurer complies substantially and in

good faith with the requirements of this section with respect to the

giving of any required notice to shareholders or policyholders, its

failure in any case to give such notice to any person or persons

entitled thereto shall not impair the validity of the actions and

proceedings taken under this section or entitle such person to any

injunctive or other equitable relief with respect thereto but this

subsection shall not impair any claim for damage such person or persons

would otherwise have due to such failure.

(r) A shareholder or policyholder whose shares or policyholder's

equity interest would be exchanged for or converted into other

consideration pursuant to a plan of reorganization adopted pursuant to

this section shall, by complying with section six hundred twenty-three

of the business corporation law, except as otherwise provided in this

subsection, have the right to receive payment for the fair value of his

shares or policyholder's equity interest. In the case of a policyholder,

no act pursuant to such section six hundred twenty-three, and no receipt

by him of any payment pursuant to such section with respect to his

policyholder's equity interest, shall impair or otherwise affect his

rights expressly conferred by his insurance contract which are in

addition to those rights conferred by or arising under the charter of

the guarantee capital insurer. The provisions of section seven thousand

one hundred nineteen of this chapter shall not apply in case of a

reorganization under this section. For purposes of this subsection, the

provisions of section six hundred twenty-three of the business

corporation law, other than paragraphs (i) and (m) thereof are

applicable except that:

(1) The references to "this chapter" in paragraph (a) of section six

hundred twenty-three of the business corporation law are deemed to refer

to this section.

(2) The references used in section six hundred twenty-three of the

business corporation law to "shareholder" and "shareholders" are deemed

to include a policyholder or policyholders and the references therein to

"shares" are, in the case of a policyholder, deemed to refer to his

policyholder's equity interest.

(3) The term "shareholders authorization date" used in section six

hundred twenty-three of the business corporation law is deemed to refer

to the date of the meeting required by subsection (h) of this section.

(4) In the case of a policyholder, the information with respect to

shareholdings required by paragraphs (a) and (c) of section six hundred

twenty-three of the business corporation law to be contained in the

notice of election to dissent is deemed to refer to the policy number of

the policyholder's insurance contract entitling him to a policyholder's

equity interest.

(5) Notwithstanding paragraph (e) of section six hundred twenty-three

of the business corporation law, upon filing by a policyholder of

election to dissent the policyholder shall cease to have any rights with

respect to his policyholder's equity interest, but his rights expressly

conferred by his insurance contract and not conferred by or arising

under the charter of the guarantee capital insurer shall be unaffected.

In the case of a policyholder, the provisions of paragraph (e) thereof

providing for the reinstatement of a shareholder's rights in certain

events are deemed to provide for reinstatement of his policyholder's

equity interest.

(6) In the case of a policyholder, the provision of paragraph (f) of

section six hundred twenty-three of the business corporation law,

referring to share certificates shall be deemed to refer to insurance

contracts.

(7) Any provision of paragraph (g) of section six hundred twenty-three

of the business corporation law to the contrary notwithstanding, the

written offer made pursuant to said paragraph to the policyholders who

have filed notices of election to dissent shall be made at prices such

that the total price offered to all such policyholders shall be

apportioned among the different classes and categories of said

dissenting policyholders in the same manner as the plan of

reorganization provides for the total consideration to be paid pursuant

thereto to be apportioned among all of the classes and categories of

policyholders.