A N
A C T
RELATING TO
CORPORATIONS, ASSOCIATIONS AND PARTNERSHIPS - CORPORATIONS - GENERAL PROVISIONS
- INSURANCE
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Introduced By: Senator David E. Bates |
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Date Introduced: January 30, 2002 |
It is enacted
by the General Assembly as follows:
SECTION 1.
Section 27-35-2 of the General Laws in Chapter 27-35 entitled "Insurance
Holding Company Systems" is hereby amended to read as follows:
27-35-2. Acquisition of control of or merger with domestic insurer. -- (a) Filing Requirements.
(1) No person other than the issuer shall make a tender offer for or a request or invitation for tenders of, or enter into any agreement to exchange securities for, seek to acquire, or acquire, in the open market or otherwise, any voting security of a domestic insurer if, after the consummation thereof, the person would, directly or indirectly, or by conversion or by exercise of any right to acquire, be in control of the insurer, and no person shall enter into an agreement to merge with or otherwise to acquire control of a domestic insurer unless, at the time the offer, request, or invitation is made or the agreement is entered into, or prior to the acquisition of the securities if no offer or agreement is involved, the person has filed with the commissioner and has sent to the insurer, and, to the extent permitted by applicable federal laws, rules, and regulations, the insurer has sent to its shareholders, a statement containing the information required by this section and the offer, request, invitation, agreement or acquisition has been approved by the commissioner in the manner hereinafter prescribed;
(2) For the purposes of this section, a domestic insurer shall include any other person controlling a domestic insurer unless the other person is either directly or through its affiliates primarily engaged in business other than the business of insurance.
(b) Content of Statement.
(1) The statement to be filed with the commissioner under this section shall be made under oath or affirmation and shall contain the following information:
(i) The name and address of each person by whom or on whose behalf the merger or other acquisition of control referred to in subsection (a) is to be effected, hereinafter called "acquiring party", and:
(A) If that person is an individual, his or her principal occupation and all offices and positions held during the past five (5) years, and any conviction for crimes other than minor traffic violations during the past ten (10) years; or
(B) If that person is not an individual, a report of the nature of its business operations during the past five (5) years or for such lesser period as that person and any predecessors thereof shall have been in existence, an informative description of the business intended to be done by the person and the person's subsidiaries, and a list of all individuals who are or who have been selected to become directors or executive officers of the person, or who perform or will perform functions appropriate to those positions. The list shall include for each individual the information required by subsection (b)(1);
(ii) The source, nature, and amount of the consideration used or to be used in affecting the merger or other acquisition of control, a description of any transaction wherein funds were or are to be obtained for the purpose, and the identity of persons furnishing the consideration; provided, however, that where a source of the consideration is a loan made in the lender's ordinary course of business, the identity of the lender shall remain confidential, if the person filing the statement so requests;
(iii) Fully audited financial information as to the earnings and financial condition of each acquiring party for the preceding five (5) years of each acquiring party, or for such lesser period as the acquiring party and any predecessors thereof shall have been in existence, and similar unaudited information as of a date not earlier than ninety (90) days prior to the filing of the statement;
(iv) Any plans or proposals which each acquiring party may have to liquidate the insurer, to sell its assets or merge or consolidate it with any person, or to make any other material change in its business or corporate structure or management;
(v) The number of shares of any security referred to in subsection (a) which each acquiring party proposes to acquire, and the terms of the offer, request, invitation, agreement, or acquisition referred to in subsection (a), and a statement as to the method by which the fairness of the proposal was arrived at;
(vi) The amount of each class of any security referred to in subsection (a) which is beneficially owned or concerning which there is a right to acquire beneficial ownership by each acquiring party;
(vii) A full description of any contracts, arrangements, or understanding with respect to any security referred to in subsection (a) in which any acquiring party is involved, including, but not limited to the transfer of any of the securities, joint ventures, loan or option arrangements, puts or calls, guarantees of loans, guarantees against loss or guarantees of profits, division of losses or profits, or the giving or withholding of proxies. The description shall identify the persons with whom the contracts, arrangements, or understandings have been entered into;
(viii) A description of the purchase of any security referred to in subsection (a) during the twelve (12) calendar months preceding the filing of the statement by any acquiring party, including the dates of purchase, names of the purchasers, and consideration paid or agreed to be paid therefor;
(ix) A description of any recommendations to purchase any security referred to in subsection (a) made during the twelve (12) calendar months preceding the filing of the statement by any acquiring party, or by anyone based upon interviews or at the suggestion of the acquiring party;
(x) Copies of all tender offers for, requests or invitations for tenders of, exchange offers for, and agreements to acquire or exchange any securities referred to in subsection (a), and, if distributed, of additional soliciting material relating thereto;
(xi) The terms of any agreement, contract, or understanding made with any broker-dealer as to solicitation of securities referred to in subsection (a) for tender, and the amount of any fees, commissions, or other compensation to be paid to broker-dealers with regard thereto; and
(xii) Any additional information that the commissioner may by rule or regulation prescribe as necessary or appropriate for the protection of policyholders and security holders of the insurer or in the public interest;
(2) If the person required to file the statement referred to in subsection (a) is a partnership, limited partnership, syndicate, or other group, the commissioner may require that the information called for by subsections (b)(1)(i) through (b)(1)(xii) shall be given with respect to each partner of the partnership, each member of the syndicate or group, and each person who controls the partner or member. If any partner, member, or person is a corporation, or the person required to file the statement referred to in subsection (a) is a corporation, the commissioner may require that the information called for by subsections (b)(1)(i) through (b)(1)(xii) shall be given with respect to the corporation, and each person who is directly or indirectly the beneficial owner of more than ten percent (10%) of the outstanding voting securities of the corporation;
(3) If any material change occurs in the facts set forth in the statement filed with the commissioner and sent to the insurer pursuant to this section, an amendment setting forth the change, together with copies of all documents and other material relevant to the change, shall be filed with the commissioner and sent to the insurer within two (2) business days after the person learns of the change. The insurer shall send the amendment to its shareholders.
(c) Alternative filing materials. - If any offer, request, invitation, agreement or acquisition referred to in subsection (a) is proposed to be made by means of a registration statement under 15 U.S.C. sections 77a et seq. or in circumstances requiring the disclosure of similar information under 15 U.S.C. sections 78a et seq. or under a state law requiring similar registration or disclosure, the person required to file the statement referred to in subsection (a) may utilize the documents in furnishing the information called for by that statement.
(d) Approval by Commissioner: Hearings.
(1) The commissioner shall approve any merger or other acquisition of control referred to in subsection (a) unless, after a public hearing held thereon at the discretion of the commissioner or upon the request of the acquiring party, the insurer or any other interested party, he or she finds that any of the following conditions exist:
(i) After the change of control the domestic insurer referred to in subsection (a) would not be able to satisfy the requirements for the issuance of a license to write the line or lines of insurance for which it is presently authorized;
(ii) The effect of the merger or other acquisition of control would be substantially to lessen competition in insurance in this state or tend to create a monopoly therein;
(iii) The financial condition of any acquiring party is such as might jeopardize the financial stability of the insurer, or prejudice the interest of its policyholders or the interests of any remaining security holders who are unaffiliated with the acquiring party;
(iv) The terms of the offer, request, invitation, agreement or acquisition referred to in subsection (a) are unfair and unreasonable to the security holders of the insurer;
(v) The plans or proposals which the acquiring party has to liquidate the insurer, sell its assets or consolidate or merge it with any person, or to make any other material change in its business or corporate structure or management, are unfair and unreasonable to policyholders of the insurer and not in the public interest; or
(vi) The competence, experience, and integrity of those persons who would control the operation of the insurer are such that it would not be in the interest of policyholders of the insurer and of the public to permit the merger or other acquisition of control;
(2) The public hearing referred to in subsection (d)(1) , if required, shall be held within sixty (60) days after the statement required by subsection (a) is filed, and at least twenty (20) days notice of the public hearing shall be given by the commissioner to the person filing the statement. Not less than seven (7) days notice of the public hearing shall be given by the person filing the statement to the insurer and to such other persons as may be designated by the commissioner. The insurer shall give notice of the public hearing to its security holders. The commissioner shall make a determination within thirty (30) days after the conclusion of the hearing. At the hearing, the person filing the statement, the insurer, any person to whom notice of hearing was sent, and any other person whose interests may be affected thereby shall have the right to present evidence, examine and cross examine witnesses, and offer oral and written arguments and in connection therewith shall be entitled to conduct discovery proceedings in the same manner as is presently allowed in the superior court of this state. All discovery proceedings shall be concluded not later than three (3) days prior to the commencement of the public hearing;
(3) The commissioner may retain at the acquiring person's expense any attorneys, actuaries, accountants and other experts not otherwise a part of the commissioner's staff as may be reasonably necessary to assist the commissioner in reviewing the proposed acquisition of control.
(e) Mailings to shareholders; payment of expenses. - To the extent permitted by applicable federal laws, rules and regulations, all statements, amendments, or other material filed pursuant to subsection (a) or (b), and all notices of public hearings held pursuant to subsection (d), shall be mailed by the insurer to its shareholders within five (5) business days after the insurer has received the statements, amendments, other material, or notices. The expenses of mailing shall be borne by the person making the filing. As security for the payment of the expenses, the person shall file with the commissioner an acceptable bond or other deposit in an amount to be determined by the commissioner.
(f) Exemptions. - The provisions of this section shall not apply to any offer, request, invitation, agreement or acquisition which the commissioner by order shall exempt there from as (i) not having been made or entered into for the purpose and not having the effect of changing or influencing the control of a domestic insurer, or (ii) as otherwise not comprehended within the purposes of this section.
(g) Violations. - The following shall be violations of this section:
(1) The failure to file any statement, amendment, or other material required to be filed pursuant to subsection (a) or (b); or
(2) The effectuation or any attempt to effectuate an acquisition of control of, or merger with, a domestic insurer unless the commissioner has given his or her approval thereto.
(h) Jurisdiction; consent to service of process. - The courts of this state are hereby vested with jurisdiction over every person not resident, domiciled, or authorized to do business in this state who files a statement with the commissioner under this section, and over all actions involving the person arising out of violations of this section, and that person shall be deemed to have performed acts equivalent to and constituting an appointment by the person of the commissioner to be his true and lawful attorney upon whom may be served all lawful process in any action, suit, or proceeding arising out of violations of this section. Copies of all lawful process shall be served on the commissioner and transmitted by registered or certified mail by the commissioner to the person at his or her last known address.
SECTION 2. This
act shall take effect upon passage.