§ 27-1-40. Conversion to stock form of organization.
(a) Any mutual insurance company created under the laws of this state which meets or exceeds all capital and surplus funds required by law for the transaction of business in Rhode Island may convert to and become an insurance company with a capital stock form of organization upon adoption of a plan of conversion by two-thirds ( 2 / 3 ) vote of the board of directors or other governing body and approval of the plan by the director of the department of business regulation and the affirmative vote of one half ( 1 / 2 ) of its members or policyholders present in person or by proxy at a meeting called by the board of directors or other governing body. Unless otherwise provided in its charter or bylaws or plan of conversion, each member or policyholder shall have one vote, and in the case of any policy or contract of group life or other group insurance, the employer or other person to whom or in whose name the master policy or contract has been issued shall be deemed to be the member or policyholder and shall be entitled to one vote for each policy or contract of group insurance irrespective of the number of individuals insured. The plan of conversion shall provide that the insurance company shall issue and sell the stock issued in connection with the conversion at a price which represents its pro forma market value, as determined by an independent appraisal, and shall offer its stock, initially, in a subscription offering to the members or policyholders, individuals in the insurance company's management, and employee groups of the insurance company on an eligibility record date established by the board of directors, giving the members or policyholders, individuals in the insurance company's management, and employee groups priority rights to purchase the shares over the general public pro rata. The plan of conversion may provide for the establishment of accounts for the benefit of members or policyholders pursuant to which the converting insurance company shall provide for the continued maintenance of its dividend practices required by existing charter, bylaws, or policy provisions relative to its then existing lines of business, but assets in the account will be assets of the converting insurance company, subject to liabilities in the same manner and priority as all other assets of the company. The plan of conversion may provide for restrictions on the amount of stock which any person or entity may purchase in the conversion, or own or control after this, which may also be incorporated into the stock charter or agreement of association of the converted entity.
(b) In connection with the conversion, the insurance company may form a holding company or utilize an existing holding company to hold all the shares of the converted entity, and offer to its members or policyholders and the general public, subject to subscription rights in favor of members or policyholders as stated in subsection (a), all of the stock of the holding company in lieu of the capital stock of the converting insurance company. The converting insurance company may, at the time of the conversion, merge any insurance company subsidiary into the capital stock entity resulting from the conversion, or cause the subsidiary to become a separate subsidiary of a holding company.
(c) The corporate existence of an insurance company converting to the stock form of organization shall not terminate, but the converted institution shall be deemed to be a continuation of entity of the converted insurance company.
(d) The director of the department of business regulation, upon finding that the requirements of this section and applicable regulations have been met, that the terms and conditions of the plan are fair and equitable, and that the conversion has been completed with the sale of all shares offered in the conversion, shall issue a certificate of approval of the conversion to the converted entity. Upon the payment of fifty dollars ($50.00), the certificate of approval shall be filed in the office of the secretary of state, together with the certificate of the general treasurer that the converted entity has paid into the treasury for the use of the state a sum equal to one-tenth of one percent (.1%) of the capital stock, but in no event less than ten thousand dollars ($10,000). Upon the filing of the certificate with the secretary of state and payment of fifty dollars ($50.00), the secretary of state shall immediately record the certificate of approval and stock charter or agreement of association, then the stock charter or agreement of association will become effective.
(e) The director of the department of business regulation may employ staff personnel and professional consultants and other persons to assist in the review of the plan of conversion and may hold public hearings as, in the director's discretion, are desirable prior to granting approval of the plan of conversion. All reasonable costs related to the review of the plan of conversion, including the costs attributable to staff personnel and professional consultants, shall be borne by the insurance company filing a plan of conversion for approval.
(f) The department of business regulation shall issue rules and regulations implementing this section, which shall be administered by the director of the department of business regulation.
(g) To the extent not inconsistent with this section, each insurance company converted into a capital stock insurance company shall have all the powers, privileges, including the right to merge, convert, or otherwise restructure its corporate form upon a two-thirds (
) vote of its stockholders and subject to any regulatory approval as required by law, and duties and liabilities imposed upon insurance companies generally under the laws of this state, as applicable. Unless otherwise governed by the laws of this state specifically applicable to insurance companies, a capital stock entity converted pursuant to this section shall be subject to the general provisions of the Rhode Island Business Corporation Act, chapter 1.2 of title 7, with respect to its corporate governance.
(P.L. 1987, ch. 357, § 1; P.L. 2002, ch. 292, § 5; P.L. 2005, ch. 36, § 20; P.L. 2005, ch. 72, § 20.)