MISSISSIPPI LEGISLATURE

1998 Regular Session

To: Insurance

By: Senator(s) Kirby, White (5th), White (29th), Johnson (19th), Scoper

Senate Bill 2332

(As Sent to Governor)

AN ACT TO CREATE NEW CODE SECTIONS 83-31-101 THROUGH 83-31-181, MISSISSIPPI CODE OF 1972, TO CREATE THE MISSISSIPPI MUTUAL INSURANCE COMPANY CONVERSION, REORGANIZATION AND MERGER ACT; TO DEFINE CERTAIN TERMS; TO AUTHORIZE THE ADOPTION OF A PLAN OF CONVERSION OF A MUTUAL INSURANCE COMPANY INTO A STOCK COMPANY; TO AUTHORIZE THE INSURANCE COMMISSIONER TO TAKE SPECIFIED ACTIONS RELATING TO THE CONVERSION; TO ALLOW AMENDMENT AND WITHDRAWAL OF THE PLAN; TO SET FORTH NOTICE AND HEARING REQUIREMENTS; TO PROVIDE FOR ADOPTION OF THE PLAN; TO REQUIRE CERTAIN FILINGS AFTER CONVERSION; TO SPECIFY CERTAIN PROVISIONS WHICH MUST BE INCLUDED IN EACH PLAN; TO PROVIDE FOR MEMBER SUBSCRIPTION RIGHTS; TO PROVIDE FOR THE SALE OF CAPITAL STOCK; TO AUTHORIZE ALTERNATIVE PLANS OF CONVERSION; TO SET FORTH THE EFFECTIVE DATE OF CONVERSION; TO PROVIDE FOR THE CONTINUED CORPORATE EXISTENCE UPON CONVERSION; TO PROHIBIT CONFLICTS OF INTEREST; TO PROVIDE FOR THE EFFECT OF FAILURE TO GIVE NOTICE; TO SET FORTH THE LIMITATION ON ACTIONS CHALLENGING THE PLAN; TO SET FORTH CONVERSION REQUIREMENTS FOR INSOLVENT MUTUAL COMPANIES; TO SET FORTH THE LAW GOVERNING CONVERTED STOCK COMPANIES; TO ALLOW THE AMENDMENT OF POLICIES UPON CONVERSION; TO AUTHORIZE THE CREATION OF MUTUAL INSURANCE HOLDING COMPANIES; TO AUTHORIZE MISSISSIPPI MUTUAL INSURANCE COMPANIES TO MERGE WITH FOREIGN OR OTHER DOMESTIC MUTUAL INSURANCE COMPANIES; AND FOR RELATED PURPOSES. 

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MISSISSIPPI:

SECTION 1. The following shall be codified as Section 83-31-101, Mississippi Code of 1972:

83-31-101. The provisions of Section 83-31-101 through 83-31-181 may be cited as the "Mississippi Mutual Insurance Company Conversion, Reorganization and Merger Act."

SECTION 2. The following shall be codified as Section 83-31-103, Mississippi Code of 1972:

83-31-103. As used in Sections 83-31-101 through 83-31-143, the following terms shall have the meaning ascribed herein unless the context indicates otherwise:

(a) "Conversion plan" means a plan adopted under this act by the board of directors of a domestic mutual insurance company to convert the mutual insurance company into a stock company.

(b) "Converted stock company" means a domestic stock insurance company that has converted under this act from a domestic mutual insurance company.

(c) "Eligible member" means a member of a mutual insurance company whose policy is in force on the date that the mutual insurance company's board of directors adopts a conversion plan. The term does not include a person whose policy becomes effective after the date that the board of directors adopts the conversion plan but before the conversion plan's effective date.

(d) "Mutual insurance company" means a domestic mutual insurance company formed under Section 83-31-1 et seq. except for domestic mutual insurance companies that have active life insurance or annuities products in force.

(e) "Participating policy" means a policy that grants a holder the right to receive dividends or other distributions if, as and when, declared by the mutual insurance company that issued such policy.

(f) "Stock company" means a domestic stock insurance company subject to Section 83-19-1 et seq.

SECTION 3. The following shall be codified as Section 83-31-105, Mississippi Code of 1972:

83-31-105. (1) A mutual insurance company that seeks to convert to a stock company must adopt, by the affirmative vote of not less than two-thirds (2/3) of the members of its board of directors, a conversion plan consistent with the requirements of this act. A mutual insurance company may not engage in the business of insurance as a stock company until it complies with the requirements of this act.

(2) Before the eligible members of a mutual insurance company may vote on approval of a conversion plan, the mutual insurance company must comply with Section 83-31-107 and other applicable requirements under this act.

SECTION 4. The following shall be codified as Section 83-31-107, Mississippi Code of 1972:

83-31-107. (1) Not later than the ninetieth day after the date on which a mutual insurance company's board of directors adopts a conversion plan, the company shall file with the commissioner:

(a) A copy of the conversion plan, including the documents relating to the conversion plan;

(b) The independent evaluation of a pro forma market value required by Section 83-31-121(2);

(c) The form of notice required by Section 83-31-111;

(d) The form of proxy to be solicited from eligible members under Section 83-31-113(2);

(e) The form of notice required by Section 83-31-129(3) to persons whose policies are issued after adoption of the conversion plan but before the effective date of the conversion plan;

(f) An audited financial statement prepared on a statutory basis in accordance with the insurance laws of the State of Mississippi, including an actuarial opinion for the most recent calendar year ended, or a copy thereof, if the statement was previously filed with the commissioner;

(g) The proposed amended or restated articles of association of the converted stock company, which shall include a change of the name of the company to delete the word "mutual" from the name of such company and proposed amended or restated bylaws of such company;

(h) A statement regarding acquisition of control, if applicable, as required by Section 83-6-1 et seq.; and

(i) Any other information as required under rules or regulations or as requested by the commissioner.

(2) Except as otherwise provided by this subsection, the commissioner shall approve or disapprove a conversion plan not later than the ninetieth day after the first day on which all the documents and other information required under subsection (1) of this section are filed with the commissioner. The commissioner may not extend the time for approval or disapproval beyond the ninety-day time period unless he finds it necessary to retain a qualified expert in accordance with subsection (4) of this section, in which case he may extend the time for review for an additional sixty (60) days beyond the initial ninety-day period. Notwithstanding the stated time limits herein, the commissioner may extend the time for approval or disapproval for an additional thirty (30) days beyond the date on which any amendment to such plan is filed with the commissioner. The commissioner shall, within five (5) days of approving or disapproving a conversion plan, give written notice to the mutual insurance company of the commissioner's decision and, in the event of disapproval, a detailed statement of the reasons for the adverse decision. If a plan is disapproved, then the conversion plan may be amended and resubmitted to the commissioner for his approval or disapproval as provided in this act. If the commissioner disapproves the plan, then the mutual insurance company may appeal the commissioner=s decision as provided by the laws of this state to the Chancery Court of the First Judicial District of Hinds County, Mississippi.

(3) The commissioner shall approve a conversion plan if the commissioner finds that the conversion plan complies with this act, the conversion plan=s method of allocating subscription rights or other value is fair and equitable and the conversion plan is otherwise fair and equitable to members and policyholders, and the converted stock company would satisfy the requirements applicable to a domestic stock company; however, the commissioner may not approve such a conversion plan and shall disapprove such a plan if the commissioner finds that (a) the effect of the conversion plan would be substantially to lessen competition in insurance in this state or tend to create a monopoly therein; (b) the financial condition of any party to the conversion plan is such as might jeopardize the financial stability of the insurers which are parties to the plan or prejudice the interests of their policyholders; (c) the conversion plan or the plans for operation of the parties to the conversion plan following implementation of the conversion plan are not in the public interest; (d) the competence, experience and integrity of those persons who would control the operations of the parties to the conversion plan are such that it would not be in the interest of policyholders of the parties to the conversion plan or of the public to permit the conversion plan; (e) the conversion plan=s method of allocating subscription rights or other value is not fair and equitable; (f) the conversion plan is not fair and equitable to the members and policyholders; (g) implementation of the conversion plan is likely to be hazardous or prejudicial to the insurance buying public; or (h) the conversion unfairly enriches the officers and directors of the converting insurer.

(4) The commissioner may retain, at the mutual insurance company's expense, a qualified expert or experts, including but not limited to appraisers, actuaries, accountants and attorneys, not otherwise a part of the commissioner's staff to assist the commissioner in reviewing the conversion plan and the independent evaluation of the pro forma market value required under Section 83-31-121(2).

(5) The commissioner may hold a public hearing to allow comment on the conversion plan after giving written notice to the mutual insurance company and other interested persons, all of whom have the right to appear at the hearing. Notice to interested persons who have not filed an appearance in the matter may be made in any reasonable manner deemed appropriate by the commissioner with the costs thereof assessed to the mutual insurance company.

SECTION 5. The following shall be codified as Section 83-31-109, Mississippi Code of 1972:

83-31-109. (1) The conversion plan may be:

(a) Amended by a vote of two-thirds (2/3) of the members of the board of directors of the applicant in response to the comments or recommendations of the commissioner or any other state or federal agency or governmental entity before any solicitation of proxies from members of the mutual insurance company to vote on the conversion plan or at any time with the consent of the commissioner, except that any material amendment after the members' approval shall require the members' approval; or

(b) Terminated by a vote of two-thirds (2/3) of the members of the board of directors of the applicant at any time before members of the mutual insurance company vote on the conversion plan and, otherwise, at any time with the consent of the commissioner.

(2) (a) Within twenty (20) business days after filing with the commissioner the documents required under Section 83-31-107(1), the mutual insurance company shall send to each eligible member a notice advising the eligible member of the adoption and filing of the conversion plan and of the member=s right to provide to the commissioner and the mutual insurance company comments on the plan.

(b) As an alternative to the notice required under paragraph (a) of this subsection, the mutual insurance company may use any other means which is reasonably designed to provide notice to eligible members and which alternative means of providing notice is approved by the commissioner.

(c) The notice required under paragraphs (a) or (b) of this subsection shall include a description of the procedure to be used in making comments.

(3) An eligible member who elects to make comments must make the comments in writing (a) if notice is sent to each eligible member, not later than the thirtieth day after the date on which the notice is sent; or (b) if an alternative means of providing notice is approved by the commissioner, not later than such date for receipt of comments approved by the commissioner.

SECTION 6. The following shall be codified as Section 83-31-111, Mississippi Code of 1972:

83-31-111. (1) Within sixty (60) days after the commissioner's approval of the plan, the mutual insurance company shall send to each eligible member notice of the members' meeting to vote on the conversion plan. The notice must be sent to the member's last known address, as shown on the mutual insurance company's records, before the thirtieth day preceding the date set for the meeting. The notice shall:

(a) Briefly but fairly describe the material terms and provisions of the proposed conversion plan; and

(b) Inform the member of the member's right to vote on the conversion plan.

(2) If the meeting to vote on the conversion plan is held during the mutual insurance company's annual meeting of policyholders, only a combined meeting notice is required.

SECTION 7. The following shall be codified as Section 83-31-113, Mississippi Code of 1972:

83-31-113. (1) A conversion plan is adopted on receiving the affirmative vote of at least two-thirds (2/3) of the votes cast in person or by proxy by eligible members at a duly convened meeting to consider the plan of conversion.

(2) Members entitled to vote on the proposed conversion plan may vote in person or by proxy. The number of votes each eligible member may cast shall be determined by the mutual insurance company's bylaws. If the bylaws are silent, each eligible member may cast one (1) vote.

(3) At the meeting held to vote on the conversion plan, the members shall also consider the adoption of amended or restated articles of association. Adoption of the amended or restated articles requires the affirmative vote of at least two-thirds (2/3) of the votes cast in person or by proxy by eligible members. SECTION 8. The following shall be codified as Section 83-31-115, Mississippi Code of 1972:

83-31-115. Not later than the thirtieth day after the date on which the eligible members adopt the conversion plan at a duly convened meeting, the converted stock company shall file with the commissioner the minutes of the meeting of the eligible members at which the conversion plan was adopted.

SECTION 9. The following shall be codified as Section 83-31-117, Mississippi Code of 1972:

83-31-117. (1) Each conversion plan must include the provisions required by this act and by any rules or regulations adopted by the commissioner.

(2) Each policy in effect on the effective date of the conversion remains in effect under the terms of that policy, except that the following rights, to the extent they existed in the mutual insurance company, are extinguished on the effective date of the conversion:

(a) Any voting rights of policyholders provided under the policy;

(b) Except as provided in subsection (3) of this section, a right to share in the surplus or profits of the mutual insurance company; and

(c) Any assessment provisions provided under the policy.

(3) Except as otherwise provided by Section 83-31-143, the holder of a participating policy in effect on the date of the conversion continues to have a right to receive dividends or distributions as provided by the participating policy.

(4) Except for the mutual insurance company=s guaranteed renewable accident and health policies and guaranteed renewable, noncancellable accident and health policies, on the renewal date of a participating policy, the converted stock company may issue the insured a nonparticipating policy as a substitute for the participating policy on such terms and conditions and on such policy forms as shall be approved by the commissioner.

SECTION 10. The following shall be codified as Section 83-31-119, Mississippi Code of 1972:

83-31-119. (1) Except for an alternative plan under Section 83-31-127, each conversion plan must specify the subscription rights of eligible members.

(2) The plan must include a provision that:

(a) Each eligible member is to receive, without payment by the member, nontransferable subscription rights to purchase a portion of the capital stock of the converted stock company, including a method for determining the number of shares which may be purchased; and

(b) In the aggregate, all eligible members have the right, before the right of any other party, to purchase one hundred percent (100%) of the capital stock of the converted stock company; however, that such plan may provide for the sale or distribution of capital stock to the holders of surplus notes, if any, but only upon such terms and conditions as may be approved by the commissioner.

(3) As an alternative to subscription rights in the converted stock company, the conversion plan may provide that each eligible member is to receive, without payment by the member, nontransferable subscription rights to purchase a portion of the capital stock of one of the following:

(a) A corporation organized for the purpose of purchasing and holding all the stock of the converted stock company;

(b) A stock insurance company owned by the mutual insurance company into which the mutual insurance company is to be merged; or

(c) An unaffiliated stock insurance company or other corporation that is to purchase all the stock of the converted stock company.

(4) The conversion plan must provide that the subscription rights are allocated in whole shares among the eligible members using a fair and equitable method, with such exceptions and other terms and conditions as the commissioner may approve. The method may consider, but is not required to consider, how the different classes of policies of the eligible members contributed to the surplus of the mutual insurance company or any other factors that may be fair or equitable as determined by the board of directors.

(5) The conversion plan must provide a fair and equitable means for allocating shares of capital stock in the event of an oversubscription to shares by eligible members exercising subscription rights under this section.

(6) Notwithstanding any other provision of this act to the contrary, no officer, director or employee of any insurer reorganizing under any provision of this act shall be eligible to receive subscription rights to, purchase or acquire any stock in the reorganized stock insurance company under any plan except in accordance with his rights as an eligible member, and then he shall receive only such rights as are received by other similarly situated eligible members.

SECTION 11. The following shall be codified as Section 83-31-121, Mississippi Code of 1972:

83-31-121. (1) The conversion plan must provide that any shares of capital stock not sold or distributed to holders of surplus notes, or subscribed to by eligible members exercising subscription rights under Section 83-31-119, may be sold in a private placement, public offering or other alternative method approved by the commissioner.

(2) The conversion plan must set the total price of the capital stock in an amount equal to the estimated pro forma market value of the converted stock company based on an independent valuation by a qualified expert, giving consideration to the amount of capital deemed necessary by the board of directors to be raised by the company. The pro forma market value may be the value estimated to be necessary to attract full subscription for the shares, as indicated by the independent valuation, and may be stated as a range of values.

(3) The conversion plan shall set the purchase price per share of capital stock at any reasonable amount approved by the commissioner. The purchase price per share need not be the same for each class of purchaser; however, eligible members purchasing stock in accordance with subscription rights received under Section 83-31-119 shall have the right to purchase shares at the lowest available purchase price under the plan.

(4) The conversion plan must provide that a person or group of persons acting in concert may not acquire, in the public offering or private placement or through the exercise of subscription rights, more than ten percent (10%) of the capital stock of the converted stock company except with the approval of the commissioner. This limitation does not apply to an entity that purchases one hundred percent (100%) of the capital stock of the converted company as part of the conversion plan approved by the commissioner.

SECTION 12. The following shall be codified as Section 83-31-125, Mississippi Code of 1972:

83-31-125. The conversion plan may provide for the creation of a liquidation account for the benefit of members in the event of voluntary liquidation after conversion in an amount equal to the surplus of the mutual insurance company, exclusive of the principal amount of any surplus note, on the last day of the quarter immediately preceding the date of adoption of the conversion plan.

SECTION 13. The following shall be codified as Section 83-31-127, Mississippi Code of 1972:

83-31-127. (1) The board of directors may adopt a conversion plan that does not rely wholly or partially on issuing nontransferable subscription rights to members to purchase stock of the converted stock company if the commissioner finds that the alternative conversion plan complies with Section 83-31-107(3).

(2) An alternative conversion plan may:

(a) Include the merger of a domestic mutual insurance company into a domestic or foreign stock insurance company;

(b) Provide for issuing stock, cash, or other consideration to members instead of subscription rights;

(c) Provide for the formation of a mutual holding company under Section 83-31-145 et seq.; or

(d) Set forth another plan containing any other provisions approved by the commissioner.

(3) The commissioner may retain, at the mutual insurance company's expense, a qualified expert or experts, including but not limited to appraisers, actuaries, accountants and attorneys, not otherwise a part of the commissioner's staff to assist in reviewing whether the alternative conversion plan may be approved by the commissioner.

SECTION 14. The following shall be codified as Section 83-31-129, Mississippi Code of 1972:

83-31-129. (1) For a conversion plan to take effect:

(a) The commissioner must approve the conversion plan; and

(b) The eligible members must approve the conversion plan and adopt the amended or restated articles of association.

(2) A conversion plan takes effect when the amended or restated articles of association are filed with and approved by the commissioner and also filed with the Mississippi Secretary of State or at such other delayed effective time and date as specified in the amended or restated articles of association as filed.

(3) (a) On issuance of a policy after a conversion plan has been adopted by the board of directors but before the effective date of the conversion plan, the mutual insurance company shall send to the member to whom the policy is issued a written notice regarding the conversion plan.

(b) Except as provided by paragraph (d) of this subsection, a member of an accident and health insurance company entitled to receive the notice described by paragraph (a) of this subsection is entitled to rescind the member=s policy and receive a full refund of any amount paid for the policy not later than the ten (10) days after the date on which the member receives the notice.

(c) Except as provided by paragraph (d) of this subsection, each member who is insured under a property or casualty insurance policy is entitled to receive the notice provided by paragraph (a) of this subsection and shall be advised of the member=s right to cancel the policy and receive a pro rata refund of unearned premiums.

(d) A member who has made or filed a claim under the insurance policy is not entitled to a right to receive a refund under paragraphs (b) or (c) of this subsection. A person who has exercised the rights provided by paragraphs (b) or (c) of this subsection is not entitled to make or file a claim under the insurance policy.

SECTION 15. The following shall be codified as Section 83-31-131, Mississippi Code of 1972:

83-31-131. (1) On the effective date of the conversion:

(a) The corporate existence of the mutual insurance company continues in the converted stock company; and

(b) All assets, rights, franchises and interests of the mutual insurance company in and to property, real, personal or mixed, and any accompanying things in action, are vested in the converted stock company, without a deed or transfer, and the converted stock company assumes all the obligations and liabilities of the mutual insurance company.

(2) Unless otherwise specified in the conversion plan, the directors and officers of the mutual insurance company serving on the effective date of the conversion serve as directors and officers of the converted stock company until new directors and officers of the converted stock company are elected under the articles of association and bylaws of the converted stock company.

SECTION 16. The following shall be codified as Section 83-31-133, Mississippi Code of 1972:

83-31-133. (1) A director, officer, agent or employee of the mutual insurance company may not receive a fee, commission or other consideration, other than that person's usual salary or compensation, for aiding, promoting or assisting in a conversion under this act, except as provided by the conversion plan approved by the commissioner.

(2) All the costs and expenses connected with a conversion plan shall be paid for or reimbursed by the mutual insurance company or the converted stock company.

SECTION 17. The following shall be codified as Section 83-31-135, Mississippi Code of 1972:

83-31-135. If the mutual insurance company complies substantially and in good faith with the notice requirements of this act, the mutual insurance company's failure to send a member the required notice under Section 83-31-109(2)(a) or Section 83-31-111(1) does not impair the validity of any action taken under this act.

SECTION 18. The following shall be codified as Section 83-31-137, Mississippi Code of 1972:

83-31-137. An action challenging the validity of or arising out of acts taken or proposed to be taken regarding a conversion plan under this act must begin in the Chancery Court of the First Judicial District of Hinds County, Mississippi, not later than the thirtieth day after the effective date of the conversion plan.

SECTION 19. The following shall be codified as Section 83-31-139, Mississippi Code of 1972:

83-31-139. (1) If a mutual insurance company is insolvent or, in the judgment of the commissioner, is in hazardous financial condition, its board of directors, by a majority vote, may petition the commissioner to waive the provisions of this act requiring notice to and policyholder approval of the planned conversion.

(2) The petition must specify the method and basis for the issuance of the converted stock company's shares of its capital stock to an independent party in connection with an investment by the independent party in an amount sufficient to restore the converted stock company to a sound financial condition.

(3) The conversion may be accomplished without payment of consideration to past, present or future policyholders, but only if the petition makes such a specific request and the commissioner finds that the value of the mutual insurance company is insufficient to warrant that consideration.

SECTION 20. The following shall be codified as Section 83-31-141, Mississippi Code of 1972:

83-31-141. (1) A mutual insurance company may not be permitted to convert under this act if, as a direct result of the conversion, any person or any affiliate acquires control of the converted stock company, unless that person or the affiliate complies with the requirements of Section 83-6-1 et seq.

(2) Except as otherwise specified in this act, a converted stock company has all of the rights and privileges and is subject to all of the requirements and regulations imposed on stock companies formed under the laws of this state but may not exercise rights or privileges that other stock companies may not exercise.

SECTION 21. The following shall be codified as Section 83-31-143, Mississippi Code of 1972:

83-31-143. A mutual insurance company, by endorsement or rider approved by the commissioner and delivered to the policyholder, may simultaneously with or at any time after the adoption of a conversion plan amend any outstanding insurance policy to evidence the extinguishment of the rights, if any, of the holder of the policy as described in the plan of conversion approved by the commissioner. However, such an amendment is void if the conversion plan does not take effect.

SECTION 22. The following shall be codified as Section 83-31-145, Mississippi Code of 1972:

83-31-145. As used in Sections 83-31-145 through 83-31-181, the following items shall have the meaning ascribed herein unless the context indicates otherwise:

(a) "Mutual insurance holding company" means an incorporated entity without permanent capital stock that is organized under Section 83-31-145 et seq. and whose members are determined in accordance with such provisions.

(b) "Subsidiary insurance company" means a stock insurance company, the majority of the voting shares of the capital stock of which are at all times owned by a mutual insurance holding company. For these purposes, "majority of the voting shares of the capital stock" means shares of the capital stock of a company which carry the right to cast a majority of the votes entitled to be cast by all of the outstanding shares of the capital stock for the election of directors, other than securities having voting power only because of the occurrence of a contingency. The ownership of a majority of the voting shares of the capital stock of a former mutual insurance company reorganized under this act which voting shares are required by this act to be at all times owned by a mutual insurance holding company includes indirect ownership through one or more intermediate holding companies. However, indirect ownership through one or more intermediate holding companies shall not result in a mutual insurance holding company owning less than the equivalent of a majority of the voting shares of the capital stock of the former mutual reorganized insurance company.

(c) "Intermediate holding company" means a holding company which is a subsidiary of a mutual insurance holding company and which directly or through a subsidiary intermediate holding company owns a majority of the voting shares of the capital stock of one or more subsidiary insurance companies.

(d) "Plan of reorganization" means a plan adopted under this act by the board of directors of a domestic mutual insurance company to reorganize as provided in Section 83-31-151.

(e) "Mutual insurance company" means a domestic mutual insurance company formed pursuant to Section 83-31-1 et seq. except for domestic mutual insurance companies that have active life insurance or annuities products in force.

SECTION 23. The following shall be codified as Section 83-31-147, Mississippi Code of 1972:

83-31-147. (1) The voting shares of the capital stock of a subsidiary insurance company, which are required by this act in

order to maintain a majority of the voting shares, are to be at all times owned by a mutual insurance holding company or one or more intermediate holding companies and the voting shares of the capital stock of any intermediate holding company, which are necessary to satisfy such ownership requirement through indirect ownership, shall not be conveyed, transferred, assigned, pledged, subjected to a security interest or lien, encumbered or otherwise hypothecated or alienated by the mutual insurance holding company or any intermediate holding company, except with the prior approval of the commissioner. Any conveyance, transfer, assignment, pledge, security interest, lien, encumbrance or hypothecation or alienation of, in or on such voting shares of capital stock is in violation of this section and shall be void in inverse chronological order of the date of such conveyance, transfer, assignment, pledge, security interest, lien, encumbrance or hypothecation or alienation as to such shares of capital stock. The shares of the capital stock of the surviving or new company resulting from a merger or consolidation of two (2) or more subsidiary insurance companies or two (2) or more intermediate holding companies which were subsidiaries of the same mutual insurance holding company are subject to the same requirements, restrictions, and limitations as provided in this section to which the shares of the merging or consolidating former mutual reorganized insurance companies or intermediate holding companies were subject by this section before the merger or consolidation.

(2) Upon approval of the commissioner and compliance with applicable law, an intermediate holding company or a subsidiary insurance company may issue to the mutual insurance holding company and to other persons securities, including voting stock, nonvoting stock and securities convertible into voting or nonvoting stock, if, after giving effect to such issuance, in the aggregate, the issued and outstanding voting stock of the intermediate holding company or the subsidiary insurance company held directly or indirectly by the mutual insurance holding company is not less than a majority of the voting shares of capital stock of such intermediate holding company or subsidiary insurance company. For purposes of this limitation, any issued and outstanding securities of an intermediate holding company or subsidiary insurance company that are convertible into voting stock shall be considered issued and outstanding voting stock. Upon approval of the commissioner and compliance with applicable law, an intermediate holding company or a subsidiary insurance company may issue any such securities: (a) to policyholders of a subsidiary insurance company in accordance with a subscription offering containing such terms, conditions and limitations as are approved by the board of directors of such intermediate holding company or subsidiary insurance company and the mutual insurance holding company; (b) in a public offering; or (c) in a private placement, including, without limitation, to one or more purchasers who are holders of surplus notes or other securities of a subsidiary insurance company, have or will have a lending, pooling or reinsurance arrangement with a subsidiary insurance company, have or will have an insurance, marketing, investment, support or other cooperative arrangement or affiliation with the subsidiary insurance company or are an affiliate of any entity which has such a relationship.

SECTION 24. The following shall be codified as Section 83-31-149, Mississippi Code of 1972:

83-31-149. Domestic mutual insurance holding companies shall have all the powers and authority and shall be subject to the requirements applicable to Mississippi nonprofit private corporations under Section 79-11-101 et seq., except:

(a) A mutual insurance holding company shall be organized exclusively under this act and shall be a mutual company without capital stock.

(b) The articles of association of the mutual insurance holding company and any amendment to such articles or restatement of such articles shall be subject to the approval of the commissioner for compliance with the provisions of this act before filing with the Mississippi Secretary of State and shall contain the name of the mutual insurance holding company, which shall include the word "mutual."

(c) To the extent that the provisions of Section 79-11-101 et seq. conflict with the provisions of this act, the insurance laws of the State of Mississippi or the regulations of the commissioner, then such provisions of this act, the insurance laws of the State of Mississippi or the regulations of the commissioner shall control.

SECTION 25. The following shall be codified as Section 83-31-151, Mississippi Code of 1972:

83-31-151. (1) A domestic mutual insurance company, by itself or together with one or more other mutual insurance companies, under a plan of reorganization, may reorganize as a mutual insurance holding company system that must consist of a mutual insurance holding company and one or more controlled subsidiaries and which may consist of one or more intermediate stock holding companies and other subsidiaries as permitted by Section 83-6-1 et seq. The reorganization may be effected by the organization of one or more companies, amendment or restatement of the articles of association and bylaws of one or more companies, transfer of assets and liabilities among two (2) or more companies, issuance, acquisition or transfer of capital stock of one or more companies or merger or consolidation of two (2) or more companies. On and after the effective date of a plan of reorganization, the mutual insurance holding company shall at all times own, directly or indirectly, a majority of the voting shares of each controlled subsidiary and any intermediate stock holding company.

(2) All of the initial shares of the capital stock of the insurance company which reorganized as a subsidiary insurance company shall be issued either to the mutual insurance holding company or to an intermediate holding company which is wholly owned by the mutual insurance holding company. This restriction does not preclude the subsequent issuance of additional shares of stock by an intermediate holding company or the subsidiary insurance company, subject to the approval of the commissioner and compliance with applicable law, so long as the mutual insurance holding company at all times owns directly or through one or more intermediate holding companies, a majority of the voting shares of the capital stock of the subsidiary insurance company. The membership interests of the policyholders of the subsidiary insurance company shall become membership interests in the mutual insurance holding company in accordance with the plan of reorganization. Policyholders of the subsidiary insurance company which was formerly the mutual insurer shall be members of the mutual insurance holding company in accordance with the plan of reorganization and the articles of association and bylaws of the mutual insurance holding company.

SECTION 26. The following shall be codified as Section 83-31-153, Mississippi Code of 1972:

83-31-153. (1) A plan of reorganization shall include the following provisions:

(a) A description of the structure of the proposed mutual insurance holding company system consistent with the requirements therefor set forth in this act.

(b) A description of the qualifications for membership in and the rights of members of the mutual insurance holding company consistent with the requirements therefor set forth in this act, provisions for the extinguishment of membership interests in the mutual insurance company and provisions for the conversion of such membership interests in the mutual insurance company into membership interests in the mutual insurance holding company.

(c) A description of the transactions, and parties to such transactions, that will effect the reorganization, including, but not limited to, transfer and assumption of policies, contracts, assets and liabilities.

(d) A description of corporate restructuring and other corporate transactions that will effect the reorganization, including, but not limited to, formation or organization of companies, amendment or restatement of articles of association or bylaws or those proposed in connection with the formation or organization of companies in connection with the plan and mergers and consolidations.

(e) A description of those persons who shall serve as directors and officers of the mutual insurance holding company, its intermediate stock holding companies, if any, its controlled subsidiaries and other subsidiaries as of the effective date of the reorganization. The initial directors of each such company shall be the directors of the mutual insurance company who shall have terms concurrent with the terms as directors of the reorganized mutual insurance company unless otherwise specified in the plan.

(f) Provisions requiring that, following the reorganization, the material terms and conditions of indemnification or coverage of policyholders of the mutual insurance company shall remain in full force and effect under policies transferred to and assumed by one or more subsidiaries of the mutual insurance holding company.

(g) Provisions requiring that, following the reorganization, the material terms and conditions of subordinated surplus notes and other contractual obligations, other than those arising under policies described in paragraph (f) of this section, of the mutual insurance company, subject to the rights of the mutual insurance company under applicable law, and to the extent such obligations are not otherwise satisfied or terminated in accordance with their terms or retained by a mutual insurance holding company or controlled subsidiary, shall remain in full force and effect upon the transfer of such obligations to, and assumption of such obligations by, one or more subsidiaries of the mutual insurance holding company.

(2) A plan of reorganization must be adopted by two-thirds (2/3) of the members of the board of directors of the mutual insurance company or, in the case of the formation of any intermediate stock insurance holding company that is not concurrent with the formation of the mutual insurance holding company, by two-thirds (2/3) of the members of the board of directors of the mutual insurance holding company.

(3) Not later than the ninetieth day following the adoption of a plan of reorganization by the board of directors, and before the meeting of the mutual insurance company members to approve the plan, the mutual insurance company shall submit to the commissioner the following:

(a) The plan of reorganization, as adopted.

(b) The form of notice to be sent to the mutual insurance company members, informing them of their right to vote on the plan of reorganization.

(c) The form of proxy statement to be sent to the mutual insurance company members informing them of their right to vote by proxy on the plan of reorganization and describing the plan.

(d) The form of proxy to be sent to the mutual insurance company members to solicit their vote on the plan of reorganization.

(e) Proposed articles of association, merger or consolidation, bylaws, restatements of or amendments to articles of association and bylaws and plans of merger or consolidation with respect to each entity to be organized, reorganized or otherwise subject to such action under the plan of reorganization.

(f) An audited financial statement prepared on a statutory basis in accordance with the insurance laws of the State of Mississippi, including an actuarial opinion for the most recent calendar year ended, or a copy thereof, if the statement was previously filed with the commissioner.

(g) Such other information as required under rules or regulations or as requested by the commissioner.

(4) The commissioner may hold a public hearing to allow public comment on the plan of reorganization after giving written notice to the mutual insurance company and other interested persons, all of whom have the right to appear at the hearing. Notice to interested persons who have not filed an appearance in the matter may be made in any reasonable manner deemed appropriate by the commissioner with the costs thereof assessed to the mutual insurance company.

(5) (a) Within twenty (20) business days after filing with the commissioner the documents required in connection with a plan of reorganization, the mutual insurance company shall send to each eligible member a notice advising the eligible member of the adoption and filing of the plan of reorganization and of the member=s right to provide to the commissioner and the mutual insurance company comments on the plan.

(b) As an alternative to the notice required under paragraph (a) of this subsection, the mutual insurance company may use any other means which is reasonably designed to provide notice to eligible members and which alternative means of providing notice is approved by the commissioner.

(c) The notice required under paragraphs (a) or (b) of this subsection shall include a description of the procedure to be used in making comments.

(d) An eligible member who elects to make comments must make the comments in writing (i) if notice is sent to each eligible member, not later than the thirtieth day after the date on which the notice is sent, or (ii) if an alternative means of providing notice is approved by the commissioner, not later than such date for receipt of comments approved by the commissioner.

(6) Except as otherwise provided by this subsection, the commissioner shall approve or disapprove a plan of reorganization not later than the ninetieth day after the first day on which all the documents and other information required are filed with the commissioner. The commissioner may not extend the time for approval or disapproval beyond the ninety-day time period unless he finds it necessary to retain a qualified expert in accordance with subsection (7) of this section, in which case he may extend the time for review for an additional sixty (60) days beyond the initial ninety-day period. Notwithstanding the stated time limits herein, the commissioner may extend the time for approval or disapproval for an additional thirty (30) days beyond the date on which any amendment to such plan is filed with the commissioner. The commissioner shall, within five (5) days of approving or disapproving a plan of reorganization, give written notice to the mutual insurance company of the commissioner's decision and, in the event of disapproval, a detailed statement of the reasons for the adverse decision. If a plan is disapproved, then the plan of reorganization may be amended and resubmitted to the commissioner for his approval or disapproval as provided in this act. If the commissioner disapproves the plan then the mutual insurance company may appeal the commissioner=s decision as provided by the laws of this state to the Chancery Court of the First Judicial District of Hinds County, Mississippi.

(7) The commissioner may retain, at the mutual insurance company's expense, a qualified expert or experts, including but not limited to appraisers, actuaries, accountants and attorneys, not otherwise a part of the commissioner's staff to assist the commissioner in reviewing the plan of reorganization.

(8) The commissioner shall approve a plan of reorganization if the commissioner finds that the plan of reorganization complies with this act and the plan of reorganization is fair and equitable to members and policyholders; however, the commissioner may not approve such a plan of reorganization and shall disapprove such a plan if the commissioner finds that (a) the effect of the plan of reorganization would be substantially to lessen competition in insurance in this state or tend to create a monopoly therein; (b) the financial condition of any party to the plan of reorganization is such as might jeopardize the financial stability of the insurers which are parties to the plan, or prejudice the interests of their policyholders; (c) the plan of reorganization or the plans for operation of the parties to the plan of reorganization following implementation of the plan of reorganization are not in the public interest; (d) the competence, experience and integrity of those persons who would control the operations of the parties to the plan of reorganization are such that it would not be in the interest of policyholders of the parties to the plan of reorganization or of the public to permit the plan of reorganization; (e) the plan of reorganization=s method of allocating value is not fair and equitable; (f) the plan of reorganization is not fair and equitable to the members and policyholders; (g) implementation of the plan of reorganization is likely to be hazardous or prejudicial to the insurance buying public; or (h) the plan of reorganization unfairly enriches the officers and directors of the reorganizing insurer.

(9) (a) A plan of reorganization adopted by the board of directors of the mutual insurance company may be:

(i) Amended by the board of directors of the mutual insurance company in response to the comments or recommendations of the commissioner or any other state or federal agency or governmental entity before any solicitation of proxies from members of the mutual insurance company to vote on the plan of reorganization or at any time with the consent of the commissioner, except that any material amendment after the members' approval shall require the members' approval; or

(ii) Terminated by the board of directors of the applicant at any time before members of the mutual insurance company vote on the plan of reorganization and, otherwise, at any time with the consent of the commissioner.

(b) The plan of reorganization is approved upon the affirmative vote of at least two-thirds (2/3) of the votes cast by members of the mutual insurance company, notwithstanding quorum or voting action requirements otherwise applicable to the mutual insurance company to the contrary.

(c) Within thirty (30) days after members have approved the plan of reorganization, the applicant must file with the commissioner the minutes of the meeting at which the plan of reorganization was approved.

SECTION 27. The following shall be codified as Section 83-31-155, Mississippi Code of 1972:

83-31-155. A mutual insurance holding company shall not be authorized to pay dividends or make distributions to mutual insurance holding company members except as may be expressly approved by the commissioner. Neither the adoption nor the implementation of a plan of reorganization leading to the formation of a mutual holding company shall be deemed to give rise to any obligation by or on behalf of a mutual insurance company to make any distribution or payment to any member or policyholder or to any other person, fund or entity of any nature whatsoever in connection with the ownership, control, benefits, policies, purpose, or nature of the mutual insurance company or otherwise.

SECTION 28. The following shall be codified as Section 83-31-157, Mississippi Code of 1972:

83-31-157. (1) Subject to applicable requirements of this act and Section 83-6-1 et seq., a mutual insurance holding company may:

(a) Merge or consolidate with, or acquire the assets of, a mutual insurance holding company formed under this act or any similar entity or organization formed under the laws of any other state;

(b) Either alone or together with one or more intermediate stock holding companies, or other subsidiaries, directly or indirectly acquire the stock of a stock insurance company or a mutual insurance company that reorganizes under this act or the law of its state of organization;

(c) Together with one or more of its stock insurance company subsidiaries, acquire the assets of a stock insurance company or a mutual insurance company;

(d) Acquire a stock insurance company through the merger of such stock insurance subsidiary with a stock insurance company or intermediate stock insurance company subsidiary of the mutual insurance holding company; or

(e) Acquire the stock or assets of any other person to the same extent as would be permitted for a mutual insurance company.

(2) (a) A plan and agreement for merger or consolidation in accordance with subsection (1) of this section shall be submitted to and approved by two-thirds (2/3) of the members of each domestic mutual insurance holding company or mutual insurance company involved in the merger or consolidation who vote either in person or by proxy thereon at meetings called for the purposes pursuant to such reasonable notice and procedure as has been approved by the commissioner; however, no vote of a domestic mutual insurance holding company shall be required to approve the merger of a mutual insurance holding company which has resulted from the reorganization of a domestic or foreign mutual insurance company and which has surplus equal to not more than twenty-five percent (25%) of the surplus of the combined companies.

(b) No such merger or consolidation shall be effectuated unless in advance thereof the plan and agreement therefor have been filed with the commissioner and approved by the commissioner in accordance with Section 83-6-1 et seq.

(c) All of the initial shares of the capital stock of the reorganized subsidiary insurance company shall be issued either to the mutual insurance holding company, or to an intermediate holding company which is a subsidiary of the mutual insurance holding company. The membership interests of the policyholders of the reorganized insurance company shall become membership interests in the mutual insurance holding company in accordance with the plan and agreement of merger or consolidation. Policyholders of the reorganized insurance company shall be members of the mutual insurance holding company in accordance with the plan and agreement of merger or consolidation and the articles of association and bylaws of the mutual insurance holding company. The mutual insurance holding company shall at all times directly or indirectly own a majority of the voting shares of the capital stock of any reorganized subsidiary insurance company.

SECTION 29. The following shall be codified as Section 83-31-159, Mississippi Code of 1972:

83-31-159. (1) No mutual insurance holding company shall be formed unless its articles of association are approved by the commissioner before filing the articles of association with the Mississippi Secretary of State as provided by law.

(2) The articles of association shall be effective when filed with and approved by the commissioner and also filed with the Mississippi Secretary of State or at such other delayed effective time and date as specified in the articles of association as filed.

SECTION 30. The following shall be codified as Section 83-31-161, Mississippi Code of 1972:

83-31-161. (1) A domestic mutual insurance holding company may amend its articles of association by vote of a majority of those members present or represented by proxy at a lawful meeting of its members if the notice given members included due notice of the proposal to amend.

(2) Upon adoption of an amendment, the articles of amendment shall be effective when filed with and approved by the commissioner and also filed with the Mississippi Secretary of State or at such other delayed effective time and date as specified in the articles of amendment.

SECTION 31. The following shall be codified as Section 83-31-163, Mississippi Code of 1972:

83-31-163. (1) The initial board of directors of a mutual insurance holding company shall adopt bylaws.

(2) The bylaws shall provide:

(a) That each member is entitled to one (1) vote upon each matter coming to a vote at meetings of members or to more votes in accordance with a reasonable classification of members as set forth in the bylaws and based upon the amount of insurance in force with the mutual insurance holding company's subsidiaries or upon the amount of the premiums paid to the mutual insurance holding company's subsidiaries by such member or upon other reasonable factors. The bylaws shall provide that a member has the right to vote in person or by his written proxy. The bylaws may specify the mode of voting by proxy and other requirements relating to voting by proxy consistent with procedures used by mutual insurance companies in accordance with Section 83-31-9 et seq.

(b) For the election of directors by the members and the number, qualifications, terms of office, subject to the requirements of Section 83-31-165.

(c) For the time, notice and conduct of annual and special meetings of members and voting thereat.

(d) For the number, designation, election, terms and powers and duties of the respective corporate officers.

(e) For deposit, custody and disbursement of and accounting for corporate funds.

(f) That a quorum at all annual and special meetings of members shall consist of all members present and voting in person or by proxy, after due notice of such meeting.

(g) For any other reasonable provisions customary, necessary or convenient for the management or regulation of the company's corporate affairs not inconsistent with law.

(3) Within thirty (30) days of adoption of any bylaws or any modification thereof or addition thereto, a mutual insurance holding company shall file with the commissioner a copy, certified by the mutual insurance holding company's secretary, of such bylaws and of every modification thereof or addition thereto, which shall be subject to the approval of the commissioner. The insurer shall not, after receiving written notice of such disapproval and during the existence thereof, effectuate any bylaw provision disapproved by the commissioner.

SECTION 32. The following shall be codified as Section 83-31-165, Mississippi Code of 1972:

83-31-165. (1) The affairs of every mutual insurance holding company shall be managed by not less than five (5) directors.

(2) Directors shall be elected by the members of the mutual insurance holding company at the annual meeting of members. Directors may be elected for terms of not more than three (3) years each and until their successors are elected and have qualified, and, if to be elected for terms of more than one (1) year, the mutual insurance holding company's bylaws may provide for a classified board under which the terms of a proportionate part of the members of the board of directors shall expire on the date of each annual meeting of members.

(3) If so provided in a mutual insurance holding company's bylaws, a director of such mutual insurance holding company must be a policyholder of a subsidiary insurance company of the mutual insurance holding company.

SECTION 33. The following shall be codified as Section 83-31-167, Mississippi Code of 1972:

83-31-167. (1) A mutual insurance holding company and, if applicable, an intermediate holding company shall not be dissolved or liquidated without the approval of the commissioner.

(2) The commissioner shall retain jurisdiction over a mutual insurance holding company incorporated in this state and, if applicable, an intermediate holding company, to assure that policyholder interests are protected, including, but not limited to, regulation of the solvency of such companies.

(3) Subject to the limitations of Section 83-6-2, a mutual insurance holding company formed under this act may (a) invest in the stock or debt securities of one or more intermediate holding companies; (b) invest in the stock or debt securities of one or more domestic or foreign insurance companies; (c) exercise any power or engage in any transaction or activity permitted by Section 83-31-157 or other provision applicable to mutual insurance holding companies; and (d) invest in any corporation, partnership, limited liability company, business trust or other entity permitted for a mutual insurance company under the laws of this state.

SECTION 34. The following shall be codified as Section 83-31-169, Mississippi Code of 1972:

83-31-169. (1) Membership in a mutual insurance holding company shall be determined in accordance with the mutual insurance holding company's articles of association and bylaws and, subject to such exceptions as are set forth in the articles of association or bylaws, shall be based upon each member's holding a policy of insurance with a subsidiary insurance company. (2) Any person, public or private corporation, board, association, firm, estate, trustee or fiduciary may be a member of a mutual insurance holding company.

(3) No member of a mutual insurance holding company may transfer membership or any right arising therefrom.

(4) A member of a mutual insurance holding company is not, as such, personally liable for the acts, debts, liabilities or obligations of the company and may not be assessed by the directors of such company.

(5) A membership interest in a mutual insurance holding company shall not constitute a security as defined by Section 75-71-105 and shall not be subject to any requirements of the Mississippi Securities Act, Section 75-71-101 et seq.

SECTION 35. The following shall be codified as Section 83-31-171, Mississippi Code of 1972:

83-31-171. (1) Upon any voluntary dissolution of a domestic mutual insurance holding company, its assets remaining after discharge of its indebtedness, if any, and expenses of administration shall be distributed to existing persons who were its members at any time within the three-year period preceding the date such liquidation was authorized or ordered or date of last termination of the insurer's certificate of authority, whichever date is earlier; except, if the commissioner has reason to believe that those in charge of the management of the mutual insurance holding company have caused or encouraged the reduction of the number of members of the insurer in anticipation of liquidation and for the purpose of reducing thereby the number of persons who may be entitled to share in distribution of the insurer's assets, the commissioner may enlarge the three-year qualification period by such additional time as the commissioner may deem to be reasonable.

(2) The distributive share of each such member shall be determined by a formula based upon such reasonable classifications of members as the commissioner may approve.

SECTION 36. The following shall be codified as Section 83-31-173, Mississippi Code of 1972:

83-31-173. Each mutual insurance holding company shall be subject to the applicable laws and rules of this state relating to insurance holding company systems. A mutual insurance holding company shall not be subject to provisions of Title 83 of the Mississippi Code or rules adopted thereunder with respect to the writing of insurance or required capital or surplus. A mutual insurance holding company system shall be considered an insurance holding company system but shall not require separate approval under Section 83-31-1 et seq. for an acquisition of controlling stock, ownership interest, assets or control or for a merger or consolidation, share exchange, organization, or reorganization of insurance companies or other transaction with respect to any action approved under the provisions of this act.

SECTION 37. The following shall be codified as Section 83-31-177, Mississippi Code of 1972:

83-31-177. A mutual insurance holding company may become a stock holding company under such plan and procedure as may be approved by the commissioner and as provided in Section 83-31-101 et seq.

SECTION 38. The following shall be codified as Section 83-31-175, Mississippi Code of 1972:

83-31-175. An action challenging the validity of or arising out of acts taken or proposed to be taken regarding a plan of reorganization under this act must begin in the Chancery Court of the First Judicial District of Hinds County, Mississippi, not later than the thirtieth day after the effective date of the plan of reorganization.

SECTION 39. The following shall be codified as Section 83-31-179, Mississippi Code of 1972:

83-31-179. (1) A director, officer, agent or employee of the mutual insurance company may not receive a fee, commission or other consideration other than that person's usual salary or compensation for aiding, promoting or assisting in a plan of reorganization under this act, except as provided by the plan of reorganization approved by the commissioner.

(2) All the costs and expenses connected with a plan of reorganization shall be paid for or reimbursed by the mutual insurance company or the mutual insurance holding company.

SECTION 40. The following shall be codified as Section 83-31-181 Mississippi Code of 1972:

83-31-181. The commissioner may adopt rules and regulations implementing the provisions of Sections 83-31-101 through 83-31-179, including, but not limited to, the regulation of the solvency of mutual insurance holding companies and intermediate holding companies.

SECTION 41. (1) A domestic mutual insurance company may effect a merger with one or more domestic mutual insurance companies, or with one or more foreign mutual insurance companies, if such merger is authorized by the laws of the state under which each such foreign company is organized.

(2) The Commissioner of Insurance shall review and approve the plan to merge the mutual insurance companies before submission of the plan to the eligible members for their consideration and vote. The plan must be approved by two-thirds (2/3) of those eligible members who vote in person or by proxy at a duly called eligible members' meeting to consider the plan of merger. The commissioner may require mutual companies to comply with appropriate requirements as that analogous to those of a stock company merger under Sections 83-6-24 and 83-19-99.

SECTION 42. This act shall take effect and be in force from and after July 1, 1998.