California Insurance Code

§ 4097.12

INS § 4097.12 Effective Jan 1, 1999Div. 2 · Part 1 · Ch. 4 · Art. 10

Statute text

(a)Upon the effective date of a plan of conversion in accordance with Section 4097.05, the mutual insurer immediately becomes a stock corporation, the membership interests and rights in surplus of its members are extinguished, the members of the mutual insurer immediately become members of the mutual holding company and are granted rights in surplus in the mutual holding company equivalent to those rights in surplus previously held in the converted company, all of the voting stock initially issued by the converted insurer is owned by the stock holding company, and all of the voting stock initially issued by the stock holding company is owned by the mutual holding company. Except for the membership interests in the mutual insurer, which become membership interests in the mutual holding company, nothing herein is intended to, nor shall eliminate, curtail or otherwise diminish the contract rights of policyholders of a converted company. The stock holding company may thereafter, subject to compliance with Article 8 (commencing with Section 820) of Chapter 1 of Part 2 of Division 1, issue securities to other persons. After the effective date, owners of policies that are issued by a stock insurer that has been converted from a mutual insurer pursuant to proceedings under this article shall become members of the mutual holding company immediately upon issuance of the policies, except that owners of a reporting endorsements issued by the insurer that provide strictly tail coverage on expired claims made policies shall not be members of the mutual holding company. Any person may be a member of a mutual holding company.

(b)From the effective date, the mutual holding company shall hold at least 51 percent of the issued and outstanding voting stock of the stock holding company and the stock holding company thereafter shall at all times hold all of the issued and outstanding voting stock of the converted insurer. The stock holding company may issue additional voting stock, and securities convertible into voting stock, to the mutual holding company and to other persons if, in the aggregate, the voting stock of the stock holding company held by the mutual holding company is not less than 51 percent of the issued and outstanding voting stock of the stock holding company. For purposes of the 51 percent limitation, any issued and outstanding securities of the stock holding company that are convertible into voting stock are considered issued and outstanding voting stock.

(c)From the effective date, the mutual holding company’s equity interest in the stock holding company shall not be less than 51 percent of the total stockholders’ equity in the stock holding company. For purposes of the 51 percent limitation, any issued and outstanding securities of the stock holding company that are convertible into equity securities, whether voting or nonvoting, shall be considered stockholders’ equity. Debt securities that include a default contingency conversion interest shall not be considered stockholders’ equity for compliance with the foregoing limitation.

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Legislative history

Added by Stats. 1998, Ch. 421, Sec. 4. Effective January 1, 1999.