§ 36-1653. Acquisition of control of or merger with domestic insurer.  


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  • A.  No person other than the issuer shall make a tender offer for, request or invite tenders of, or enter into any agreement to exchange, seek to acquire or acquire, in the open market or otherwise, any voting security of a domestic insurer or of any other person controlling a domestic insurer if, after the consummation of such action, such person would, directly or indirectly, or by conversion or by exercise of any right to acquire, be in control of such insurer.  No person shall enter into an agreement to merge with or otherwise to acquire control of a domestic insurer unless, at the time any such offer, request, or invitation is made or any such agreement is entered into, or prior to the acquisition of such securities if no offer or agreement is involved, such person has filed with the Insurance Commissioner and has sent to such insurer, and such insurer has sent to its shareholders, a statement containing the information required by this section and such offer, request, invitation, agreement or acquisition has been approved by the Commissioner in the manner prescribed in subsection D of this section.

    B.  The statement to be filed with the Commissioner as required by subsection A of this section shall be made under oath or affirmation and shall contain the following information described in this subsection.

    1.  The name and address of each person, referred to in this section as the "acquiring party", by whom or on whose behalf the merger or other acquisition of control referred to in subsection A of this section is to be effected.

    a.              If such person is an individual:

    (1)his or her principal occupation and all offices and positions held during the past five (5) years,

    (2)any conviction of any felony or of a misdemeanor involving moral turpitude, dishonesty, or breach of trust, during his or her lifetime, and

    (3)any conviction of crimes other than minor traffic violations and any administrative discipline imposed during the past ten (10) years.

    b.              If such person is not an individual:

    (1)a report of the nature of its business operations during the past five (5) years or for such lesser period as such person and any predecessors thereof shall have been in existence,

    (2)any conviction of any felony or of a misdemeanor involving moral turpitude, dishonesty, or breach of trust, during its existence, and any administrative discipline imposed during the past ten (10) years,

    (3)an informative description of the business intended to be done by such person and such person's subsidiaries, and

    (4)a list of all individuals who are or who have been selected to become directors or executive officers of such person, or who perform or will perform functions appropriate to such positions.  Such list shall include for each such individual the information required by subparagraph a of this paragraph.

    2.  The source, nature and amount of the consideration used or to be used in effecting the merger or other acquisition of control, a description of any transaction wherein funds were or are to be obtained for any such purpose, and the identity of persons furnishing such consideration; provided, however, that where a source of such 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 such statement so requests.

    3.  Fully audited financial information as to the earnings and financial condition of each acquiring party for the preceding five (5) fiscal years for each such acquiring party, or for such lesser period as such 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.  However, the Commissioner has the discretionary ability to waive the audit requirements set forth in this section based upon review of substantially similar financial disclosure statements submitted by the acquiring party.

    4.  Any plans or proposals which each acquiring party may have to liquidate such 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.

    5.  The number of shares of any security referred to in subsection A of this section which each acquiring party proposes to acquire, and the terms of the offer, request, invitation, agreement, or acquisition referred to in subsection A of this section, including any requested documentary evidence of the same, and a statement as to the method by which the fairness of the proposal was arrived at.

    6.  The amount of each class of any security referred to in subsection A of this section which is beneficially owned or concerning which there is a right to acquire beneficial ownership by each acquiring party.

    7.  A full description of any contracts, arrangements or understandings with respect to any security referred to in subsection A of this section in which any acquiring party is involved, including but not limited to 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, including any required documentary evidence of the same.  Such description shall identify the persons with whom such contracts, arrangements or understandings have been entered into.

    8.  A description of the purchase of any security referred to in subsection A of this section 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.

    9.  Copies of all tender offers for, advertisements for, invitations for tenders of, exchange offers for, and agreements to acquire or exchange any securities referred to in subsection A of this section, and, if distributed, of additional soliciting material relating thereto.

    10.  Such additional information as the Commissioner may require or by rule prescribe as necessary or appropriate for the protection of policyholders and securityholders of the insurer or in the public interest.

    C.  1.  If the person required to file the statement referred to in subsection A of this section is a partnership, limited partnership, limited liability company, syndicate or other group or legal entity, the Commissioner may require that the information called for by subsection B of this section shall be given with respect to each partner or each member of such entity, syndicate or group, and each person who controls such partner or member.  If any such partner, member or person is a corporation or the person required to file the statement referred to in subsection A of this section is a corporation, the Commissioner may require that the information called for by subsection B of this section be given with respect to such corporation, each officer and director of such corporation, and each person who is directly or indirectly the beneficial owner of more than ten percent (10%) of the outstanding voting securities of such corporation.

    2.  If any material change occurs in the facts set forth in the statement filed with the Commissioner and sent to such insurer pursuant to this section, an amendment setting forth such change, together with copies of all documents and other material relevant to such change, shall be filed with the Commissioner and sent to such insurer within two (2) business days after the person learns of such change.  Such insurer shall send such amendment to its shareholders.

    3.  If any offer, request, invitation, agreement or acquisition referred to in subsection A of this section is proposed to be made by means of a registration statement under the Securities Act of 1933, Public Law 22, or in circumstances requiring the disclosure of similar information under the Securities Exchange Act of 1934, Public Law 291, or under a state law requiring similar registration or disclosure, the person required to file the statement referred to in subsection A of this section may utilize such documents in furnishing the information called for by that statement.

    D.  1.  The Commissioner shall approve any merger or other acquisition of control referred to in subsection A of this section unless, after a public hearing thereon, he or she finds that:

    a.after the change of control, the domestic insurer referred to in subsection A of this section 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 licensed,

    b.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,

    c.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,

    d.the terms of the offer, request, invitation, agreement or acquisition referred to in subsection A of this section are unfair and unreasonable,

    e.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

    f.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 or the public to permit the merger or other acquisition of control.

    2.  The public hearing referred to in paragraph 1 of this subsection shall be held within thirty (30) days after the statement required by subsection A of this section is filed, or after the information required by the Commissioner has been supplied, and at least twenty (20) days' notice thereof shall be given by the Commissioner to the person filing the statement, unless the notice is waived.  Not less than fourteen (14) 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, unless the notice is waived in writing.  The insurer shall give notice to its securityholders.  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.  All discovery proceedings shall be concluded not later than three (3) days prior to the commencement of the public hearing, except by consent.

    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.  The provisions of this section shall not apply to any offer, request, invitation, agreement or acquisition which the Commissioner by order shall exempt therefrom as 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 as otherwise not comprehended within the purposes of this section.

    F.  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 such person arising out of violations of this section.  Each such person shall be deemed to have performed acts equivalent to and constituting an appointment by such a person of the Commissioner to be the person's true and lawful agent upon whom may be served all lawful process in any action, suit or proceeding arising out of violations of this section.  Copies of all such lawful process shall be served on the Commissioner in triplicate and transmitted by certified mail with return receipt requested by the Commissioner to such person at the person's last-known address.

Added by Laws 1970, c. 166, § 3, emerg. eff. April 9, 1970.  Amended by Laws 1982, c. 258, § 1, operative Oct. 1, 1982; Laws 1986, c. 251, § 26, eff. Nov. 1, 1986; Laws 1992, c. 178, § 3, eff. Sept. 1, 1992; Laws 1993, c. 79, § 7, eff. Sept. 1, 1993; Laws 1997, c. 418, § 88, eff. Nov. 1, 1997; Laws 2001, c. 363, § 14, eff. July 1, 2001.