20-482.01. Effect of reorganization

A. On the effective date of a plan of reorganization, all of the following occur:

1. The converting mutual insurer becomes a converted stock insurer. The amended or restated articles of incorporation and bylaws of the converting mutual insurer shall be filed with the director as part of the plan and shall become effective on the effective date of the conversion. The director shall amend the certificate of authority of the converting mutual insurer on the effective date of the conversion.

2. All membership interests and rights in surplus of the converting mutual insurer are extinguished and the members of the converting mutual insurer become members of the mutual holding company in accordance with this article and the articles of incorporation and bylaws of the mutual holding company.

3. Any owner of one or more policies of insurance, other than a policy of reinsurance, issued by the converted stock insurer after the effective date of the conversion and, if permitted under the articles of incorporation or bylaws of the mutual holding company, any holder of one or more policies of insurance, other than a policy of reinsurance, issued by any other insurer that is a direct or indirect subsidiary or affiliate of the mutual holding company after the effective date of the reorganization becomes a member of the mutual holding company.

4. The mutual holding company or, if created, an intermediate stock holding company acquires and shall retain all shares of the voting stock of the converted stock insurer.

5. The mutual holding company acquires and shall retain all shares of the voting stock of any intermediate stock holding company.

6. A converted stock insurer continues the corporate existence of the converting mutual insurer. Except as provided in the plan, the conversion does not annul, modify or change any existing license or other authority or any of the existing civil actions, rights, contracts or liabilities of the converting mutual insurer. The converted stock insurer retains all property, debts and choses in action and every other interest belonging to the converting mutual insurer before the conversion without further action needed. On and after the effective date of the conversion, the converted stock insurer may exercise all rights and powers conferred and shall perform all duties imposed by law on insurers writing the classes of insurance written by the converted stock insurer, shall retain the rights and contracts of the converting mutual insurer existing immediately before the conversion and shall be subject to all obligations and liabilities of the converting mutual insurer existing immediately before the conversion, subject to the terms of the plan.

B. Any intermediate stock holding company created at the time of reorganization to hold the stock of the converting mutual insurer shall be incorporated under title 10 and may engage in any business or activity permitted by title 10.

C. The converted stock insurer and any intermediate stock holding company may issue to third parties debt securities, stock other than voting stock and voting stock if all of the following apply:

1. No shares of stock representing a majority of the voting power of all issued and outstanding voting stock of either the converted stock insurer or the intermediate stock holding company, if any, are issued to third parties.

2. A majority of the voting stock of the converted stock insurance company is at all times owned by the mutual holding company or by the intermediate stock holding company, a majority of whose voting stock is held by the mutual holding company, and such majority interest in the converted stock insurance company and any intermediate stock holding company is not conveyed, transferred, assigned, pledged, subjected to a security interest or lien, placed in a voting trust, encumbered or otherwise hypothecated or alienated by the mutual holding company or by the intermediate stock holding company. Any conveyance, transfer, assignment, pledge, security interest, lien, placement in a voting trust, encumbrance or hypothecation or alienation of, in or on a majority of the voting shares of the converted stock insurer or the intermediate stock holding company in violation of this paragraph is void in inverse chronological order as to the shares necessary to constitute a majority of such voting stock.

D. Unless otherwise specified in the plan, the directors and officers of the converting mutual insurer shall serve as directors and officers of the mutual holding company, any intermediate stock holding company and the converted stock insurer until new directors and officers are elected.