SECTIONS 11529-11533 - California Statutes

INSURANCE CODE

SECTION 11529-11533

11529. In carrying out any such plan, the insurer may acquire any
shares of its own stock by gift, bequest or purchase. Any shares so
acquired shall, unless as a result of such acquisition all of the
shares of the insurer shall have been acquired, be acquired in trust
for the policyholders of the class or classes for whose benefit the
plan provides that the stock of the insurer shall be acquired as
hereinafter provided. Such shares shall be assigned and transferred
on the books of such insurer to three or more trustees appointed by
the insurer and approved by the commissioner under a trust agreement
approved by the commissioner. Such trustees shall hold such stock in
trust until all of the outstanding shares of capital stock of such
insurer have been acquired, but for not longer than 30 years with
such extensions of not more than five years each as may be granted by
the commissioner. Such extensions may be granted by the commissioner
if the plan so provides and if in his opinion the plan of
acquisition of all of such stock can be completed within a reasonable
period. Such trustees shall vote such stock at all corporate
meetings at which stockholders have the right to vote. When all of
the outstanding shares of capital stock of such insurer have been
acquired, all said shares shall be canceled, the certificate of
amendment of the insurer's articles of incorporation giving effect
thereto shall be filed in accordance with the provisions of Chapter 9
(commencing with Section 1300) of Division 1 of Title 1, of the
Corporations Code, and the insurer shall become a nonstock
corporation for the profit of its members and such trust shall
thereupon terminate. Thereafter such corporation shall be conducted
for the mutual benefit, ratably, of its policyholders of the class or
classes for whose benefit the stock was acquired and shall have
power to issue nonassessable policies on a reserve basis subject to
all provisions of law applicable to incorporated life insurers or
life and disability insurers, as the case may be, issuing
nonassessable policies on a reserve basis. Policies so issued may be
upon the basis of full or partial participation therein as agreed
between the insurer and the insured.
Upon the termination of any such voting trusts, either in
accordance with its terms or as hereinabove provided, such plan of
mutualization shall terminate, unless theretofore completed. Upon
such termination, unless the plan of mutualization provides for the
disposition of the shares acquired by the insurer under such plan or
for the disposition of the proceeds thereof, the shares held by such
trustees shall be disposed of in accordance with an order of the
superior court of the county in which is located the principal office
of such insurer, made upon a verified application of the
commissioner.

11529.5. Any such plan of mutualization may provide for the
creation of a voting trust under a trust agreement for the holding
and voting by three or more trustees of any portion or all of the
shares of the insurer not acquired upon the adoption of such plan.
The voting trustees shall be named in accordance with such plan or,
if no provision is made therein for the naming of such trustees, then
by the insurer. The voting trust agreement and voting trustees shall
be subject to the approval of the commissioner. Any or all of the
trustees under such voting trust agreement may be the same person or
persons as any or all of the trustees referred to in Section 11529.
Such voting trust agreement shall provide that in the event of
acquisition by the insurer of any of the shares of stock held
thereunder in accordance with the provisions of the plan, such shares
so acquired together with the voting rights thereof shall be
transferred by the trustees named under the provisions of this
section to the trustees named under the provisions of Section 11529.
Any voting trust agreement created pursuant to the provisions of this
section may be made irrevocable for not longer than thirty (30)
years and thereafter until the termination of the trust provided for
in Section 11529. The trust created pursuant to the provisions of
this section shall terminate in any event upon termination of the
trust provided for in Section 11529. Upon the termination of the
trust created pursuant to the provision of this section, any shares
held in such trust shall revert to the persons entitled thereto by
law.

11530. Every payment for the acquisition of any shares of the
capital stock of such insurer, the purchase price of which is not
fixed by such plan, shall be subject to the prior approval of the
commissioner. Neither such plan, nor any such payment, may be
approved by the commissioner unless he finds that the rights and
interests of the insurer, its policyholders, and shareholders are
protected.

11531. The trustees referred to in section 11529 shall file with
such insurer and with the commissioner a verified acceptance of their
appointments and verified declarations that they will faithfully
discharge their duties as such trustees. All dividends and other sums
received by said trustees on the shares held by them, after paying
the necessary expenses of executing their trust, shall be immediately
repaid to such insurer for the benefit of all who are, or may
become, policyholders of such insurer of the class or classes for
whose benefit the stock of such insurer was acquired and entitled to
participate in the profits thereof and shall be added to and become a
part of the assets of such insurer.

11532. Such insurer, after mutualization, shall be a continuation
of the original insurer, and such mutualization shall not affect such
insurer's certificate of authority nor existing suits, rights or
contracts except as provided in said plan for the acquisition of the
outstanding shares of the capital stock of such insurer, approved as
provided in this chapter. Such insurer, after mutualization, shall
exercise all the rights and powers and perform all the duties
conferred or imposed by law upon insurers writing the classes of
insurance written by it, and to protect rights and contracts existing
prior to mutualization, subject to the effect of said plan. The
board of directors of such insurer, prior to mutualization, may adopt
amendments to its bylaws to take effect upon mutualization.

11532.1. An annual meeting of members shall be held at 10 o'clock
in the morning of the fourth Tuesday of March of each year at the
principal office of the insurer, unless a different time or place be
provided in the by-laws.

11532.2. Special meetings of the members, for any purpose or
purposes whatsoever, may be called at any time by the president, or
by the board of directors, or by one or more members holding not less
than one-fifth of the voting power of such insurer, or by such other
officers or persons as the by-laws authorize.

11532.3. Notice of all meetings of members whether annual or
special shall be given in writing to the members entitled to vote by
the secretary, or an assistant secretary, or other person charged
with that duty, or if there be no such officer, or in case of his
neglect or refusal, by any director or member. At the option of the
insurer such notice may be imprinted on premium notices or receipts
or on both.
A notice may be given by such insurer to any member either
personally, or by mail, or other means of written communication,
charges prepaid, addressed to such member at his address appearing on
the books of the insurer, or given by him to the insurer for the
purpose of notice. If a member gives no address, notice shall be
deemed to have been given him if sent by mail or other means of
written communication addressed to the place where the principal
office of the insurer is situated, or if published at least once in
some newspaper of general circulation in the county in which said
office is located.
Notice of any meeting of members shall be sent to each member
entitled thereto not less than seven days before such meeting, unless
the bylaws provide otherwise.
Notice of any meeting of members shall specify the place, the day,
and the hour of the meeting and the general nature of the business
to be transacted.
Notice of an annual meeting to be held at the time and place
specified in Section 11532.1 shall be sufficiently given if published
at least once in each of four successive weeks in a newspaper of
general circulation in the county in which the principal office of
such insurer is located, and if so published no other notice of such
meeting shall be required.

11532.4. The presence in person or by proxy of 5 per cent of the
members entitled to vote at any meeting shall constitute a quorum for
the transaction of business, unless otherwise provided in the
by-laws.

11532.5. Each such member shall have one vote at any meeting of
members regardless of the number of policies or the amount of
insurance that such member holds and regardless of whether such
policies are policies of life insurance, or of disability insurance,
or both. Any member entitled to vote shall have the right to do so
either in person or by an agent or agents authorized by a written
proxy executed by such person or his duly authorized agent and filed
with the secretary of such insurer.

11532.6. The directors of the insurer in office at the time the
insurer is mutualized as provided in this chapter shall continue in
office until the first annual meeting of members. At the first annual
meeting of members and at each annual meeting thereafter directors
shall be elected by the members for the term or terms authorized by
this chapter.

11532.7. The articles of incorporation or the bylaws may provide
that the directors may be divided into two or more classes whose
terms of office shall expire at different times, but no term shall
continue longer than six years. In the absence of such provisions,
each director, except members of the board of directors at the time
the insurer is mutualized, shall be elected for a term of one year.
All directors shall hold office for the term for which they are
elected and until their successors are elected and qualified. A
director may, but need not be a member or policyholder of the insurer
of which he is acting as director. Vacancies in the board of
directors may be filled by a majority of the remaining directors,
though less than a quorum, and each director so elected shall hold
office until the next annual meeting.

11532.8. All insurers mutualized under the provisions of this
chapter shall be subject to all other applicable provisions of this
code and to the provisions of the general corporation law as provided
in Section 1140 of this code.

11533. The provisions of Article 8 of Chapter 1 of Part 2 of
Division 1 of this code shall not apply to any of the following:
(a) Shares of the capital stock of such insurer acquired as
provided in section 11529 and assigned and transferred to the
trustees as is provided in said section, and the assignment and
transfer of said shares as so provided.
(b) Any certificate or other instrument issued to a policyholder
of such mutualized insurer conferring or evidencing membership in
such mutualized insurer or conferring or evidencing such member's
right to participate in the profits or share in the assets of such
mutualized insurer by virtue of his membership therein, and the
issuance of such certificate or other instrument.
(c) The plan for the acquisition of the outstanding shares of the
capital stock of such insurer authorized by the provisions of this
chapter, the submission of said plan to the commissioner and to the
policyholders of such insurer as provided in this chapter, and the
approval and carrying out of said plan or any part thereof in
accordance with the provisions of this chapter.