§ 58-65-132. Review and approval of conversion plan; new corporation. - North Carolina Statutes

§58‑65‑132.  Review and approval of conversion plan; newcorporation.

(a)        Approval of Plan ofConversion. – The Commissioner shall approve the plan of conversion and issue acertificate of authority to the new corporation to transact business in thisState only if the Commissioner finds all of the following:

(1)        The plan ofconversion meets the requirements of G.S. 58‑65‑131, this section,and G.S. 58‑65‑133.

(2)        Upon conversion, thenew corporation will meet the applicable standards and conditions under thisChapter, including applicable minimum capital and surplus requirements.

(3)        The plan ofconversion adequately protects the existing contractual rights of thecorporation's subscribers and certificate holders to medical or hospitalservices and payment of claims for reimbursement for those services.

(4)        No director,officer, or employee of the corporation will receive:

a.         Any fee, commission,compensation, or other valuable consideration for aiding, promoting, orassisting in the conversion of the corporation other than compensation paid toany director, officer, or employee of the corporation in the ordinary course ofbusiness; or

b.         Any distribution ofthe assets, surplus, capital, or capital stock of the new corporation as partof a conversion.

(5)        The corporation hascomplied with all material requirements of this Chapter, and disciplinaryaction is not pending against the corporation.

(6)        The plan ofconversion is fair and equitable and not prejudicial to the contractual rightsof the policyholders and certificate holders of the new corporation.

(7)        The plan ofconversion is in the public interest. The Commissioner shall find that the planis in the public interest only if it provides a benefit for the people of NorthCarolina equal to the value of the corporation at the time of conversion, inaccordance with the criteria set out in this subdivision. In determiningwhether the plan of conversion is in the public interest, the Commissioner mayalso consider other factors, including, but not limited to, those relating tothe accessibility and affordability of health care. The Commissioner mustdetermine that the plan of conversion meets all of the following criteria:

a.         Consideration,determined by the Commissioner to be equal to one hundred percent (100%) of thefair market value of the corporation, will be conveyed or issued by thecorporation to the Foundation at the time the new corporation files itsarticles of incorporation. If the consideration to be conveyed is all of thecommon stock of the new corporation that is then issued and outstanding at thetime of conversion, and there is no other capital stock of any type or naturethen outstanding, it is conclusively presumed that the Foundation will acquirethe fair market value of the corporation.

b.         At any time afterthe conversion, the new corporation may issue, in a public offering or aprivate placement, additional shares of common stock of the same class andhaving the same voting, dividend, and other rights as that transferred to theFoundation, subject to the applicable provisions of Chapter 55 of the GeneralStatutes and any voting and registration agreements.

(8)        The plan ofconversion contains a proposed voting agreement and registration agreementbetween the Foundation and the proposed new corporation that meets therequirements of G.S. 58‑65‑133.

(9)        The Attorney Generalhas given approval pursuant to G.S. 58‑65‑133(h).

(b)        New Corporation. –After issuance of the certificate of authority as provided in subsection (a) ofthis section, the new corporation shall no longer be subject to this Articleand Article 66 of this Chapter but shall be subject to and comply with allapplicable laws and regulations applicable to domestic insurers and Chapter 55of the General Statutes, except that Articles 9 and 9A of Chapter 55 shall notapply to the new corporation. The new corporation shall file its articles ofincorporation, as amended and certified by the Commissioner, with the NorthCarolina Secretary of State. The legal existence of the corporation does notterminate, and the new corporation is a continuation of the corporation. Theconversion shall only be a change in identity and form of organization. Exceptas provided in subdivision (a)(7) of this subsection, all property, assets,rights, liabilities, obligations, interests, and relations of whatever kind ofthe corporation shall continue and remain in the new corporation. All actionsand legal proceedings to which the corporation was a party prior to conversionshall be unaffected by the conversion.

(c)        Final Decision andOrder; Procedures. – The Commissioner's final decision and order regarding theplan of conversion shall include findings of fact and conclusions of law.Findings of fact shall be based upon and supported by substantial evidence,including evidence submitted with the plan by the corporation and evidenceobtained at hearings held by the Commissioner. A person aggrieved by a finaldecision of the Commissioner approving or disapproving a conversion maypetition the Superior Court of Wake County within 30 days thereafter forjudicial review. An appeal from a final decision and order of the Commissionerunder this section shall be conducted pursuant to G.S. 58‑2‑75.Chapter 150B of the General Statutes does not apply to the procedures of G.S.58‑65‑131, this section, and G.S. 58‑65‑133. Thissubsection does not apply to appeal of an order of the Commissioner issuedpursuant to G.S. 58‑65‑131(c).

(d)        Attorney General'sEnforcement Authority; Legal Action on Validity of Plan of Conversion. –

(1)        Nothing in thisChapter limits the power of the Attorney General to seek a declaratory judgmentor to take other legal action to protect or enforce the rights of the public inthe corporation.

(2)        Any legal actionwith respect to the conversion must be filed in the Superior Court of WakeCounty. (1998‑3, s. 2.)