§ 27-1-38 - Acquisition of minority interests in subsidiary insurers. - Rhode Island Statutes

SECTION 27-1-38

   § 27-1-38  Acquisition of minorityinterests in subsidiary insurers. – (a) Any parent corporation directly or indirectly owning at least ninety-fivepercent (95%) of the aggregate issued and outstanding shares of all classes ofvoting stock of an insurance company created by special act of the generalassembly may, pursuant to a plan for acquisition of minority interests in theinsurance company adopted pursuant to this section, acquire all of theremaining issued and outstanding shares of voting stock of the insurancecompany, by exchange of stock, other securities, cash, other consideration, orany combination of these.

   (b) The board of directors, trustees, or other governing bodyof the parent corporation may adopt a plan for the acquisition of minorityinterests in a subsidiary insurer. Every plan shall set forth:

   (1) The name of the company whose shares are to be acquired;

   (2) The total number of issued and outstanding shares of eachclass of voting stock of the company, the number of its shares owned by theparent corporation and, if either of these is subject to change prior to theeffective date of acquisition, the manner in which any change may occur;

   (3) The terms and conditions of the plan, including themanner and basis of exchanging the shares to be acquired for shares or othersecurities of the parent corporation, for cash, other consideration, or anycombination of these, the proposed effective date of acquisition, and astatement clearly describing the rights of dissenting shareholders to demandappraisal;

   (4) If the parent corporation that has adopted the plan isneither a domestic corporation nor an authorized insurer, its consent to theenforcement against it in this state of the rights of shareholders pursuant tothe plan, and a designation of the insurance commissioner as the agent uponwhom process may be served against the parent corporation in the same manner asif the parent corporation were a foreign insurance company licensed to dobusiness in this state; and

   (5) The other provisions with respect to the plan that theboard of directors, trustees or other governing body deems necessary ordesirable, or which the director of the department of business regulation mayprescribe.

   (c) Upon adoption of the plan, it shall be duly executed bythe president and attested by the secretary, or the executive officerscorresponding to the president and the secretary, under the corporate seal ofthe parent corporation which has adopted the plan. A certified copy of theplan, together with a certificate of its adoption subscribed by the officersand affirmed by them as true under the penalties of perjury and under the sealof the parent corporation, shall be submitted to the director of businessregulation for his or her approval. The director of business regulation shallconsider the plan and, if satisfied that it complies with this section, is fairand equitable and not inconsistent with law, the director of businessregulation shall approve the plan. The director of business regulation shallapprove, modify, or disapprove the plan within sixty (60) days of itssubmission to him or her. If the director of business regulation modifies ordisapproves the plan, notification of his or her modification or disapproval,assigning the reasons for that action, shall be given in writing by him or herto the parent corporation that submitted the plan. No plan shall take effectunless the approval of the director of the department of business regulationhas been obtained.

   (d) If the director of business regulation approves the planas submitted or modified, the parent corporation which has adopted the planshall deliver to each person who as of the date of delivery is a holder ofrecord of stock to be acquired pursuant to the plan a copy of the plan, or asummary of the plan approved by the director of the department of businessregulation in person or by depositing a copy or a summary of the plan in thepost office, postage prepaid, addressed to the shareholder at the shareholder'saddress of record. On or before the date of acquisition proposed in the plan,the parent corporation which has adopted the plan shall file with the directorof the department of business regulation a certificate, executed by itspresident and attested by its secretary, or the executive officerscorresponding to the president and the secretary, and subscribed by theofficers and affirmed by them as true under the penalties of perjury and underthe seal of the parent corporation, attesting to compliance with thissubsection.

   (e) Upon compliance with this section, ownership of theshares to be acquired pursuant to the plan shall vest in the parent corporationwhich has adopted the plan on the date of acquisition proposed in the planwhether or not the certificates for the shares have been surrendered forexchange. The parent corporation shall be entitled to have new certificatesregistered in its name. Shareholders whose shares have been acquired in thismanner shall after this retain only the right either to receive theconsideration to be paid in exchange for their shares pursuant to the plan orto demand appraisal pursuant to subsection (g).

   (f) Neither the right granted by this section nor theexercise of that right by a parent corporation shall preclude the exercise bythe parent corporation of any other rights it may have under any otherapplicable law.

   (g) Any shareholder of an insurance company whose shares areto be acquired by a parent corporation pursuant to a plan for the acquisitionof minority interests adopted under this section shall have the right todissent from the plan.

   (2) A shareholder may not dissent as to less than all of theshares registered in the shareholder's name which are owned beneficially by theshareholder. A nominee or fiduciary may not dissent on behalf of any beneficialowner as to less than all of the shares of the owner registered in the name ofthe nominee or fiduciary.

   (3) Any shareholder electing to exercise the right of dissentshall file with the parent corporation a written demand for payment of the fairvalue of the shareholder's shares within fifteen (15) days after the plan shallhave been mailed to the shareholder.

   (4) Any shareholder failing to make demand within the fifteen(15) day period shall be bound by the terms of the plan. Any shareholder makinga demand shall be entitled only to payment as provided in this section andshall not be entitled to vote or to exercise any other rights of a shareholder.

   (5) No demand may be withdrawn unless the parent corporationconsents. If, the demand shall be withdrawn upon consent, or if the plan shallbe abandoned, or if no demand or petition for the determination of fair valueby a court shall have been made or filed within the time provided in thissection, or if a court of competent jurisdiction shall determine that theshareholder is not entitled to the relief provided by this section, then theright of the shareholder to be paid the fair value of his or her shares shallcease and his or her status as a shareholder shall be restored, withoutprejudice to any corporate proceedings which may have been taken during theinterim.

   (6) Within ten (10) days after the effective date of theacquisition under the plan, the parent corporation shall make a written offerto each shareholder who has made demand to pay for the shares at a specifiedprice deemed by the corporation to be fair value of the shares. The notice andoffer shall be accompanied by a balance sheet of the insurance company as ofthe latest available date and not more than twelve (12) months prior to themaking of the offer, and a profit and loss statement of the insurance companyfor the twelve (12) month period ended on the date of the balance sheet.

   (7) If within thirty (30) days after the effective date ofthe acquisition under the plan the fair value of the shares is agreed uponbetween any dissenting shareholder and the parent corporation, payment for theshares shall be made within ninety (90) days after the effective date of theacquisition under the plan upon surrender of the certificate or certificatesrepresenting the shares. Upon payment of the agreed value, the dissentingshareholder shall cease to have any interest in the shares.

   (8) If within the period of thirty (30) days a dissentingshareholder and the parent corporation do not agree as provided in subdivision(7) of this subsection, then the parent corporation shall file a petition inany court of competent jurisdiction in the county in this state where theinsurance company maintains its principal office praying that the fair value ofthe shares be found and determined; provided, that the parent corporation shallhave received a written request for the filing from any dissenting shareholdergiven within sixty (60) days after the effective date of the acquisition underthe plan, and the parent corporation shall file the petition within thirty (30)days after receipt of the request. If no request is made, the parentcorporation may at its election file a petition at any time within sixty (60)days after the effective date of the acquisition date of the plan. If theparent corporation shall fail to institute the proceeding, any dissentingshareholder may do so in the name of the parent corporation.

   (9) The subsidiary insurance company shall join as a partypetitioner in the proceeding, and in the event that the insurance company shallfail to do so, the court upon the motion of any party shall join the insurancecompany as a party petitioner.

   (10) All dissenting shareholders, wherever residing, shall bemade parties to the proceeding as an action against their shares quasi in rem.A copy of the petition shall be served on each dissenting shareholder who is aresident of this state and shall be served by registered or certified mail oneach dissenting shareholder who is a nonresident. Service on nonresidents shallalso be made by publication as provided by law. The jurisdiction of the courtshall be plenary and exclusive. All shareholders who are parties to theproceeding shall be entitled to judgment against the parent corporation and thesubsidiary insurance company jointly and severally for the amount of the fairvalue of their shares, and execution shall issue upon the motion of any partyrespondent against either or both of the parent corporation and the subsidiaryinsurance company and their respective assets, and any execution so issuedagainst the insurance company shall have priority over the claims of any othershareholder.

   (11) The court may, if it elects, appoint one or more personsas appraisers to receive evidence and recommend a decision on the question offair value. The appraisers shall have the power and authority specified in theorder of their appointment or an amendment of the order. The judgment shall bepayable only upon and concurrently with the surrender to the parent corporationof the certificate or certificates representing the shares. Upon payment of thejudgment, the dissenting shareholder shall cease to have any interest in theshares.

   (12) The judgment shall include an allowance for interest ata rate that the court may find to be fair and equitable in all thecircumstances, from the date of acquisition proposed in the plan to the date ofpayment.

   (13) The costs and expenses of any proceeding shall bedetermined by the court and shall be assessed against the parent corporation,but all or any part of the costs and expenses may be apportioned and assessedas the court may deem equitable against any or all of the dissentingshareholders who are parties to the proceeding to whom the parent corporationshall have made an offer to pay for the shares, if the court shall find thatthe action of the shareholders in failing to accept the offer was arbitrary orvexatious or not in good faith. The expenses shall include reasonablecompensation for and reasonable expenses of the counsel for any expertsemployed by any party; but if the fair value of the share as determinedmaterially exceeds the amount which the parent corporation offered to pay, orif no offer was made, the court in its discretion may award to any shareholderwho is a party to the proceeding the sum as the court may determine to bereasonable compensation to any expert or experts employed by the shareholder inthe proceeding.

   (14) Within twenty (20) days after demanding payment for hisor her shares, each shareholder demanding payment shall submit the certificateor certificates representing his or her shares to the parent corporation fornotation on the certificate or certificates that the demand has been made. Theshareholder's failure to do this shall, at the option of the parentcorporation, terminate the shareholder's rights under this subsection unless acourt of competent jurisdiction, for good and sufficient cause shown, otherwisedirects. If shares represented by a certificate on which notation has been madein this manner shall be transferred, each new certificate issued shall bearsimilar notation, together with the name of the original dissenting holder ofthe shares, and a transferee of the shares shall acquire by transfer no rightsin the insurance company other than those which the original dissentingshareholder had after making demand for payment of the fair value of the shares.