§ 27-35-2 - Acquisition of control of or merger with domestic insurer. - Rhode Island Statutes

SECTION 27-35-2

   § 27-35-2  Acquisition of control of ormerger with domestic insurer. – (a) Filing Requirements. (1)  No person other than the issuershall make a tender offer for or a request or invitation for tenders of, orenter into any agreement to exchange securities for, seek to acquire, oracquire, in the open market or otherwise, any voting security of a domesticinsurer if, after the consummation of the agreement, the person would, directlyor indirectly, or by conversion or by exercise of any right to acquire, be incontrol of the insurer, and no person shall enter into an agreement to mergewith or otherwise to acquire control of a domestic insurer unless, at the timethe offer, request, or invitation is made or the agreement is entered into, orprior to the acquisition of the securities if no offer or agreement isinvolved, the person has filed with the commissioner and has sent to theinsurer, and, to the extent permitted by applicable federal laws, rules, andregulations, the insurer has sent to its shareholders, a statement containingthe information required by this section and the offer, request, invitation,agreement or acquisition has been approved by the commissioner in the mannerprescribed in subsection (d) of this section;

   (2) For the purposes of this section, a domestic insurerincludes any other person controlling a domestic insurer unless the otherperson is either directly or through its affiliates primarily engaged inbusiness other than the business of insurance.

   (b) Content of Statement. (1)  The statementto be filed with the commissioner under this section shall be made under oathor affirmation and shall contain the following information:

   (i) The name and address of each person by whom or on whosebehalf the merger or other acquisition of control referred to in subsection (a)of this section is to be effected, called "acquiring party" in this section,and:

   (A) If that person is an individual, his or her principaloccupation and all offices and positions held during the past five (5) years,and any conviction for crimes other than minor traffic violations during thepast ten (10) years; or

   (B) If that person is not an individual, a report of thenature of its business operations during the past five (5) years or for thelesser period as that person and any predecessors of that person shall havebeen in existence, an informative description of the business intended to bedone by the person and the person's subsidiaries, and a list of all individualswho are or who have been selected to become directors or executive officers ofthe person, or who perform or will perform functions appropriate to thosepositions. The list shall include for each individual the information requiredby this subdivision;

   (ii) The source, nature, and amount of the consideration usedor to be used in affecting the merger or other acquisition of control, adescription of any transaction in which funds were or are to be obtained forthe purpose, and the identity of persons furnishing the consideration;provided, that where a source of the consideration is a loan made in thelender's ordinary course of business, the identity of the lender shall remainconfidential, if the person filing the statement so requests;

   (iii) Fully audited financial information as to the earningsand financial condition of each acquiring party for the preceding five (5)years of each acquiring party, or for any lesser period as the acquiring partyand any predecessors of it shall have been in existence, and similar unauditedinformation as of a date not earlier than ninety (90) days prior to the filingof the statement;

   (iv) Any plans or proposals which each acquiring party mayhave to liquidate the insurer, to sell its assets or merge or consolidate itwith any person, or to make any other material change in its business orcorporate structure or management;

   (v) The number of shares of any security referred to insubsection (a) of this section which each acquiring party proposes to acquire,and the terms of the offer, request, invitation, agreement, or acquisitionreferred to in subsection (a) of this section, and a statement as to the methodby which the fairness of the proposal was arrived at;

   (vi) The amount of each class of any security referred to insubsection (a) of this section that is beneficially owned or concerning whichthere is a right to acquire beneficial ownership by each acquiring party;

   (vii) A full description of any contracts, arrangements, orunderstanding with respect to any security referred to in subsection (a) ofthis section in which any acquiring party is involved, including, but notlimited to the transfer of any of the securities, joint ventures, loan oroption arrangements, puts or calls, guarantees of loans, guarantees againstloss or guarantees of profits, division of losses or profits, or the giving orwithholding of proxies. The description shall identify the persons with whomthe contracts, arrangements, or understandings have been entered into;

   (viii) A description of the purchase of any security referredto in subsection (a) of this section during the twelve (12) calendar monthspreceding the filing of the statement by any acquiring party, including thedates of purchase, names of the purchasers, and consideration paid or agreed tobe paid for the purchase;

   (ix) A description of any recommendations to purchase anysecurity referred to in subsection (a) of this section made during the twelve(12) calendar months preceding the filing of the statement by any acquiringparty, or by anyone based upon interviews or at the suggestion of the acquiringparty;

   (x) Copies of all tender offers for, requests or invitationsfor tenders of, exchange offers for, and agreements to acquire or exchange anysecurities referred to in subsection (a) of this section, and, if distributed,of additional soliciting material relating to the offer, request, or agreement;

   (xi) The terms of any agreement, contract, or understandingmade with any broker-dealer as to solicitation of securities referred to insubsection (a) of this section for tender, and the amount of any fees,commissions, or other compensation to be paid to broker-dealers with regard tothe agreement, contract, or understanding; and

   (xii) Any additional information that the commissioner may byrule or regulation prescribe as necessary or appropriate for the protection ofpolicyholders and securityholders of the insurer or in the public interest;

   (2) If the person required to file the statement referred toin subsection (a) of this section is a partnership, limited partnership,syndicate, or other group, the commissioner may require that the informationcalled for by paragraphs (1)(i) – (1)(xii) of this subsection shall begiven with respect to each partner of the partnership, each member of thesyndicate or group, and each person who controls the partner or member. If anypartner, member, or person is a corporation, or the person required to file thestatement referred to in subsection (a) of this section is a corporation, thecommissioner may require that the information called for by paragraphs (1)(i)– (1)(xii) of this subsection shall be given with respect to thecorporation, and each person who is directly or indirectly the beneficial ownerof more than ten percent (10%) of the outstanding voting securities of thecorporation;

   (3) If any material change occurs in the facts set forth inthe statement filed with the commissioner and sent to the insurer pursuant tothis section, an amendment setting forth the change, together with copies ofall documents and other material relevant to the change, shall be filed withthe commissioner and sent to the insurer within two (2) business days after theperson learns of the change. The insurer shall send the amendment to itsshareholders.

   (c) Alternative filing materials. If any offer,request, invitation, agreement or acquisition referred to in subsection (a) ofthis section is proposed to be made by means of a registration statement under15 U.S.C. §§ 77a et seq. or in circumstances requiring the disclosureof similar information under 15 U.S.C. §§ 78a et seq. or under astate law requiring similar registration or disclosure, the person required tofile the statement referred to in subsection (a) of this section may utilizethe documents in furnishing the information called for by that statement.

   (d) Approval by commissioner; hearings.(1)  The commissioner shall approve any merger or other acquisitionof control referred to in subsection (a) of this section unless, after a publichearing held on the merger or acquisition, at the discretion of thecommissioner or upon the request of the acquiring party, the insurer or anyother interested party, he or she finds that any of the following conditionsexist:

   (i) After the change of control the domestic insurer referredto in subsection (a) of this section would not be able to satisfy therequirements for the issuance of a license to write the line or lines ofinsurance for which it is presently authorized;

   (ii) The effect of the merger or other acquisition of controlwould be substantially to lessen competition in insurance in this state or tendto create a monopoly in insurance;

   (iii) The financial condition of any acquiring party is suchas might jeopardize the financial stability of the insurer, or prejudice theinterest of its policyholders or the interests of any remaining securityholderswho are unaffiliated with the acquiring party;

   (iv) The terms of the offer, request, invitation, agreementor acquisition referred to in subsection (a) of this section are unfair andunreasonable to the securityholders of the insurer;

   (v) The plans or proposals which the acquiring party has toliquidate the insurer, sell its assets or consolidate or merge it with anyperson, or to make any other material change in its business or corporatestructure or management, are unfair and unreasonable to policyholders of theinsurer and not in the public interest; or

   (vi) The competence, experience, and integrity of thosepersons who would control the operation of the insurer are such that it wouldnot be in the interest of policyholders of the insurer and of the public topermit the merger or other acquisition of control;

   (2) The public hearing referred to in subdivision (1) of thissubsection, if required, shall be held within sixty (60) days after thestatement required by subsection (a) of this section is filed, and at leasttwenty (20) days notice of the public hearing shall be given by thecommissioner to the person filing the statement. Not less than seven (7) daysnotice of the public hearing shall be given by the person filing the statementto the insurer and to any other persons that may be designated by thecommissioner. The insurer shall give notice of the public hearing to itssecurityholders. The commissioner shall make a determination within thirty (30)days after the conclusion of the hearing. At the hearing, the person filing thestatement, the insurer, any person to whom notice of hearing was sent, and anyother person whose interests may be affected by it shall have the right topresent evidence, examine and cross examine witnesses, and offer oral andwritten arguments and in connection with the hearing shall be entitled toconduct discovery proceedings in the same manner as is presently allowed in thesuperior court of this state. All discovery proceedings shall be concluded notlater than three (3) days prior to the commencement of the public hearing;

   (3) The commissioner may retain at the acquiring person'sexpense any attorneys, actuaries, accountants and other experts not otherwise apart of the commissioner's staff as may be reasonably necessary to assist thecommissioner in reviewing the proposed acquisition of control.

   (e) Mailings to shareholders; payment of expenses. Tothe extent permitted by applicable federal laws, rules and regulations, allstatements, amendments, or other material filed pursuant to subsection (a) or(b) of this section, and all notices of public hearings held pursuant tosubsection (d) of this section, shall be mailed by the insurer to itsshareholders within five (5) business days after the insurer has received thestatements, amendments, other material, or notices. The expenses of mailingshall be borne by the person making the filing. As security for the payment ofthe expenses, the person shall file with the commissioner an acceptable bond orother deposit in an amount to be determined by the commissioner.

   (f) Exemptions. The provisions of this section shallnot apply to any offer, request, invitation, agreement or acquisition which thecommissioner by order shall exempt from this section as: (1) not having beenmade or entered into for the purpose and not having the effect of changing orinfluencing the control of a domestic insurer, or (2) as not comprehendedwithin the purposes of this section.

   (g) Violations. The following shall be violations ofthis section:

   (1) The failure to file any statement, amendment, or othermaterial required to be filed pursuant to subsection (a) or (b) of thissection; or

   (2) The effectuation or any attempt to effectuate anacquisition of control of, or merger with, a domestic insurer unless thecommissioner has given his or her approval to the acquisition or merger.

   (h) Jurisdiction; consent to service of process. Thecourts of this state are vested with jurisdiction over every person notresident, domiciled, or authorized to do business in this state who files astatement with the commissioner under this section, and over all actionsinvolving the person arising out of violations of this section, and that personshall be deemed to have performed acts equivalent to and constituting anappointment by the person of the commissioner to be his true and lawfulattorney upon whom may be served all lawful process in any action, suit, orproceeding arising out of violations of this section. Copies of all lawfulprocess shall be served on the commissioner and transmitted by registered orcertified mail by the commissioner to the person at his or her last knownaddress.