CHAPTER 805. DIRECTORS, OFFICERS, AND OTHER INTERESTED PERSONS - Texas Statutes

INSURANCE CODE

TITLE 6. ORGANIZATION OF INSURERS AND RELATED ENTITIES

SUBTITLE A. GENERAL PROVISIONS APPLICABLE TO INSURERS AND RELATED

ENTITIES

CHAPTER 805. DIRECTORS, OFFICERS, AND OTHER INTERESTED PERSONS

SUBCHAPTER A. ACTIVITIES OF DIRECTORS, OFFICERS, AND SHAREHOLDERS

Sec. 805.001. DEFINITIONS. In this subchapter:

(1) "Major shareholder" means an individual, corporation,

partnership, association, joint-stock company, business trust, or

unincorporated organization that is directly or indirectly the

beneficial owner of more than 10 percent of any class of an

equity security of an insurer.

(2) "Subsidiary" means a corporation:

(A) of which at least 50 percent of any class of an equity

security is owned by an insurer; or

(B) that is managed, directly or indirectly controlled, or

subject to control by an insurer.

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,

2003.

Sec. 805.002. APPLICABILITY OF SUBCHAPTER. (a) This subchapter

applies to any insurer, including a:

(1) capital stock company;

(2) reciprocal or interinsurance exchange;

(3) Lloyd's plan;

(4) fraternal benefit society;

(5) mutual company, including a mutual assessment company;

(6) local mutual aid association;

(7) burial association;

(8) county mutual insurance company;

(9) farm mutual insurance company;

(10) fidelity, guaranty, or surety company;

(11) mutual life insurance company;

(12) mutual insurance company other than a mutual life insurance

company;

(13) stipulated premium company;

(14) title insurance company; and

(15) any other insurance company engaged in the business of

insurance in or organized under the laws of this state or

otherwise regulated under this code.

(b) A provision of this code limiting regulation under this code

does not limit the application of this subchapter.

(c) This subchapter controls if there is ambiguity or a conflict

between this subchapter and another provision of this code.

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,

2003.

Sec. 805.003. PROHIBITED ACTIVITIES. (a) A director, officer,

or major shareholder of an insurer may not:

(1) except as provided by this subchapter, directly, indirectly,

or through a substantial interest in another corporation, firm,

or business unit receive money or another thing of value for

negotiating, procuring, recommending, or aiding in a purchase,

sale, or exchange of property or a loan from the insurer or its

subsidiary;

(2) directly, indirectly, or through a substantial interest in

another corporation, firm, or business unit have a pecuniary

interest in a purchase, sale, exchange, or loan described by

Subdivision (1) as a principal, co-principal, agent, or

beneficiary; or

(3) directly or indirectly accept a loan or guarantee described

by Subsection (b).

(b) An insurer may not directly, indirectly, or through its

subsidiary make a loan to or guarantee the financial obligation

of a director, officer, or major shareholder of an insurer.

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,

2003.

Sec. 805.004. ACTIVITIES NOT PROHIBITED. This subchapter does

not prohibit:

(1) a director, officer, or major shareholder of an insurer

from:

(A) becoming a policyholder of the insurer and exercising the

usual rights of a policyholder;

(B) participating as beneficiary in a pension plan, deferred

compensation plan, profit-sharing or bonus plan, stock option

plan, or similar plan adopted by the insurer and for which the

director, officer, or major shareholder may be eligible under the

terms of the plan;

(C) receiving a salary, bonus, or other remuneration for a

service rendered to the insurer as an employee of the insurer and

not in violation of another provision of this code; or

(D) entering into an arms-length transaction with the insurer

if:

(i) the transaction is not prohibited by another statute; and

(ii) the commissioner approves the transaction before the

transaction is made;

(2) a director of an insurer from:

(A) performing professional services not required of a director

by law; or

(B) receiving director's fees or reimbursement for an expense

incurred in the performance of a duty as a director;

(3) a transaction within an insurance holding company system by

an insurer with its holding company, subsidiary, or affiliate

that:

(A) is not prohibited by law;

(B) meets the test of being fair and proper; and

(C) is regulated by another statute;

(4) a transaction or arrangement that:

(A) is not prohibited by law; and

(B) meets the test of being fair and proper as prescribed by

rules adopted by the commissioner; or

(5) the approval and payment of lawful dividends to

policyholders and shareholders.

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,

2003.

SUBCHAPTER B. CERTAIN PAYMENTS BY DIRECTORS, OFFICERS, AND

TRUSTEES

Sec. 805.021. LIABILITY FOR FEE AND TAX PAYMENTS. (a) In this

section, "fee or tax" includes a license, excise, privilege,

premium, or occupation fee or tax.

(b) A director, officer, or trustee of an insurer is not

personally liable, in complying with the law, for the payment of

or for the determination not to contest the payment of a fee or

tax to a state or a political subdivision of a state that the

board of directors or trustees considers to be in the corporate

interest of the insurer.

(c) Subsection (b) does not apply if, before the payment of the

fee or tax, the state court of final appellate jurisdiction or

the United States Supreme Court expressly holds that the law

imposing the fee or tax is invalid.

(d) This section does not directly or indirectly limit,

minimize, or interpret the rights and powers of an insurer or the

directors, officers, or trustees of an insurer.

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,

2003.