CHAPTER 824. MERGER AND CONSOLIDATION OF STOCK INSURANCE CORPORATIONS - Texas Statutes

INSURANCE CODE

TITLE 6. ORGANIZATION OF INSURERS AND RELATED ENTITIES

SUBTITLE B. ORGANIZATION OF REGULATED ENTITIES

CHAPTER 824. MERGER AND CONSOLIDATION OF STOCK INSURANCE

CORPORATIONS

SUBCHAPTER A. AUTHORITY AND PROCEDURES

Sec. 824.001. AUTHORITY TO MERGE OR CONSOLIDATE. Two or more

insurance corporations that engage in a similar line of the

business of insurance may merge or consolidate under this

chapter.

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

2003.

Sec. 824.002. PROCEDURES; APPLICABILITY OF TEXAS BUSINESS

CORPORATION ACT. (a) To the extent that the provisions of the

Texas Business Corporation Act are not inconsistent with the

provisions of this code, the Texas Business Corporation Act

governs:

(1) the procedures for a merger or consolidation under this

chapter;

(2) the effect of a merger or consolidation under this chapter;

and

(3) the rights and duties of creditors, shareholders, and the

corporations that are involved in a merger or consolidation under

this chapter.

(b) To the extent that the Texas Business Corporation Act

applies under this chapter to insurance corporations, the

commissioner shall perform each duty, exercise each power, and

perform each act vested in, required of, or to be performed by

the secretary of state under the Texas Business Corporation Act.

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

2003.

Sec. 824.003. PROPOSED PLAN OF MERGER OR CONSOLIDATION; APPROVAL

OF DIRECTORS AND SHAREHOLDERS. (a) A proposed plan of merger or

consolidation must be approved by the boards of directors of the

corporations that are parties to the merger or consolidation.

(b) After approval by the boards of directors, the proposed plan

shall be submitted for approval to the shareholders of each

corporation that is a party to the plan at a separate regular or

special meeting of the shareholders called in the manner provided

by the bylaws of the respective corporations.

(c) A plan is approved on the affirmative vote of the holders of

two-thirds of the shares of the capital stock of each corporation

that is a party to the plan.

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

2003.

Sec. 824.004. FILING OF PROPOSED PLAN WITH COMMISSIONER. After

a proposed plan of merger or consolidation has been approved as

provided by Section 824.003, the plan shall be filed with the

commissioner.

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

2003.

Sec. 824.005. COMMISSIONER ACTION ON PLAN. (a) The

commissioner shall hold a hearing on a proposed plan of merger or

consolidation not later than the 15th day after the date on which

the plan is filed with the commissioner as required by Section

824.004.

(b) Not later than the 15th day after the hearing date, the

commissioner shall:

(1) give written approval of the plan to each insurance

corporation that is a party to the proposed merger or

consolidation; or

(2) disapprove the plan if the commissioner determines that the

plan:

(A) is contrary to law; or

(B) would not be in the best interests of the policyholders

affected by the plan and would substantially reduce the security

of and service to be rendered to policyholders of the insurance

corporation in this state or elsewhere.

(c) The commissioner may extend the period during which the

commissioner may affirmatively approve or disapprove the proposed

plan if representatives of the applicants for the proposed merger

or consolidation concur in that extension.

(d) If the commissioner disapproves a proposed plan, the

commissioner shall specify in detail the reasons for that

disapproval.

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

2003.

SUBCHAPTER B. EFFECTIVE DATE OF MERGER OR CONSOLIDATION

Sec. 824.051. EFFECTIVE DATE OF MERGER. A merger takes effect

on the date specified in the proposed plan of merger.

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

2003.

Sec. 824.052. EFFECTIVE DATE OF CONSOLIDATION. (a) A new

insurance corporation resulting from a plan of consolidation

shall be issued a charter and a certificate of authority on:

(1) submission of proper articles of incorporation to the

commissioner;

(2) approval by the commissioner in accordance with the

procedures required for the issuance of a new charter; and

(3) submission of proof that the new corporation has capital and

surplus at least equal to that of the corporation that is a party

to the consolidation and has the largest capital and surplus.

(b) A consolidation takes effect on the date of issuance of the

charter and certificate of authority under Subsection (a).

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

2003.

Sec. 824.053. APPROVAL OF MERGER OR CONSOLIDATION AFFECTING

FOREIGN CORPORATION; EFFECTIVE DATE. Notwithstanding Section

824.051 or 824.052, a merger or consolidation involving a

corporation organized under the laws of another state does not

take effect until the merger or consolidation is approved by the

proper official of the domiciliary state, if that approval is

required.

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

2003.

SUBCHAPTER C. EFFECT OF MERGER OR CONSOLIDATION

Sec. 824.101. EFFECT OF MERGER OR CONSOLIDATION ON OUTSTANDING

INSURANCE POLICIES. (a) A new or surviving corporation

resulting from a merger or consolidation shall assume each

insurance policy outstanding against each insurance corporation

that merges or consolidates on the same terms and under the same

conditions as if the policy had continued in force through the

original corporation.

(b) The new or surviving insurance corporation shall implement

the terms of the policy.

(c) The new or surviving insurance corporation is entitled to:

(1) all rights and privileges under the policy; and

(2) all reserves that accumulated on the policy before the

merger or consolidation.

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

2003.

Sec. 824.102. EFFECT OF MERGER OR CONSOLIDATION ON CERTAIN

INVESTMENTS. (a) This section applies to each investment of an

affected corporation, including an investment in real property,

that:

(1) was authorized as a proper asset, as of the date on which

the investment was made and under the laws of the state in which

the insurance corporation was organized, for investment of funds

of an insurance corporation; and

(2) is taken over by the new or surviving corporation under the

terms of the merger or consolidation.

(b) On the merger or consolidation of two or more insurance

corporations under this chapter, an investment of the affected

corporations described by Subsection (a) is a proper asset under

the laws of this state of the new or surviving corporation if the

investment is:

(1) approved by the commissioner; and

(2) taken over on terms satisfactory to the commissioner.

(c) A new or surviving corporation that acquires, under the

terms of the merger or consolidation, real property that exceeds

the amount of real property permitted by the applicable sections

of this code relating to owning or holding real property must

sell and dispose of the excess real property:

(1) within the period specified by those sections; or

(2) within a longer period if the corporation obtains a

certificate from the commissioner:

(A) stating that the interests of the corporation will

materially suffer by the forced sale of the affected real

property; and

(B) specifying the longer period for the sale of the excess real

property.

(d) This section does not preclude the designation and use of

the acquired excess real property as branch offices in accordance

with this code.

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

2003.

Sec. 824.103. RETIREMENT AND CANCELLATION OF TREASURY SHARES.

(a) After a merger or consolidation is completed, any shares of

the new or surviving corporation acquired by that corporation as

a result of distribution of shares to the shareholders of another

corporation that is merged or consolidated or as a result of

purchase of shares of dissenting shareholders, may be held as

treasury shares until the first anniversary of the date on which

the merger or consolidation takes effect.

(b) After the period during which shares described by Subsection

(a) are held as treasury shares, the corporation shall retire and

cancel those shares by proper amendments to its charter if the

shares have not previously been reissued.

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

2003.

Sec. 824.104. EFFECT ON ANTITRUST LAWS. This chapter does not

affect in any manner the antitrust laws of this state.

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

2003.

SUBCHAPTER D. MERGER OR CONSOLIDATION OF LIFE INSURANCE

CORPORATIONS

Sec. 824.151. PURCHASE OF OUTSTANDING SHARES BY LIFE INSURANCE

CORPORATION. (a) A life insurance corporation may purchase or

contract to purchase all or part of the outstanding shares of

another life insurance corporation for purposes of merger or

consolidation.

(b) Except as provided by Section 824.152, the provisions of

Subchapter D, Chapter 425, that limit investments in the

corporate stock of another corporation do not apply to a purchase

made under this section.

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

2003.

Amended by:

Acts 2007, 80th Leg., R.S., Ch.

730, Sec. 2E.013, eff. April 1, 2009.

Sec. 824.152. LIMITATIONS ON PURCHASE OF OUTSTANDING SHARES BY

LIFE INSURANCE CORPORATION. (a) A purchase or contract to

purchase under Section 824.151 is subject to this section.

(b) The intention to merge or consolidate must be evidenced by a

resolution adopted by the board of directors of the purchasing

corporation on or before the purchase of the shares or the

execution of a contract to purchase the shares.

(c) The purchasing corporation shall obtain or seek to obtain at

least the number of shares of the other insurance corporation

necessary to vote an approval of the merger or consolidation

under the laws of the state in which the other insurance

corporation is organized, by one or more of the following means:

(1) initially purchasing or contracting to purchase the shares;

or

(2) offering to purchase, making a tender offer for, requesting

or inviting tenders of, or otherwise seeking to acquire the

shares in the open market or otherwise.

(d) A purchase, offer to purchase, tender offer, request to

purchase, or invitation to purchase shares in excess of the

limits imposed under Subchapter D, Chapter 425, may not be made

until it is filed with and approved by the commissioner in

accordance with Chapter 823.

(e) Following the earlier of the date of the contract to

purchase the shares or the date of the commissioner's approval of

the purchase, offer to purchase, tender offer, or request or an

invitation to purchase the shares, the corporation the shares of

which are being purchased may not purchase or contract to

purchase any of its own shares as treasury shares, issue or

contract to issue any of its authorized but unissued shares, or

make any investments in or loans to the purchasing corporation or

any of its affiliates unless the investment or loan is otherwise

authorized and approved in advance by the commissioner under

Chapter 823.

(f) The merger or consolidation must take effect on or before

December 31 of the second year after the earlier of the year in

which the initial purchase of the shares is made or the year in

which the initial contract to purchase is executed unless the

commissioner for good cause shown extends that period.

(g) If the merger or consolidation does not take effect within

the period finally determined and extended by the commissioner,

the purchasing corporation must sell or otherwise dispose of the

purchased shares that exceed the investment limitations imposed

under Subchapter D, Chapter 425, within six months of the final

effective date.

(h) Amounts actually paid by the purchasing corporation for the

purchase of shares acquired or obtained under this subchapter may

not include the minimum capital, minimum surplus, and policy

reserves required by law for the purchasing corporation.

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

2003.

Amended by:

Acts 2007, 80th Leg., R.S., Ch.

730, Sec. 2E.014, eff. April 1, 2009.