§ 58-19-15. Acquisition of control of or merger with domestic insurer.
§ 58‑19‑15. Acquisition of control of or merger with domestic insurer.
(a) No person otherthan the issuer shall make a tender offer for or a request or invitation fortenders of, or enter into any agreement to exchange securities, or seek toacquire, or acquire, in the open market or otherwise, any voting security of adomestic insurer, if, after the consummation thereof, the person would,directly or indirectly (or by conversion or by exercise of any right toacquire), be in control of the insurer, and no person shall enter into anagreement to merge with or otherwise to acquire control of a domestic insureror any person controlling a domestic insurer unless the offer, request,invitation, agreement, or acquisition is conditioned upon the approval of theCommissioner under this section. No such merger or other acquisition of controlis effective until a statement containing the information required by thissection has been filed with the Commissioner and all other provisions of thissection have been complied with and the merger or acquisition of control hasbeen approved by the Commissioner under this section. The statement containingthe information required by this section shall also be filed with the domesticinsurer when it is filed with the Commissioner.
(a1) For the purposes ofthis section a "domestic insurer" includes any person controlling adomestic insurer. Further, for the purposes of this section, "person"does not include any securities broker holding, in the usual and customary broker'sfunction, less than twenty percent (20%) of the voting securities of aninsurance company or of any person that controls an insurance company.
(a2) Any acquisition ofcontrol of a domestic insurer must be completed not later than 90 days afterthe date of the Commissioner's order approving the acquisition under thissection, unless the Commissioner grants an extension in writing on a showing ofgood cause for the delay. Any increase in a company's capital and surplusrequired under this Article as a result of the change of control of a domesticinsurer must be completed not later than 90 days after the date of theCommissioner's order approving the change of control and before the companywrites any new insurance business.
(a3) If the deadlines forcompletion in subsection (a2) of this section are not met, the person seekingto acquire control of the domestic insurer must resubmit the statement requiredby subsection (b) of this section, and the Commissioner may reconsider approvalof acquisition of control under this section.
(b) The statement to befiled with the Commissioner under subsection (a) of this section shall be madeunder oath or affirmation and shall contain the following information:
(1) The name and addressof each person by whom or on whose behalf the merger or other acquisition ofcontrol referred to in subsection (a) of this section is to be effected(hereinafter called "acquiring party"), and: (i) if such person is anindividual, his principal occupation and all offices and positions held during thepast five years, and any conviction of crimes other than minor trafficviolations during the past 10 years; (ii) if such person is not an individual,a report of the nature of its business operations during the past five years orfor such lesser period as such person and any predecessors thereof shall havebeen in existence; an informative description of the business intended to bedone by such person and such person's subsidiaries; and a list of allindividuals who are or who have been selected to become directors or executiveofficers of such person, or who perform or will perform functions appropriateto such positions. Such list shall include for each such individual theinformation required by sub‑subdivision (1)(i) of this subsection.
(2) The source, nature,and amount of the consideration used or to be used in effecting the merger orother acquisition of control; a description of any transaction wherein fundswere or are to be obtained for any such purpose, including any pledge of theinsurer's stock, or the stock of any of its subsidiaries or controllingaffiliates; and the identity of persons furnishing such consideration;provided, however, that where a source of such consideration is a loan made inthe lender's ordinary course of business, the identity of the lender shallremain confidential, if the person filing such statement so requests.
(3) Fully auditedfinancial information as to the earnings and financial condition of eachacquiring party for the preceding five fiscal years of each such acquiringparty, or for such lesser period as such acquiring party and any predecessorsthereof have been in existence; and similar unaudited information as of a datenot earlier than 90 days prior to the filing of the statement.
(4) Any plans orproposals that each acquiring party may have to liquidate such insurer, to sellits assets or merge or consolidate it with any person, or to make any othermaterial change in its business or corporate structure or management.
(5) The number of sharesof any security referred to in subsection (a) of this section that eachacquiring party proposes to acquire; the terms of the offer, request,invitation, agreement, or acquisition referred to in subsection (a) of thissection; and a statement as to the method by which the fairness of the proposalwas arrived at.
(6) The amount of eachclass of any security referred to in subsection (a) of this section that isbeneficially owned or concerning which there is a right to acquire beneficialownership by each acquiring party.
(7) A full descriptionof any contracts, arrangements, or understandings with respect to any securityreferred to in subsection (a) of this section in which any acquiring party isinvolved, including 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. Such description shall identify the persons with whomsuch contracts, arrangements, or understandings have been entered into.
(8) A description of thepurchase of any security referred to in subsection (a) of this section duringthe 12 calendar months preceding the filing of the statement, by any acquiringparty, including the dates of purchase, names of the purchasers, andconsideration paid or agreed to be paid therefor.
(9) A description of anyrecommendations to purchase any security referred to in subsection (a) of thissection made during the 12 calendar months preceding the filing of thestatement, by any acquiring party, or by anyone based upon interviews or at thesuggestion of such acquiring party.
(10) Copies of all tenderoffers for, requests, or invitations for tenders of, exchange offers for, andagreements to acquire or exchange any securities referred to in subsection (a)of this section, and any related additional soliciting material that has beendistributed.
(11) The term of anyagreement, contract, or understanding made with or proposed to be made with anythird party in connection with any acquisition of control of or merger with adomestic insurer, and the amount of any fees, commissions, or othercompensation to be paid to the third party with regard thereto.
(12) Such additionalinformation as the Commissioner may by rule prescribe as necessary orappropriate for the protection of policyholders of the insurer or in the publicinterest.
If the person required to filethe statement referred to in subsection (a) of this section is a partnership,limited partnership, syndicate, or other group, the Commissioner shall requirethat the information called for by subdivisions (1) through (12) of thissubsection be given with respect to each partner of such partnership or limitedpartnership, each member of such syndicate or group, and each person whocontrols such partner or member. If any such partner, member, or person is acorporation or the person required to file the statement referred to insubsection (a) of this section is a corporation, the Commissioner shall requirethat the information called for by subdivisions (1) through (12) of thissubsection be given with respect to such corporation, each officer and directorof such corporation, and each person who is, directly or indirectly, thebeneficial owner of more than ten percent (10%) of the outstanding votingsecurities of such corporation.
If any material change occursin the facts set forth in the statement filed with the Commissioner and sent tosuch insurer pursuant to this section, an amendment setting forth such change,together with copies of all documents and other material relevant to suchchange, shall be filed with the Commissioner and sent to such insurer by thefiler within two business days after the person learns of such change.
(c) If any offer, request,invitation, agreement, or acquisition referred to in subsection (a) of thissection is proposed to be made by means of a registration statement under theFederal Securities Act of 1933, in circumstances requiring the disclosure ofsimilar information under the Federal Securities Exchange Act of 1934, or underany State law requiring similar registration or disclosure, the person requiredto file the statement referred to in subsection (a) may utilize such documentsin furnishing the information called for by that statement.
(d) The Commissionershall approve any merger or other acquisition of control referred to insubsection (a) of this section unless, after a public hearing thereon, he findsany of the following:
(1) After the change ofcontrol, the domestic insurer referred to in subsection (a) of this sectionwould not be able to satisfy the requirements for the issuance of a license towrite the kind or kinds of insurance for which it is presently licensed.
(2) The effect of themerger or other acquisition of control would be substantially to lessencompetition in insurance or tend to create a monopoly in this State.
(3) The financialcondition of any acquiring party might jeopardize the financial stability ofthe insurer or prejudice the interest of its policyholders.
(4) Any plans orproposals that the acquiring party has to liquidate the insurer, sell itsassets or consolidate or merge it with any person, or to make any othermaterial change in its business or corporate structure or management, areunfair and unreasonable to policyholders of the insurer and not in the publicinterest.
(5) The competence,experience, and integrity of those persons who would control the operation ofthe insurer are such that it would not be in the interests of policyholders ofthe insurer and of the public to permit the merger or other acquisition ofcontrol.
(6) The acquisition islikely to be hazardous or prejudicial to the insurance‑buying public.
(e) The public hearingreferred to in subsection (d) of this section shall be held within 120 daysafter the statement required by subsection (a) of this section is filed, andthe Commissioner shall give at least 30 days notice of the hearing to theperson filing the statement, to the insurer, and to such other persons as maybe designated by the Commissioner. The Commissioner shall make a determinationas expeditiously as is reasonably practicable after the conclusion of thehearing. At the hearing, the person filing the statement, the insurer, anyperson to whom notice of hearing was sent, and any other person whose interestmay be affected by the hearing shall have the right to present evidence,examine and cross‑examine witnesses, and offer oral or written arguments;and in connection therewith shall be entitled to conduct discovery proceedingsat any time after the statement is filed with the Commissioner under thissection and in the same manner as is presently allowed in the superior courtsof this State. In connection with discovery proceedings authorized by this section,the Commissioner may issue such protective orders and other orders governingthe timing and scheduling of discovery proceedings as might otherwise have beenissued by a superior court of this State in connection with a civil proceeding.If any party fails to make reasonable and adequate response to discovery on atimely basis or fails to comply with any order of the Commissioner with respectto discovery, the Commissioner on the Commissioner's own motion or on motion ofany other party or person may order that the hearing be postponed, recessed,convened, or reconvened, as the case may be, following proper completion ofdiscovery and reasonable notice to the person filing the statement, to theinsurer, and to such other persons as may be designated by the Commissioner.
(f) The Commissionermay retain, at the acquiring person's expense, any attorneys, actuaries,economists, accountants, or other experts not otherwise a part of theCommissioner's staff as may be reasonably necessary to assist the Commissionerin reviewing the proposed acquisition of control.
(g) The expenses ofmailing any notices and other materials required by this section shall be borneby the person making the filing. As security for the payment of such expenses,such person shall file with the Commissioner an acceptable bond or otherdeposit in an amount to be determined by the Commissioner.
(h) The provisions ofthis section do not apply to any offer, request, invitation, agreement, oracquisition that the Commissioner by order exempts therefrom as (i) not havingbeen made or entered into for the purpose and not having the effect of changingor influencing the control of a domestic insurer, or (ii) as otherwise notcomprehended within the purposes of this section. Any acquisition of stock of aformer domestic mutual insurer by a parent company that occurs in connectionwith the conversion of a mutual insurer to a stock insurer under G.S. 58‑10‑10is not subject to this section, provided that no person acquires control of theparent company.
(i) The following areviolations of this section:
(1) The failure to fileany statement, amendment, or other material required to be filed pursuant tosubsection (a) or (b) of this section; or
(2) The effectuation orany attempt to effectuate an acquisition of control of or merger with adomestic insurer, unless the Commissioner has given his approval thereto.
(j) The courts of thisState are vested with jurisdiction over every person not resident, domiciled,or authorized to do business in this State who files a statement with theCommissioner under this section; and each such person is deemed to haveperformed acts equivalent to and constituting an appointment by such person ofthe Commissioner to be his true and lawful attorney upon whom may be served alllegal process in any action, suit, or proceeding arising out of violations ofthis section. Copies of all such process shall be handled in accordance withthe provisions of G.S. 58‑16‑30, 58‑16‑35, and 58‑16‑45.(1989, c. 722,s. 1; 1991, c. 681, ss. 31, 32; c. 720, s. 17; 1993, c. 452, ss. 26‑29;c. 504, s. 12; c. 553, s. 16; 1995, c. 517, ss. 11, 12; 2001‑223, s.16.5.)