31A-5-505 - Conversion of a domestic stock corporation into a mutual.
31A-5-505. Conversion of a domestic stock corporation into a mutual.
A domestic stock corporation may be converted into a domestic mutual as follows:
(1) The board shall adopt a plan of conversion. After adopting the plan, no additionalshares of capital stock may be issued, except that the board may continue to issue stock optionsunder existing contracts, and holders of outstanding options may continue to exercise theseoptions until the conversion is completed under Subsection (5).
(2) (a) The plan of conversion shall provide for the corporation's purchase of all of itsoutstanding capital stock. The purchase price shall either be specified in the plan or bedetermined under a formula specified in the plan, for cash, specified debt securities to be issuedby the mutual corporation, or both. All holders of capital stock of the same class have the samerights under the plan. Shareholders may be given an election to take all or a portion of the pricein the specified debt securities. Debt securities may be of any class authorized for mutualcorporations under Subsection 31A-5-305(2).
(b) The plan shall provide an equitable procedure for valuing contractual obligations ofthe stock corporation, including those relating to stock options, which options terminate on thedate of conversion and are subject to being extinguished under Subsection (5)(b).
(3) No conversion may be effected unless the plan of conversion is approved by thecommissioner under Chapter 16.
(4) After the commissioner approves the plan of conversion, it shall be submitted to theshareholders for approval by the affirmative vote of a majority of each class of shares entitled tovote. Only shareholders of record on the date of the board's action under Subsection (1) mayvote.
(5) (a) If the shareholders approve the plan of conversion under Subsection (4), thecommissioner shall issue a new certificate of authority and the board shall then implement theplan of conversion. The issuance of the certificate is the conversion of the corporation to amutual. The corporation is no longer a stock corporation. The mutual is considered as havingbeen organized at the time the converted stock corporation was organized.
(b) Any contractual obligation inconsistent with the nature of a mutual, including anyobligation to issue or to redeem stock options, terminates upon the conversion under Subsection(5)(a), without compensation other than provided under Subsection (2)(b), unless the obligationwas legally binding before July 1, 1986.
(6) The corporation may not pay any person, in connection with the proposed conversion,compensation other than regular salaries to existing personnel and compensation for clerical andmailing expenses. With the commissioner's approval, the corporation in connection with theproposed conversion may pay reasonable printing costs and legal and other professional fees forservices actually rendered. All expenses of the conversion, including the expenses incurred bythe commissioner and the prorated salaries and fringe benefits of any Insurance Department staffmembers involved, shall be paid by the corporation being converted.
Enacted by Chapter 242, 1985 General Session