Michigan Laws 500.5511 – Division effectiveness; allocation and distribution of assets and liabilities
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Terms Used In Michigan Laws 500.5511
- Annuity: A periodic (usually annual) payment of a fixed sum of money for either the life of the recipient or for a fixed number of years. A series of payments under a contract from an insurance company, a trust company, or an individual. Annuity payments are made at regular intervals over a period of more than one full year.
- Appraisal: A determination of property value.
- Assets: (1) The property comprising the estate of a deceased person, or (2) the property in a trust account.
- Assets: means property, whether real, personal, mixed, tangible, or intangible, and any right or interest in the property, including all rights under contracts and other agreements. See Michigan Laws 500.5500
- Capital: means the capital stock component of statutory surplus, as defined in the National Association of Insurance Commissioners Accounting Practices and Procedures Manual, version effective January 1, 2001, and subsequent revisions. See Michigan Laws 500.5500
- Contract: A legal written agreement that becomes binding when signed.
- Department: means the department of insurance and financial services. See Michigan Laws 500.102
- Director: means , unless the context clearly implies a different meaning, the director of the department. See Michigan Laws 500.102
- Dividing insurer: means a domestic stock insurer that approves a plan of division pursuant to section 5505. See Michigan Laws 500.5500
- division: means the act by operation of law by which a domestic stock insurer divides into 2 or more resulting insurers in accordance with a plan of division and this chapter. See Michigan Laws 500.5500
- Domestic stock insurer: means a domestic stock insurer organized or created under the laws of this state. See Michigan Laws 500.5500
- Insurer: means a corporation engaged or attempting to engage in the business of making insurance or surety contracts. See Michigan Laws 500.5500
- Liabilities: The aggregate of all debts and other legal obligations of a particular person or legal entity.
- New insurer: means a domestic stock insurer that is created by a division occurring on or after the effective date of the amendatory act that added this chapter. See Michigan Laws 500.5500
- Plan of division: means a plan of division approved by a dividing insurer in accordance with section 5505. See Michigan Laws 500.5500
- Resulting insurer: means a domestic stock insurer created by a division or a dividing insurer that survives a division. See Michigan Laws 500.5500
- Shareholder: means the person in whose name a share is registered in the records of a corporation or the beneficial owner of a share to the extent of the rights granted by a nominee certificate on file with a corporation. See Michigan Laws 500.5500
- state: when applied to the different parts of the United States, shall be construed to extend to and include the District of Columbia and the several territories belonging to the United States; and the words "United States" shall be construed to include the district and territories. See Michigan Laws 8.3o
- Surplus: means total statutory surplus less capital, calculated in accordance with the National Association of Insurance Commissioners Accounting Practices and Procedures Manual, version effective January 1, 2001, and subsequent revisions. See Michigan Laws 500.5500
- Transfer: includes an assignment, assumption, conveyance, sale, lease, encumbrance, including a mortgage or security interest, gift, or transfer by operation of law. See Michigan Laws 500.5500
- Uniform Commercial Code: A set of statutes enacted by the various states to provide consistency among the states' commercial laws. It includes negotiable instruments, sales, stock transfers, trust and warehouse receipts, and bills of lading. Source: OCC
(1) When a division becomes effective under section 5509(4), all of the following apply:
(a) If the dividing insurer has survived the division:
(i) It continues to exist.
(ii) Its articles of incorporation must be amended, if at all, as provided in the plan of division.
(iii) Its bylaws must be amended, if at all, as provided in the plan of division.
(b) If the dividing insurer has not survived the division, its separate existence ceases to exist, subject to satisfying the other requirements of this state relating to the surrender of a certificate of authority to the extent applicable.
(c) All of the following apply to each new insurer:
(i) It comes into existence.
(ii) It shall hold any capital, surplus, and other assets allocated to the new insurer by the plan of division as a successor to the dividing insurer, automatically, by operation of law and not by transfer, whether directly or indirectly.
(iii) Its articles of incorporation, if any, and bylaws, if any, are effective.
(iv) The director of the department shall issue a certificate of authority, subject to satisfying the other requirements of this state relating to the formation and licensure of new domestic stock insurers to the extent applicable.
(d) Capital, surplus, and other assets of the dividing insurer are vested as follows:
(i) If it is allocated by the plan of division, it vests in the applicable resulting insurer as provided in the plan of division.
(ii) If it is not allocated by the plan of division, it vests, if the dividing insurer survives the division, in the dividing insurer or, if the dividing insurer does not survive the division, equally in the resulting insurers as tenants in common.
(iii) Otherwise it vests as provided in this section without transfer, reversion, or impairment.
(e) A resulting insurer to which a cause of action is allocated as provided in subdivision (d) may be substituted or added in any pending action or proceeding to which the dividing insurer is a party when the division becomes effective.
(f) The liabilities, including policy liabilities, of the dividing insurer are allocated between or among the resulting insurers as provided in section 5513 and each resulting insurer to which liabilities are allocated is liable only for those liabilities, including policy liabilities, so allocated as successors to the dividing insurer, automatically, by operation of law, and not by transfer or assumption, whether directly or indirectly.
(g) The shares in the dividing insurer that are to be converted or canceled in the division are converted or canceled, and the shareholders of those shares are entitled only to the rights provided to them under the plan of division and any appraisal rights that they may have under section 5515.
(2) Except as provided in the articles of incorporation or bylaws of the dividing insurer, the division does not give rise to any rights that a shareholder, director of domestic stock insurer, or third party would have on a dissolution, liquidation, or winding up of the dividing insurer.
(3) The allocation to a new insurer of capital, surplus, or other assets that is collateral covered by an effective financing statement is not effective until a new financing statement naming the new insurer as a debtor is effective under the uniform commercial code, 1962 PA 174, MCL 440.1101 to 440.9994.
(4) Unless otherwise provided in the plan of division, the shares in and any securities of each new insurer must be distributed to either of the following:
(a) The dividing insurer, if it survives the division.
(b) Shareholders of the dividing insurer that do not assert any appraisal rights that they may have under section 5515, pro rata.
(5) A division that becomes effective under section 5509(4) is not an assignment of any insurance policy, annuity, or reinsurance agreement or any other type of contract.