Bill Summary for S 296 (2023-2024)
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View NCGA Bill Details | 2023-2024 Session |
AN ACT TO ESTABLISH A PROCEDURE FOR A HOSPITAL SERVICE CORPORATION TO REORGANIZE BY CREATING A NONPROFIT HOLDING CORPORATION.Intro. by Johnson, Craven, Proctor.
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Bill summary
Identical to H 346, filed 3/9/23.
Enacts a new Part 3, nonprofit holding corporations, to Article 645of GS Chapter 58 (pertaining to hospital service corporations). Sets forth definitions of affiliate, executive officer, subsidiary, and ultimate controlling person.
Defines reorganization as a transaction or series of transactions in which a nonprofit holding corporation is created by or on behalf of a hospital service corporation to hold, directly or indirectly, membership interests in the hospital service corporation and becomes the ultimate controlling person of the hospital service corporation.
Defines nonprofit holding corporation as a domestic corporation formed in connection with a reorganization and operating under GS Chapter 55A (the North Carolina Nonprofit Corporation Act [NCNCA]) that directly or indirectly holds all the membership interests in a hospital service corporation and is the ultimate controlling person of the hospital service corporation. Specifies that a nonprofit holding corporation is not (1) a "company," "insurance company," or "insurer," as those terms are defined in GS 58-1-5, or (2) a "hospital service corporation," as defined in GS 58-65-1.1.
Permits a hospital service corporation by action of its governing board to authorize a reorganization and propose corresponding amendments to its charter. Provides a procedure for submission of proposed amendments to the Commissioner of Insurance (Commissioner) for their approval within 30 days of receipt. Requires Commissioner to evaluate the amendments against the requirements of the newly enacted Part 3 to Article 46 of Chapter 58 and the requirements set forth in GS Chapter 55A (NCNCA) and to reject amendments that are not in compliance with those statutory requirements. Specifies that any other provision of Article 64 relating to charter amendments is not applicable here.
Enacts GS 58-65-177, pertaining to reorganization, as follows. Allows reorganization to include transfers, by dividend or otherwise, of property, assets, rights, liabilities, equity or ownership interests in subsidiaries or other owned business entities, and other interests between the hospital service corporation and the nonprofit holding corporation and any other subsidiaries of the nonprofit holding corporation, and other related transactions. Authorizes a hospital service corporation to have a nonprofit holding corporation as its ultimate controlling person. Clarifies that a reorganization is considered an internal restructuring that does not have the effect of changing or influencing the control of the hospital service corporation. States that a reorganization is not to be considered a change of control of the hospital service corporation and is not subject to the provisions of GS 58-19-15 (governing acquisition of or merger with domestic insurer). Incorporates definition of insurer as set forth in GS 58-19-5 to the subsection. Specifies that as part of a reorganization, a hospital service corporation may transfer, by dividend or otherwise, of property, assets, rights, liabilities, equity or ownership interests in subsidiaries or other owned business entities, and other interests between the hospital service corporation and the nonprofit holding corporation and any other subsidiaries of the nonprofit holding corporation, and other related transactions. Clarifies that compliance with GS 58-19-30 and the act are the only means of approval to permit a reorganization. Specifies that the provisions of GS 58-19-10(b)(investments of domestic insurers), GS 58-65-131 (pertaining to conversion plans for hospital service corporations), 58-65-132 (approval of conversion plans for hospital service corporations), and 58-65-133 (pertaining to creation and operation foundations for hospital service corporation) do not apply to a reorganization.
Prohibits a director, officer, or employee of the hospital service corporation from receiving any fee, commission, additional compensation, or other valuable consideration for aiding, promoting, or assisting in a reorganization, except for compensation paid in the ordinary course of business.
Enacts GS 58-65-181 (pertaining to operation of nonprofit holding corporation and subsidies). Specifies that a nonprofit holding corporation is not subject to the remainder of Article 65 or Article 66 (Hospital Service Corporation Readable Insurance Certificates Act) of GS Chapter 58. Specifies that after reorganization, a nonprofit holding company must remain a nonprofit corporation and the ultimate controlling person of the hospital service corporation. Specifies that these requirements do not apply if a plan of conversion of the hospital service corporation is approved under 58-65-131, GS 58-65-132, or GS 58-65-133 (all pertaining to conversion plans).
Clarifies that a nonprofit holding corporation and its direct or indirect subsidiaries that are not hospital service corporations or subsidiaries of hospital service corporations are not subject to GS 58-65-131, 58-65-132, or 58-65-133, and the actions of the nonprofit holding corporation and such subsidiaries will not constitute or require a conversion of the hospital service corporation under those sections or any other law of this State.
Specifies that no equity or ownership interest in the nonprofit holding corporation or any of its subsidiaries will be granted to any executive officer or any member of the governing board of the nonprofit holding corporation or the hospital service corporation.
Enacts GS 58-65-183 as follows. Specifies that a reorganization does not change: (1) the legal form of the hospital service corporation or (2) the hospital service corporation's license to do business in North Carolina. Requires that any subscribers' contracts and certificates issued by the hospital service corporation shall remain in full force and effect.
Specifies that the hospital service corporation shall continue to be subject to Articles 65 and 66 of GS Chapter 58 except for the following: (1) a reorganization will not constitute or require a conversion of the hospital service corporation pursuant to GS 58-65-131, 58-65-132, and 58-65-133 or any other law of this State; (2) a reorganization will not require the nonprofit holding corporation, hospital service corporation, or any affiliate of either to make any distribution or payment to any person or entity. Specifies that the subdivision does not apply to distributions or payments between a nonprofit holding corporation or hospital service corporation and any of its affiliates; (3) the hospital service corporation may make and pay direct or indirect dividends or distributions to the nonprofit holding corporation. Specifies that 58-19-10(b), 58-65-131, 58-65-132, and 58-65-133 don’t apply to such dividends or distributions, provided that such dividends or distributions comply with GS 55A-13-02 (authorized distributions of nonprofit corporation), GS 58-7-130 (dividends and distributions to stockholders), GS 58-19-25(d) (registration of insurers), and GS 58-19-30 (standards and management of an insurer within an insurance holding company); (4) if the hospital service corporation undertakes a conversion pursuant to GS 58-65-131, 58-65-132, and 58-65-133 at any time following a reorganization, then, for the purposes of that conversion, the references in GS 58-65-131, 58-65-132, and 58-65-133 to "fair market value of the corporation" or "value of the corporation" mean the fair market value of the nonprofit holding corporation.