AN ACT TO ESTABLISH A PROCEDURE FOR A HOSPITAL SERVICE CORPORATION TO REORGANIZE BY CREATING A NONPROFIT HOLDING CORPORATION. SL 2023-33. Enacted June 9, 2023. Effective June 9, 2023.
Bill Summaries: H346 REORGANIZATION & ECONOMIC DEVELOPMENT ACT.
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Bill H 346 (2023-2024)Summary date: Jun 12 2023 - View Summary
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Bill H 346 (2023-2024)Summary date: Apr 27 2023 - View Summary
House committee substitute to the 3rd edition makes the following change. Amends new GS 58-65-183(b)(3) (operation of nonprofit holding corporation and subsidiaries) by limiting the dividends or distributions may make or direct to make to only the nonprofit holding corporation (was, nonprofit holding corporation and its member).
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Bill H 346 (2023-2024)Summary date: Apr 26 2023 - View Summary
House committee substitute to the 2nd edition makes the following changes.
Amends new GS 58-65-177(c) (pertaining to transfers in connection with reorganization) to provide that as part of reorganization a hospital service corporation may transfer cash, investments, or equity ownership interests in affiliates or subsidiaries to the nonprofit holding corporation and its subsidiaries by dividend, distribution, or otherwise (was, could transfer property, assets, rights, liabilities, equity, or ownership interests in subsidiaries or other owned business entities, and other interests). Now provides that the total statutory value of cash, investments, and ownership interests in affiliates or subsidiaries, net of liabilities, transferred as part of a reorganization may not exceed 25% of the hospital service corporation's admitted assets as of its most current annual statement filed with the Commissioner of Insurance (Commissioner). Specifies that any affiliate or subsidiary of the hospital service corporation transferred as part of a reorganization cannot be an insurer engaged in the issuance of health insurance policies.
Makes organizational changes to GS 58-65-181(b) (operation of nonprofit holding corporation and subsidiaries). Requires the nonprofit holding corporation to file annual with its financial statement executive compensation information for its CEO, CFO, and next eight highest paid executive officers. Requires an annual report to the Commissioner describing the nonprofit holding corporation’s strategic investment activities for the preceding year. Requires the governing board of the nonprofit holding corporation to be comprised solely of individuals on the governing board of the hospital service corporation.
Amends GS 58-65-183 (operation of a hospital service corporation) to specify that neither a reorganization nor any other transaction permitted by the Part (was, just reorganization) constitute or require a conversion of the hospital service corporation pursuant to GS 58-65-131, GS 58-65-132, GS 58-65-133, or any other law of this State. Also specifies that neither a reorganization nor any other transaction permitted by the Part (was, just reorganization) will require the nonprofit holding corporation, hospital service corporation, or any affiliate of either to make any distribution or payment to any person or entity.
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Bill H 346 (2023-2024)Summary date: Apr 25 2023 - View Summary
House committee substitute to the 1st edition makes the following changes.
Revises new Part 3 of Article 65 of GS Chapter 58, regulating the reorganization of hospital service corporations into nonprofit holding corporation, as follows. Adds control to the Part's defined terms, defined by statutory cross-reference; deletes the identical definition set out in new GS 58-65-177. Modifies the definitions for nonprofit holding corporation and reorganization to specify that the indirect holding of membership interests in the hospital service corporation must be through another domestic corporation operating under GS Chapter 55A.
Amends new GS 58-65-177 to eliminate the permitted activities listed for a reorganization. Permits the transfer of a hospital service corporation's interests in subsidiaries or other owned businesses entities through distribution in connection with the reorganization. Adds authority to engage in other related transactions regarding interests between the service corporation and the nonprofit holding corporation and any other subsidiaries. Moves the provisions deeming the Part's provisions the exclusive means of reorganization approval to a stand alone statute, enacted as GS 58-65-178.
Amends new GS 58-65-179 to consistently refer to a hospital service corporation's charter. Now requires the Commissioner of Insurance to approve charter amendment within 30 days of receipt of the application unless the proposed amendments no not comply with GS Chapter 55A (was Article 65 or GS Chapter 55A).
Enacts new GS 58-65-180 to require a hospital service corporation reorganizing to file eight listed data points with the Commissioner. Authorizes the Commissioner to contract with professional advisors to assist in review of the submitted materials, at cost to the hospital service corporation and exempt from Articles 3 and 3C of GS Chapter 143. Requires the hospital service corporation to provide a notice of completion of reorganization to the Commissioner. Deems confidential, privileged, and not public record, any information submitted as part of a reorganization that constitutes trade secrets or personal information. Adds that privileged information is not subject to subpoena or discovery, and is not admissible evidence in any private civil action.
Amends GS 58-65-181, revising and adding to the requirements set forth for a nonprofit holding corporation upon and after reorganization. Deems the nonprofit holding corporation to remain a nonprofit corporation subject to GS Chapter 55A with no members (was, under GS 55A-1-40). Adds requirements for all or substantially all of the nonprofit holding corporation's net worth to be invested in insurance companies, affiliates, or subsidiaries that meat one of three criteria, excluding its investment portfolio held in the ordinary course of business. Allows the Commissioner to waive the investment requirement for showing of good cause. Excepts investments in affiliates and subsidiaries from the restrictions set out in GS 58-19-10. Adds that the nonprofit holding corporation and its subsidiaries are automatically a party to any delinquency proceeding under Article 30 involving a hospital service corporation that is a subsidiary of the nonprofit holding corporation due to a reorganization. Deems the assets of the nonprofit holding corporation to be assets of the estate of the hospital service corporation for purposes of satisfying claims pursuant to delinquency proceedings. Prohibits the nonprofit holding corporation from dissolving or liquidating without Commissioner-approval or pursuant to court order under Article 30. Adds a new requirement for the nonprofit holding corporation to annually file consolidated financial statements for the preceding calendar year. Authorizes the Commissioner to enforce nonprofit corporations' compliance pursuant to GS 58-2-40 and GS 58-2-60.
Changes the caption for new GS 58-65-183. Now provides that the hospital service corporation can make and pay direct or indirect dividends or distributions to the nonprofit holding corporation or its member and not be subject to listed state laws pertaining to conversion if the dividends or distributions satisfy the applicable standards for payments set forth in 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). Specifies that if the hospital service corporation undertakes a conversion pursuant to GS 58-65-131, GS 58-65-132, and GS 58-65-133 at any time following a reorganization, then, for the purposes of that conversion, the references in GS 58-65-131, GS 58-65-132, and GS 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 and its consolidated subsidiaries (was, fair market value of the nonprofit holding corporation alone).
Makes technical and organizational changes.
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Bill H 346 (2023-2024)Summary date: Mar 9 2023 - View Summary
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.