Section 1201. Incorporation of stock or mutual insurance companies. 1202. Number of directors; independent directors and committees of the board of directors; duty of directors. 1203. Non-use of corporate charter. 1204. Sale of insurance securities. 1205. Existing corporations. 1206. Amendments to charters and increase of capital of insurance corporations. 1207. Options for the purchase of shares. 1208. Method of amending mutual company charters. 1209. Management and by-laws of mutual insurance corporations. 1210. By-laws of domestic stock life insurance companies. 1211. Mutual insurance corporations; membership and dividends. 1212. Service of process upon superintendent as attorney. 1213. Service of process on superintendent as attorney for unauthorized insurers. 1214. Acting for foreign corporation which has not designated superintendent as attorney. 1215. Forfeiture of office by director or trustee of a domestic mutual insurer. 1216. Notice of indemnification of directors and officers of insurance corporations. 1217. Vouchers for disbursements. 1218. Regulation of stock ownership, interlocking directors and common management. 1219. Misconduct by directors; insolvency. 1220. Misconduct by officers and directors of co-operative fire insurance companies and of fraternal benefit societies. 1221. Transactions by officers, directors and certain shareowners in the insurer`s shares. S 1201. Incorporation of stock or mutual insurance companies. (a) A corporation may be organized and licensed to do an insurance business in this state by taking the following successive steps, subject to applicable requirements of this chapter: (1) The proposed incorporators, comprising at least nine natural persons (except as provided in section six thousand four hundred two of this chapter), shall submit to the superintendent, in writing, the corporation`s proposed name, the county in which its principal office will be located, and the name and address of a public newspaper of general circulation in such county. (2) If the superintendent approves the proposed name and newspaper, each as conforming to the requirements of law, he shall so notify the proposed incorporators, or their representative, in writing. Such approval shall become void if within six months from its date the declaration and charter referred to in paragraphs four and five hereof are not filed pursuant to paragraph six hereof. (3) The proposed incorporators shall publish in such newspaper, twice a week for three successive weeks or once a week for six successive weeks, a notice of intention to form such a corporation, stating its proposed name, the kinds of insurance business to be transacted, the names and residence addresses of the proposed incorporators, the location of its principal office in this state, and, if a stock corporation, the amount of its proposed initial capital. (4) The proposed incorporators shall submit to the superintendent: (A) proof of such publication by the affidavit of the publisher or of his foreman or clerk; and (B) a declaration, signed by each incorporator and duly acknowledged before a notary public or other officer authorized to take acknowledgments of conveyances of real property within this state. (5) (A) Such declaration shall be in the English language, shall state the proposed incorporators` intention to form a corporation to do one or more kinds of insurance business authorized by section one thousand one hundred thirteen of this chapter, shall specify the paragraphs defining such kinds of insurance business and shall set forth a copy of the corporation`s proposed charter. (B) The corporation`s proposed charter shall contain: (i) the corporation`s name, which shall include a distinctive word or words, and, if a mutual corporation, shall contain the word "mutual"; (ii) the place where its principal office is to be located; (iii) the kinds of insurance to be transacted, specified as above required; (iv) the manner in which corporate powers are to be exercised; (v) the number of directors, or that it shall be not less than a stated minimum nor more than a stated maximum. Except as provided in section six thousand four hundred two of this chapter the number of directors shall not be less than thirteen, however, a life insurance corporation with admitted assets of less than one and one-half billion dollars, may have not less than nine directors of which at least four must not be officers or employees of the company or any entity controlling, controlled by, or under common control with the company and who are not beneficial owners of a controlling interest in the voting stock of the company or any such entity. The charter of such life insurance corporation that has less than thirteen, but at least nine, directors shall provide that the number of directors shall be increased to not less than thirteen within one year following the end of the calendar year in which the corporation exceeded one and one-half billion dollars in admitted assets. As used in this item, "number of directors" means the total number of directors which the corporation would have if there were no vacancies; (vi) the times and manner of electing directors and officers, the manner of filling vacancies, and provision that each director shall be at least eighteen years of age and that at all times a majority shall be citizens and residents of the United States, and that not less than three shall be residents of this state; (vii) the names and post office residence addresses of the directors, who shall serve until the first annual meeting of such corporation; (viii) the duration of its corporate existence, which shall be not less than thirty years; (ix) the amount of its capital, if a stock corporation; and (x) any other particulars necessary to explain the corporation`s objects, purposes, management and control. (C) The corporation`s proposed charter may authorize the use in a foreign country where it does or proposes to do business of a specified translation of its name in any language commonly used in such country. (D) The superintendent may, by regulation, prescribe additional information to be required, pursuant to this paragraph, of all companies or of any kind of company. (6) The superintendent shall transmit such proof of publication, declaration, and charter to the attorney general. If approved by the attorney general, as conforming to the requirements of law, the superintendent shall thereupon file them in his office and issue a certified copy thereof to the proposed incorporators. If requested by such proposed incorporators, the superintendent shall also issue to them a certificate of incorporation executed by him in the name of the people of the state and thereupon such incorporators shall become a body corporate and have the powers enumerated in paragraph seven hereof, but such corporation shall not be authorized to do the business of insurance until it obtains a license therefor. (7) Every stock corporation, upon compliance with this chapter and the business corporation law, may create and issue the number of shares of capital stock stated in its charter which may be of one or more classes. If the charter authorizes shares which are entitled to preference in the distribution of dividends or assets it shall provide that: (A) their dividend yield shall not exceed a rate equal to the maximum rate of interest provided in section 5-501 of the general obligations law, in effect at the time such shares are offered for sale; and (B) the dividends may not be cumulative for more than three years. (8)(A) A stock corporation shall have power to: (i) open books to receive subscriptions to its capital shares, (ii) keep them open until all such shares, or so many as may be necessary to satisfy the minimum capital requirements, are subscribed for, (iii) receive payment for such subscriptions, (iv) invest the monies as prescribed in this chapter, and (v) expend money or incur liabilities necessary or proper as organization expenses, to be paid out of the proceeds of such subscriptions, such expenses not to exceed the maximum amount prescribed in its permit to solicit such subscriptions. (B) The corporation shall not solicit subscriptions to its shares until it receives a permit therefor from the superintendent which shall be issued after the corporation submits to him an estimate of the total amount to be expended for organization expenses, and he approves the estimate. Such estimate shall be recited in the permit, which shall fix the maximum amount, to be prescribed by the superintendent, which may be expended for organization expenses. (C) Such corporation shall not employ, as agents or brokers to sell its securities to the public, any persons who have not complied with the requirements of section one thousand two hundred four of this article. (9) (A) A mutual corporation shall have power to: (i) receive monies necessary to comply with the requirements of this chapter relative to its initial surplus fund; (ii) borrow such monies in accordance with the provisions of section one thousand three hundred seven of this chapter; (iii) open books to receive applications for insurance from persons desiring and eligible to become members; (iv) keep them open until the minimum number and amount of applications, and the premium payments thereon, as required by this chapter are received; (v) invest the monies as prescribed in this chapter for the investment of the minimum surplus of a mutual insurance company; and (vi) expend money or incur liabilities necessary or proper as organization expenses, such expenses not to exceed the maximum amount prescribed in its permit to solicit such applications. (B) The corporation shall not solicit applications for insurance or receive premium payments thereon until it receives a permit therefor from the superintendent. The permit shall be issued after: (i) the superintendent is satisfied, by such evidence as he may require or by such examination as he may deem expedient, that the corporation holds in trust for prospective policyholders and creditors a fund, in cash or securities acceptable to him, at least equal to the amount required as its initial surplus fund, such trust to terminate when a license to do an insurance business of the kinds provided in the corporate charter has been obtained, and (ii) the corporation submits to the superintendent an estimate of the total amount to be expended for organization expenses, and he approves the estimate. Such estimate shall be recited in the permit, which shall fix the maximum amount, to be prescribed by the superintendent, which may be expended for organization expenses. (10) The directors and incorporators of any stock or mutual corporation shall be jointly and severally liable for all its debts and liabilities until it is licensed to do an insurance business of the kind or kinds proposed. (b) This section shall not apply to co-operative fire insurance companies, fraternal benefit societies, or corporations organized under article forty-three or sixty-seven of this chapter. S 1202. Number of directors; independent directors and committees of the board of directors; duty of directors. (a) (1) Subject to item (v) of subparagraph (B) of paragraph five of subsection (a) of section one thousand two hundred one of this article, and subject to any provision of the corporate charter of a domestic insurance company, the number of directors shall be fixed by the by-laws, or if not so fixed, by action of the directors. (2) If not otherwise fixed under this article, the number shall be thirteen but it may be increased or, subject to item (v) of subparagraph (B) of paragraph five of subsection (a) of section one thousand two hundred one of this article, decreased by amendment of the by-laws, or by action of the board, subject to the following limitations: (i) if the board is authorized by the by-laws to increase or decrease the number of directors, the amendment shall require the vote of a majority of the entire board; and (ii) no decrease shall shorten the term of any incumbent director. (3) The charters of all domestic insurance companies approved before January first, nineteen hundred forty which fail to comply with item (v) of subparagraph (B) of paragraph five of subsection (a) of section one thousand two hundred one of this article but which were validated by section forty-eight-a of the former insurance law in effect prior to this chapter remain so validated and shall not be affected by such item or paragraph one or two of this subsection in respect of the minimum number of directors. (b) (1) Subject to item (v) of subparagraph (B) of paragraph five of subsection (a) of section one thousand two hundred one of this article, not less than one-third of the directors of a domestic stock life insurance company and not less than one-third of the members of each committee of the board of directors of any domestic life insurance company shall be persons who are not officers or employees of such company or of any entity controlling, controlled by, or under common control with such company and who are not beneficial owners of a controlling interest in the voting stock of such company or any such entity. At least one such person must be included in any quorum for the transaction of business at any meeting of the board of directors or any committee thereof. (2) The board of directors of a domestic life insurance company shall establish one or more committees comprised solely of directors who are not officers or employees of the company or of any entity controlling, controlled by, or under common control with the company and who are not beneficial owners of a controlling interest in the voting stock of the company or any such entity. Such committee or committees shall have responsibility for recommending the selection of independent certified public accountants, reviewing the company`s financial condition, the scope and results of the independent audit and any internal audit, nominating candidates for director for election by shareholders or policyholders, evaluating the performance of officers deemed by such committee or committees to be principal officers of the company and recommending to the board of directors the selection and compensation of such principal officers and in the case of a domestic stock life insurance company, recommending to its board of directors any plan to issue options to its officers and employees for the purchase of shares of stock, pursuant to section one thousand two hundred seven of this article. (3) The provisions of this subsection shall not apply to a life insurance company subsidiary if the parent company is a domestic insurance company having a board of directors and committees thereof that meet the requirements of paragraphs one and two of this subsection. (c) A director of a domestic life insurance company shall perform his duties as a director, including his duties as a member of any committee of the board upon which he may serve, in accordance with the provisions of section seven hundred seventeen of the business corporation law and the provisions of this chapter. S 1203. Non-use of corporate charter. (a) Any domestic insurance company which, after one year from the date of its incorporation, has not organized and obtained a certificate of authority or license to do an insurance business, shall, unless granted an extension, forfeit its corporate charter, and the superintendent may thereupon commence a proceeding, pursuant to the provisions of article seventy-four of this chapter, to liquidate and dissolve such corporation. The superintendent may for good cause shown grant a written extension of such one-year period upon a written request filed with him within such period or during the pendency of any examination or investigation pursuant to paragraph one of subsection (e) of section one thousand one hundred two of this chapter, whichever is longer. (b) Any domestic insurer which ceases to do any insurance business for more than one year continuously shall forfeit its right to resume an insurance business, except with the prior approval of the superintendent. Unless such approval shall be granted, the superintendent may commence a proceeding, pursuant to the provisions of article seventy-four of this chapter, to liquidate and dissolve such insurer. S 1204. Sale of insurance securities. (a) Subject to the provisions of subsection (e) hereof, no person, firm, association or corporation shall in this state sell or propose to sell to the public any security issued by any insurer not authorized to do business in this state, unless licensed to do so under this section. In this subsection and in subsection (b) hereof, "insurer" includes any corporation whose securities are to be sold or offered for sale (except by exchange for shares or assets and except securities issued upon a merger in conversion of securities of a merging company) primarily to acquire, organize or finance the operations of another insurer not authorized to do business in this state which is, or as a result of applying the proceeds of such offering will be, a subsidiary of such corporation. (b) The superintendent may issue a license to a named person, firm, association or corporation to sell and propose to sell to the public in this state the specified securities of a specified insurer or other company subject to subsection (a) hereof. The applicant for such a license shall submit a written application, subscribed by the applicant and affirmed by him as true under the penalties of perjury and containing such information as the superintendent may require, including the following: the name, residence address, business address in this state and previous business experience of the applicant and of such insurer and of his or its officers, members and employees, and information as to their trustworthiness; a copy of every security to be offered for sale; a statement in detail as to the insurer`s financial condition, plans and purposes, the amount and par value of securities and their selling price, the manner in which the proceeds of sale are to be used, the rate of commissions to be paid for the sale of securities, the salaries to be paid to the insurer`s officers, and the safeguards to be provided against diversion of proceeds from such plans and purposes. Before issuing any such license the superintendent may make such examination of the affairs of the proposed licensee and of such insurer as he deems expedient. The superintendent may refuse to issue such license, or may after notice and hearing revoke such license, if in his judgment such refusal or revocation will best promote the interests of the people of this state. Such license shall be for a term of one year unless sooner revoked. No license to sell or to propose to sell securities of any foreign or alien insurer shall be issued unless such insurer is qualified to obtain a license to do an insurance business in this state or, in the case of a corporation described in subsection (a) hereof, unless the insurer subsidiary is so qualified. (c) No person, firm, association or corporation shall in this state issue, circulate or distribute any advertisement, circular, letter or other public announcement in connection with the sale or proposed sale to the public in this state of any securities of any insurer unless a copy of such announcement has been filed with the superintendent and approved by him. The superintendent may approve any such announcement if, after such examination or investigation as he sees fit, he finds it is not false, misleading or likely to deceive the public. In this subsection, "insurer" shall include any corporation whose securities are to be sold or offered for sale (except by exchange for shares or assets and other than securities issued upon a merger in conversion of securities of a merging company) primarily to acquire, organize or finance the operations of another insurer which is, or as a result of applying the proceeds of such offering will be, a subsidiary of such corporation; provided that examination or investigation of any such corporation shall be limited to matters relating to the operations of the insurance subsidiary. (d) Every such license to sell or propose to sell the securities of an insurer shall state conspicuously in bold-face type: "The issuance of this license by the superintendent of insurance of New York does not constitute a recommendation of these securities." No person, firm, association or corporation shall represent that the superintendent or the insurance department or the state of New York has recommended any securities for purchase. The superintendent may in his discretion require the insertion in any public announcement to be approved by him of a statement that such approval does not constitute a recommendation of the securities therein referred to. (e) This section shall not apply to the selling or proposing to sell securities after one year from the first date upon which the security was offered to the public in this state, except that subsections (c) and (d) hereof shall apply to any insurer authorized to do business in this state and to any other corporation described in subsection (c) hereof. (f) (1) This section shall not apply to annuities or agreements to provide for annuities issued or to be issued by an authorized insurer pursuant to section four thousand two hundred forty of this chapter. (2) The superintendent may by order or regulation exempt any other security or class thereof from all or part of this section on such terms and conditions as he deems appropriate upon a finding that its application thereto is not necessary to protect the public. S 1205. Existing corporations. Any insurance corporation incorporated under the provisions of any law of this state and doing business as an authorized insurer at the effective date of this chapter shall be subject to the provisions of this chapter relating to such a corporation, except that: (a) It shall be entitled to exercise all powers conferred by virtue of its charter as in effect on the effective date of this chapter, during the term thereof, unless specifically prohibited by or pursuant to law. (b) Subject to article seventy-four of this chapter, its duration shall be perpetual. (c) If it has a guarantee capital represented by shares, it may amend any of the provisions of its charter. S 1206. Amendments to charters and increase of capital of insurance corporations. (a) Any domestic insurance corporation may amend its charter as follows: (1) It may change its name or authorize the use in a foreign country in which it does or proposes to do business of a specified translation of its name in any language commonly used in such country by delivering to the superintendent an amendment of its certificate of incorporation in the form prescribed by article eight of the business corporation law. If the superintendent finds such change is in conformity with law he may endorse his approval on such certificate of amendment. (2) It may extend or diminish its charter powers as to the kinds of insurance business in which it may engage, in the form prescribed by the business corporation law, if a stock insurance corporation, or in the manner prescribed by this chapter, if a mutual insurance corporation. No such change shall be effective until the superintendent gives his approval. If the superintendent finds, after such investigation or examination as he deems it expedient to make, that such amendment will conform with the provisions of this chapter and that the corporation has the requisite minimum capital or surplus and meets all financial requirements of this chapter, he may grant such approval; but this section shall not permit a reduction in the capital of a stock insurance corporation or in the minimum surplus of a mutual insurance corporation unless the superintendent finds that all liabilities incident to the exercise of the powers to be eliminated have been terminated. Any domestic stock or mutual insurance corporation having charter power to do a part of any kind of insurance business specified in subsection (a) of section one thousand one hundred thirteen of this chapter, may after obtaining the superintendent`s approval, by a majority vote of its board of directors at any regular or special meeting, amend its charter to acquire power to do all such kind of insurance business, if it may exercise such power under this chapter. (3) Upon the filing in the office of the superintendent of any certificate of change, amendment, or restated charter under any provision of law, with his approval endorsed thereon, the superintendent shall certify a copy thereof for filing in the office of the clerk of the county where the corporation`s principal office is located and may grant it a license conforming to such change. (4) Notwithstanding any other provisions of this section, if the corporation has a guarantee capital represented by shares, it may amend any provisions of its charter, including, without limitation, the increase, reduction or retirement of its capital and the interest thereon and the increase or decrease in the number or par value of the shares representing its capital, upon filing in the office of the superintendent, with his approval endorsed thereon, a certificate setting forth such amendments which shall become effective upon such filing. The certificate shall have been approved by its board of directors or trustees and consented to by holders of at least two-thirds of its outstanding shares. Such consent shall be given, either in person or by proxy, in writing or by vote at a meeting held on at least twenty days notice. Any holder of shares of guarantee capital not in favor of any such increase, decrease or retirement, who signifies such objection in the manner prescribed by section six hundred twenty-three of the business corporation law, shall have his rights determined in accordance with the provisions of such section of the business corporation law. All provisions of subsection (a) of section four thousand two hundred seven of this chapter shall apply to the payment of any cash dividends from profits to the holders of shares of such guarantee capital. (5) It may, if it is a stock corporation, increase the total number of shares of any class of capital stock it has power to create and issue, subject to this chapter and the business corporation law. (6) It may make any other change in conformity with law, which shall be effective upon the filing of the certificate thereof in the office of the superintendent with his approval endorsed thereon. (b) Any corporation proposing to file a certificate of change of name or a restated or amended charter shall serve upon the superintendent a copy of the proposed changes, not less than thirty days before the meeting at which such changes will be submitted. (c) The superintendent may certify the amount of issued and outstanding capital shares of any domestic stock insurance corporation, after such examination or investigation as he deems expedient, and, except as to a stock dividend or a reduction in capital stock, he shall require the affidavit of two principal officers of such corporation, stating the consideration for the issuance of such shares and that such transactions were genuine and bona fide sales of such shares for such consideration. S 1207. Options for the purchase of shares. (a) Notwithstanding any provision of the business corporation law, but subject to any provision in respect thereto set forth in its certificate of incorporation, or other certificate filed pursuant to law, a domestic stock insurance company, other than as described in subsection (d) of this section, may, with the consent of a majority of its shares entitled to vote thereon, provide and carry out a plan to issue options solely to its officers or employees for the purchase of any of its authorized but unissued shares for such consideration, value or benefit and upon such terms and conditions as may be fixed by the board of directors. In addition, a domestic stock life insurance company may provide and carry out a plan to issue such options only upon the recommendation by a committee of its board of directors pursuant to subsection (b) of section one thousand two hundred two of this article and approved by its board of directors. Any such plan must provide that: (1) the company`s right or power to make adjustments, reclassifications, reorganizations or changes of its capital or business structure, or to merge or consolidate, or dissolve, liquidate, sell, or transfer all or any part of its business or assets shall not be affected; (2) the number of shares on which options may be granted, excluding shares involved in the unexercised portions of any cancelled, terminated or expired options, shall not exceed, in the aggregate, five percent of the company`s authorized shares; (3) the number of shares for which option rights may be granted to any individual under all options issued to him shall not exceed ten percent of the total number of shares authorized to be optioned; (4) the option price of the shares shall not be less than eighty-five percent of the fair market value of such shares at the time the option is granted and shall not be less than their par value; (5) the option shall not be transferable except by will or the laws of descent and distribution; and (6) the option shall not be exercisable after ten years from the date the option is granted. (b) In the absence of fraud in the transaction, the judgment of the board of directors shall be conclusive as to the consideration, value or benefit, tangible or intangible, received or to be received by the company for the issuance of options to purchase its shares and the adequacy and sufficiency thereof. The required shareholders` consent may be given by vote at a shareholders` meeting held on notice prescribed by section six hundred five of the business corporation law, stating its object, or in writing signed by all shareholders having such voting rights. (c) Any company, other than a company described in subsection (d) of this section, proposing any plan to issue options to purchase its shares under this section shall, not less than thirty days before the shareholders` meeting at which the plan is to be voted upon, submit to the superintendent a copy of the plan for his approval. Upon approval of the plan by the shareholders, a certificate evidencing their approval, subscribed by the secretary and affirmed by him as true under the penalties of perjury, and under the company`s seal, shall be filed in the office of the superintendent. The plan shall be approved by the superintendent if he is satisfied it is fair and equitable to the company`s policyholders and not inconsistent with law, and that no reasonable objection exists thereto. If the superintendent shall refuse to approve such plan, notification of such refusal, assigning the reasons therefor, shall, within ten days from the date of filing such certificate, be given in writing by such superintendent to the company. No such plan shall take effect until the superintendent approves as herein provided. (d) A domestic stock life insurance company which is not directly or indirectly a subsidiary of a domestic mutual life insurance company, upon approval of the plan by the shareholders, shall file in the office of the superintendent a certificate evidencing their approval, subscribed by the secretary and affirmed by him as true under the penalties of perjury, and under the company`s seal. S 1208. Method of amending mutual company charters. (a) A domestic mutual insurance corporation may change its name, or amend or restate its charter in the form prescribed by article eight of the business corporation law. Except as specified in subsections (b) and (c) hereof, the following requirements shall apply to certificates of change of name and amended or restated charters of such corporations: (1) The corporation`s president or secretary shall call a meeting of its members pursuant to its by-laws, specifying any amendments to be voted upon at such meeting; (2) If at such meeting three-fourths of the members present and voting in person or by proxy vote in favor of any amendments so specified, the corporation`s president and secretary shall make a certificate, verified by their oaths, to the effect that the amendments were duly adopted by at least a three-fourths vote of the members present in person or by proxy at a meeting duly called for such purpose and setting forth the call for such meeting, the fact of service of such call upon all members of record on a specified date, and the minutes of such meeting; and (3) Such certificate shall, within thirty days after such meeting, be submitted to the superintendent for his approval as conforming to the requirements of law. (b) A domestic mutual insurance corporation except as specified in subsection (c) hereof, may, subject to the provisions of section one thousand two hundred six of this article, amend its charter as to the kind or kinds of insurance business it shall be empowered to do and to specify or change the location of its office, and may amend its charter as to any other provisions which do not impair the members` rights or enlarge their obligations under insurance policies, by a majority vote of its board of directors at a meeting held not less than thirty days after notice of the proposed amendment has been given to the directors and the superintendent. (c) Any domestic mutual life insurance corporation doing business as such may file a certificate of change of name, or restate or amend its charter, by a majority vote of its board of directors at a meeting held not less than thirty days after notice of the proposed amendment has been given to the directors. (d) A certificate of amendment or a restated charter filed pursuant to subsections (b) and (c) hereof shall be accompanied by a certificate signed by the corporation`s president and secretary that such amendment or restatement was duly adopted by a majority vote of the corporation`s board of directors at a meeting duly called for that purpose.
S 1209. Management and by-laws of mutual insurance corporations. (a) The management of the business and affairs of a domestic mutual insurance corporation shall be vested in a board of directors. (b) Such corporation shall have not less than thirteen directors, provided, however, a life insurance corporation satisfying the requirements of item (v) of subparagraph (B) of paragraph five of subsection (a) of section one thousand two hundred one of this article shall have not less than nine directors, and such officers as shall be provided for in its charter or by-laws. The directors, except as provided in section four thousand two hundred ten of this chapter, shall be elected at the annual meetings of the members, and all except four of the directors of such corporation, elected after the organization of the corporation is completed and it has been licensed to issue insurance policies, must be members of the corporation or officers of member corporations. At any time after the first annual meeting, the directors may be divided into not exceeding three groups as nearly equal as possible, and thereafter the directors in one group only or their successors shall be elected annually as provided in the by-laws. The board of directors of such corporation shall hold regular meetings at least four times in each calendar year. At least one of such meetings shall be held within this state and the other meetings may be held elsewhere. (c) The board of directors of such corporation shall elect such officers as are provided for in the by-laws. At least two of the principal officers shall be directors, but the number of officers and salaried employees who are directors shall at all times be less than a quorum of the board of directors, as prescribed in the charter or by-laws. (d) The by-laws of any such corporation organized after January first, nineteen hundred forty may be adopted at a directors` meeting held after receipt from the superintendent of a certificate of incorporation and before the issuance of a license to do an insurance business. The by-laws, except as to corporations which elect their directors pursuant to the provisions of section four thousand two hundred ten of this chapter, may thereafter be made or amended only by a majority vote of all members present in person or by proxy at any annual meeting or other stated or special meeting called for such purpose, except that the board of directors of any mutual insurance corporation may amend its by-laws as to any provisions which do not impair the members` rights or enlarge their obligations under insurance policies. The by-laws of any domestic mutual insurance corporation which elects its directors pursuant to the provisions of such section may be amended by the board of directors. No by-law or amendment or repeal of a by-law of any domestic mutual insurance corporation shall be effective until approved by the superintendent. The superintendent may refuse such approval if he finds that such by-law, amendment or repeal does not conform with the requirements of law, or is not equitable to the corporation`s policyholders, or is inconsistent with its objects and purposes. (e) No domestic mutual insurance corporation, except a domestic mutual insurance company organized before January first, nineteen hundred forty to do only marine protection and indemnity insurance, shall enter into any agreement under which any person, partnership or corporation agrees to pay all or a portion of the expenses of management of such insurance corporation in consideration of an agreement to pay him either commissions on premiums due the insurance corporation or any other compensation for his services. (f) No domestic mutual insurance corporation, except a domestic mutual insurance company organized before January first, nineteen hundred forty to do only marine protection and indemnity insurance, shall enter into any agreement with any of the officers or directors, or with any firm or corporation in which any such officer or director is pecuniarily interested directly or indirectly, whereby the insurance corporation agrees to pay, for the acquisition of business, any commission or other compensation which under the agreement is increased or diminished by the amount of such business or by the insurance corporation`s earnings on such business. S 1210. By-laws of domestic stock life insurance companies. No by-law or amendment or repeal of a by-law of any domestic stock life insurance company shall be effective until approved by the superintendent. The superintendent may refuse such approval if he finds that such by-law or amendment or repeal does not conform with the requirements of law, or is not equitable to the company`s policyholders, or is inconsistent with the objects and purposes of such company. S 1211. Mutual insurance corporations; membership and dividends. (a) Every domestic mutual insurance corporation shall be organized, maintained and operated for the benefit of its members as a non-stock corporation. Every policyholder shall be a member of such corporation and shall, except as provided in subsection (d) hereof, be entitled to vote at any regular or special meeting of such corporation, to notice thereof pursuant to the by-laws and to share equitably in dividends declared by the board of directors. The board of directors may, subject to limitations in this chapter, from time to time declare a dividend from the corporation`s surplus. No dividend shall be declared or paid if thereby the company`s minimum or other required surplus will be impaired. In declaring and paying any dividend the board of directors may make reasonable classifications of policies, and shall declare and pay such dividend in a manner that is fair and equitable to the policyholders. Unless otherwise provided in the corporation`s charter or by-laws, each member shall be entitled to one vote at any regular or special meeting. The charter or by-laws may, with the approval of the superintendent, provide for distribution of voting power among members on the basis of the amount of insurance held, number of policies held, amount of premiums paid by them or on any other basis the superintendent finds fair and equitable. (b) A member of any such corporation may vote at any such meeting in person or by proxy. No proxy or power of attorney given by him, to vote at any meeting of such corporation, shall be valid or effective after the next meeting. No person shall directly or indirectly sell or purchase, or offer to sell or purchase, any proxy or power of attorney to vote at any such meeting, nor shall any person directly or indirectly give or receive, or offer to give or receive, any proxy or power of attorney to vote at any such meeting as an inducement to the negotiation or making of a contract of insurance or any renewal thereof, to the settlement of any claim thereunder, or to any other act relating thereto. (c) All corporations, their directors and representatives and all persons, firms or corporations holding property in trust may insure the same in mutual insurance corporations and by so doing such directors, representatives or trustees, in their representative capacity, may assume the liabilities and be entitled to the rights of a member of such insurer, but shall not be personally liable as individuals upon such contract of insurance. (d) The provisions of this section as to members` voting rights and the election of directors shall not apply to any domestic mutual life insurance company governed by the provisions of section four thousand two hundred ten of this chapter, nor shall they require any such company to hold a meeting of its members. (e) As to any surety or fidelity bond or like obligation executed by a mutual property/casualty insurance company as a surety or guarantor, the principal, and not the obligee, shall be a member of such corporation. S 1212. Service of process upon superintendent as attorney. (a) No domestic, foreign or alien insurer, including a fraternal benefit society, shall be or continue to be authorized to do an insurance business in this state unless there shall be filed in the office of the superintendent a power of attorney, executed by such insurer, appointing the superintendent and his successors in office, and authorized deputies, as its true and lawful attorney in and for this state, upon whom all lawful process in any proceeding against it on a contract delivered or issued for delivery, or on a cause of action arising, in this state may be served. Such power of attorney shall be accompanied by the insurer`s written certificate of designation of the name and address of the officer, agent, or other person to whom such process shall be forwarded by the superintendent or his deputy. Such designation may be changed by filing of a new certificate of designation in the office of the superintendent. (b) Service of process upon any such insurer in any proceeding in any court of competent jurisdiction may be made by serving the superintendent, any deputy superintendent, or any salaried employee of the department whom the superintendent designates for such purpose, all of whom shall have authority to accept such service pursuant to any such power of attorney. The service of process upon a domestic fraternal benefit society shall only be made by serving the superintendent, any deputy superintendent, any salaried employee of the department whom the superintendent designates for such purpose or by serving the process at the home office of such society. The service of process upon any foreign or alien fraternal benefit society shall be made only by serving the superintendent, any deputy superintendent or any salaried employee of the department whom the superintendent designates for such purpose. Service of process so made shall be deemed to have been made within the territorial jurisdiction of any court in this state. (c) At the time of service of process a fee of twenty dollars shall be paid to the superintendent or his deputy. (d) The power of attorney required by subsection (a) hereof shall be by its terms of indefinite duration, shall bind any person or corporation which as successor acquires the insurer`s assets and assumes its liabilities by merger or consolidation, and shall not be terminated by the insurer or such successor so long as any contracts, or liabilities or duties arising out of contracts, issued or delivered by such insurer in this state are in effect. Except as provided herein, or in section one thousand two hundred thirteen of this article, the superintendent shall not be designated as attorney for the service of process upon any unlicensed alien or foreign insurer. (e) Whenever any lawful process shall be served upon the superintendent, any deputy superintendent, or any salaried employee of the department whom the superintendent designates for such purpose under the provisions of this section, such person shall forward a copy of such process by mail, prepaid, directed to the person last designated by such insurer, as shown by the records of the department. (f) When one or more underwriters of any Lloyds underwriters, or one or more subscribers of any reciprocal insurer, are joined in the same proceeding, and service of process is made pursuant to this section, only one copy of such process shall be so served, and such service shall have the same effect as if made upon all such underwriters or all such subscribers. Such process shall be forwarded to the attorney-in-fact of such Lloyds underwriters or of such reciprocal insurer, and each such attorney-in-fact shall be designated to receive such process as specified in subsection (a) hereof. (g) The superintendent shall keep records, issue certificates and destroy processes served upon him, all as provided in subsection (f) of section one thousand two hundred thirteen of this article. S 1213. Service of process on superintendent as attorney for unauthorized insurers. (a) The purpose of this section is to subject certain insurers to the jurisdiction of the courts of this state in suits by or on behalf of insureds or beneficiaries under certain insurance contracts. The legislature declares that it is a subject of concern that many residents of this state hold policies of insurance issued or delivered in this state by insurers while not authorized to do business in this state, thus presenting to such residents the often insuperable obstacle of resorting to distant forums for the purpose of asserting legal rights under such policies. In furtherance of such state interest, the legislature herein provides a method of substituted service of process upon such insurers and declares that in so doing it exercises its power to protect its residents and to define, for the purpose of this section, what constitutes doing business in this state, and also exercises powers and privileges available to the state by virtue of public law number fifteen, seventy-ninth congress of the United States, chapter twenty, first session, senate number three hundred forty, as amended, (15 U.S.C. S 1011) which declares that the business of insurance and every person engaged therein shall be subject to the laws of the several states. (b) (1) Any of the following acts in this state, effected by mail or otherwise, by an unauthorized foreign or alien insurer: (A) the issuance or delivery of contracts of insurance to residents of this state or to corporations authorized to do business therein, (B) the solicitation of applications for such contracts, (C) the collection of premiums, membership fees, assessments or other considerations for such contracts, or (D) any other transaction of business, is equivalent to and constitutes its appointment of the superintendent, and his successors in office, to be its true and lawful attorney upon whom may be served all lawful process in any proceeding instituted by or on behalf of an insured or beneficiary arising out of any such contract of insurance, and shall signify its agreement that such service of process is of the same legal force and validity as personal service of process in this state upon such insurer. (2) Such service of process upon any such insurer in any such proceeding in any court of competent jurisdiction of this state may be made by serving the superintendent, any deputy superintendent or any salaried employee of the department whom the superintendent designates for such purpose with two copies thereof and the payment to him of a fee of twenty dollars. The superintendent shall forward a copy of such process by registered or certified mail to the defendant at its last known principal place of business, as designated by the issuer of such process, and shall keep a record of all process so served upon him. Such service of process under this paragraph is sufficient, provided notice of such service and a copy of the process are sent within ten days thereafter by or on behalf of the plaintiff to the defendant at its last known principal place of business by registered or certified mail with return receipt requested. The plaintiff shall file with the clerk of the court in which the action is pending, or with the judge or justice of such court if there be no clerk, an affidavit of compliance herewith, a copy of the process, and either a return receipt purporting to be signed by the defendant or a person qualified to receive its registered or certified mail in accordance with the rules and customs of the post office department, or, if acceptance was refused by the defendant or its agent, the original envelope bearing a notation by the postal authorities that receipt was refused. Service of process so made shall be deemed made within the territorial jurisdiction of any court in this state. (3) Service of process in any such proceeding shall in addition to the manner provided in paragraph two of this subsection be valid if served upon any person within this state who, in this state on behalf of such insurer, is: (A) soliciting insurance; (B) making, issuing or delivering any contract of insurance; or (C) collecting or receiving any premium, membership fee, assessment or other consideration for insurance; provided notice of such service and a copy of such process are sent within ten days thereafter, by or on behalf of the plaintiff to the defendant at the last known principal place of business of the defendant, by registered mail with return receipt requested. The plaintiff shall file with the clerk of the court in which the action is pending, or with the judge or justice of such court in case there be no clerk, an affidavit of compliance herewith, a copy of the process, and either a return receipt purporting to be signed by the defendant or a person qualified to receive its registered mail in accordance with the rules and customs of the post office department; or, if acceptance was refused by the defendant or its agent the original envelope bearing a notation by the postal authorities that receipt was refused. (4) The papers referred to in paragraphs two and three of this subsection shall be filed within thirty days after the return receipt or other official proof of delivery, or the original envelope bearing a notation of refusal, is received by the plaintiff. Service of process shall be complete when such process and the accompanying papers are filed pursuant to this section. (5) Nothing contained in this section shall limit or abridge the right to serve any process, notice or demand upon any insurer in any other manner permitted by law. (c) (1) Before any unauthorized foreign or alien insurer files any pleading in any proceeding against it, it shall either: (A) deposit with the clerk of the court in which the proceeding is pending, cash or securities or file with such clerk a bond with good and sufficient sureties, to be approved by the court, in an amount to be fixed by the court sufficient to secure payment of any final judgment which may be rendered in the proceeding, but the court may in its discretion make an order dispensing with such deposit or bond if the superintendent certifies to it that such insurer maintains within this state funds or securities in trust or otherwise sufficient and available to satisfy any final judgment which may be entered in the proceeding, or (B) procure a license to do an insurance business in this state. (2) The court in any proceeding wherein service is made pursuant to paragraph two or three of subsection (b) of this section may, in its discretion, order such postponement as may be necessary to afford the defendant reasonable opportunity to comply with the provisions of paragraph one of this subsection and to defend such proceeding. (3) Nothing in paragraph one of this subsection is to be construed to prevent an unauthorized foreign or alien insurer from filing a motion to set aside service made in the manner provided in paragraph two or three of subsection (b) hereof on the ground (i) that such unauthorized insurer has not done any act enumerated in paragraph one of subsection (b) of this section, or (ii) that the person on whom service was made pursuant to paragraph three of subsection (b) hereof was not doing any act therein enumerated. (d) In any action against an unauthorized foreign or alien insurer upon a contract of insurance issued or delivered in this state to a resident thereof or to a corporation authorized to do business therein, if the insurer has failed for thirty days after demand prior to the commencement of the action to make payment pursuant to the contract, and it appears to the court that such refusal was vexatious and without reasonable cause, the court may allow plaintiff a reasonable attorney`s fee and include such fee in any judgment rendered in such action. Such fee shall not exceed twelve and one-half percent of the amount the court finds the plaintiff is entitled to recover against the insurer nor be less than twenty-five dollars. Failure of an insurer to defend any such action shall be prima facie evidence that its failure to pay was vexatious and without reasonable cause. (e) This section shall not apply to any proceeding against any unauthorized foreign or alien insurer arising out of any contract of insurance effectuated in accordance with subsection (b) or (c) of section two thousand one hundred seventeen of this chapter or in accordance with section two thousand one hundred five of this chapter where such contract designates the superintendent or his successors in office the insurer`s true and lawful attorney upon whom may be served all lawful process in any proceeding instituted by or on behalf of an insured or beneficiary arising out of such contract. (f) The superintendent shall keep a record of each process served upon him under this section and pursuant to section one thousand two hundred twelve of this article, including the date of service. He shall, upon request made within ten years of such service, issue a certificate under his seal certifying as to the receipt of the process by an authorized person, the date and place of service and the receipt of the statutory fee. Process served upon the superintendent pursuant to this section or section one thousand two hundred twelve of this article shall be destroyed by him after a period of ten years from such service. S 1214. Acting for foreign corporation which has not designated superintendent as attorney. No person acting for himself or for others shall solicit or procure, or aid in soliciting or procuring, policies or certificates of insurance from, or adjust losses or in any manner aid the transaction of any business for, any foreign insurance corporation which has not executed and filed in the superintendent`s office a written appointment of the superintendent as its true and lawful attorney in and for this state, upon whom all lawful processes in any proceeding against it may be served. S 1215. Forfeiture of office by director or trustee of a domestic mutual insurer. The office of a trustee or director of any domestic mutual insurer shall immediately become vacant whenever he fails to attend at least one regular meeting of the board of trustees or directors in any period of eighteen consecutive months, or unless excused by the board, which action shall be entered on the minutes, it shall appear at the end of any calendar year that he failed to attend at least one-half of such regular meetings held in such calendar year. A trustee or director whose office becomes so vacant shall not be eligible for election to such office until one year has elapsed from the date the vacancy occurred. S 1216. Notice of indemnification of directors and officers of insurance corporations. No payment of indemnification, advancement or allowance under sections seven hundred twenty-one to seven hundred twenty-seven inclusive of the business corporation law shall be made unless a notice has been filed with the superintendent not less than thirty days prior to such payment, specifying the payees, the amounts, the manner in which such payment is authorized and the nature and status, at the time of such notice, of the litigation or threatened litigation. If any action with respect to indemnification of directors or officers of any domestic insurer shall be taken by amendment of the by-laws, such action shall be in accordance with the approval requirements in sections one thousand two hundred nine and one thousand two hundred ten of this article. If any action shall be taken by resolution of directors, or by agreement or otherwise, a notice shall be filed with the superintendent not less than thirty days thereafter specifying the action taken. S 1217. Vouchers for disbursements. No domestic insurance company shall make any disbursement of one hundred dollars or more unless evidenced by a voucher signed by or on behalf of the payee as compensation for goods or services rendered for the company, and correctly describing the consideration for the payment. If such disbursement be for services and disbursements, such vouchers shall set forth the services rendered and itemize the disbursements; if it is in connection with any matter pending before any legislative or public body or before any government department or officer, the voucher shall correctly describe also the nature of the matter and the company`s interest therein. If such a voucher is unobtainable, the disbursement shall be evidenced by a statement of an officer or responsible employee affirmed by him as true under the penalties of perjury, stating the reasons therefor and setting forth the particulars above mentioned. S 1218. Regulation of stock ownership, interlocking directors and common management. (a) Any domestic insurer and any foreign or alien insurer authorized to do business in this state may retain, invest in or acquire all or any shares, or, by contract of reinsurance or otherwise, acquire the whole or a substantial part of the assets, of any other insurer, or have a common management with any other insurer, unless such retention, investment, acquisition or common management is inconsistent with any other provision of this chapter or unless the effect thereof: (1) in the case of a domestic or alien insurer, may be substantially to lessen competition in any line of commerce in insurance in any section of the country or to tend to create a monopoly therein, or (2) in the case of a foreign insurer, may be substantially to lessen competition in any line of commerce in insurance in this state or to tend to create a monopoly therein. (b) No person shall serve as a director of two or more insurers under this chapter which are or during the next preceding two years have been engaged in writing directly the same lines of commerce in insurance unless such interlocking directorate is not used as a means to substantially lessen competition generally in the business of insurance or create a monopoly therein, but any person otherwise qualified may be a director of two or more insurers having a common ownership or management which is not otherwise proscribed if such interlocking directorate is not used as a means of substantially lessening competition generally in the business of insurance or of creating a monopoly therein. (c) (1) Whenever the superintendent believes this section is being violated, he shall serve upon the insurer or insurers and the director or directors, as the case may be, a notice pursuant to section three hundred three of this chapter of a hearing before the superintendent to be held not less than thirty days after such service and requiring such insurer or insurers and such director or directors, as the case may be, to show cause why an order should not be made by the superintendent directing such insurer or insurers and such director or directors, as the case may be, to cease and desist from such violation. (2) If, upon such hearing, the superintendent finds a violation of this section he shall issue and cause to be served upon each such insurer or insurers and such director or directors, as the case may be, an order reciting the facts found by him, and setting forth the respects in which there has been a violation, and directing such insurer or insurers and such director or directors, as the case may be, to cease and desist from such violation and he may in such order direct each such insurer to divest itself of the shares or assets held or to rid itself of the directors serving contrary to the provisions of subsection (a) or (b) of this section. (3) A violation of any such cease and desist order shall, subject to judicial review, be deemed a violation of this chapter. (4) The attorney general may maintain a proceeding upon his own information to prevent and restrain violations of this section and the judgment therein against any defendant may grant affirmative relief to the same extent as may the superintendent by an order issued pursuant to this section. (5) Any person, firm, corporation or association shall be entitled to maintain a proceeding to obtain injunctive relief against loss or damages by a violation of this section at whatever time and under the same conditions and principles as when injunctive relief against conduct that will cause loss or damage is granted by the courts under the laws of this state governing such proceedings. In such proceeding, the plaintiff also may recover the damages sustained by him and the cost of suit, including a reasonable attorney`s fee. (d) Nothing contained in this section shall be deemed to alter or abridge any rights or remedies otherwise available to any person, the superintendent and the attorney general under any law of this state. S 1219. Misconduct by directors; insolvency. (a) Every director of an insurance corporation who: (1) in case of the fraudulent insolvency of such corporation, shall have participated in such fraud, or (2) as such director, either wilfully does any act expressly forbidden by statute, or wilfully omits to perform any duty imposed upon him by statute, shall be guilty of a misdemeanor, unless otherwise prescribed by law. (b) The insolvency of an insurance corporation is deemed fraudulent unless its affairs appear upon investigation to have been administered fairly, legally and with the same care and diligence that agents receiving a compensation for their services are bound, by law, to observe. S 1220. Misconduct by officers and directors of co-operative fire insurance companies and of fraternal benefit societies. No officer or director of a co-operative fire insurance company or of a fraternal benefit society shall sell his position as such officer or director for any money or valuable consideration, or accept or receive, directly or indirectly, any money or valuable consideration for his resignation as such officer or director. He shall be guilty of a felony if any money or valuable consideration accepted or received for any such sale or resignation exceeds five hundred dollars. If it is a less amount, he shall be guilty of a misdemeanor. S 1221. Transactions by officers, directors and certain shareowners in the insurer`s shares. (a) Every person who directly or indirectly owns beneficially more than ten percent of any class of shares of a domestic insurer or is a director or officer thereof shall file in the office of the superintendent: (1) within ten days after he becomes such owner, director or officer a statement, in form prescribed by the superintendent, of the amount of all such shares of which he is the beneficial owner, and (2) within ten days after the close of each calendar month in which a change in such ownership occurs a statement, in such form as the superintendent may prescribe, indicating his ownership at the close of such calendar month and such changes in his ownership as have occurred during such calendar month. (b) To prevent unfair use of any information obtained by such beneficial owner, director or officer by reason of his relationship to such insurer, any profit realized by him from any purchase and sale, or any sale and purchase, of the insurer`s shares within any period of less than six months, unless the shares were acquired in good faith in connection with a debt previously contracted, shall inure to and be recoverable by the insurer, irrespective of any intention he had in entering into such transaction to hold the shares purchased or not to repurchase the shares sold for a period exceeding six months. A proceeding to recover such profit may be instituted at law or in equity in any court of competent jurisdiction by the insurer or by the owner of any shares of the insurer in the insurer`s name and behalf if it fails or refuses to bring such suit within sixty days after request or fails diligently to prosecute it; but no such suit shall be brought more than two years after the date such profit was realized. This subsection shall not apply to any transaction where such beneficial owner was not such at the time of both the purchase and sale, or both the sale and purchase, of the shares involved, or any transaction which the superintendent may by rules and regulations exempt as not comprehended within the purpose of this subsection. (c) It shall be unlawful for any such beneficial owner, director or officer, directly or indirectly, to sell any shares of such insurer if the person selling the shares or his principal either does not own the shares sold, or, if owning them, does not deliver them against such sale within twenty days thereafter, or does not within five days after such sale deposit them in the mails or other usual channels of transportation; but no person shall be deemed to have violated this subsection if he proves that notwithstanding the exercise of good faith he was unable to make such delivery or deposit within such time, or that to do so would cause undue inconvenience or expense.