Limitation of mortgage loans. Real estate. Policy loans. Collateral loans. 1817, 120, § 3. Prohibited investments. Certain funds exempt. Proviso. SECTION 2. No domestic insurance company shall invest any of its funds in loans upon mortgages except upon the conditions expressed in sub-division 4 of section thirty-seven of said chapter five hundred and seventy-six, as amended by section one of this act, provided that the investments of companies organized under the tenth clause of section thirty-two of said chapter five hundred and seventy-six shall be subject to no greater restrictions hereunder than those imposed by section sixty-four of said chapter. 5. In such real property as shall be requisite for convenient accommodation in the transaction of its business and subject to the provisions of section twenty-six. 6. In loans upon the security of its own policies not exceeding at the time of making the loan the legal reserve on the policy. 7. In loans secured by collateral security consisting of any of the above. R. S. 37, § 10. 1854, 453, § 5. 1856, 252, § 14. R. L. 118, § 34. G. S. 58, § 31. 8. No domestic life insurance company shall invest any of its funds in any unincorporated business or enterprise, nor in the stocks or evidence of indebtedness of any corporation, the owners or holders of which stock or evidence of indebtedness may in any event be or become liable on account thereof to any assessment except for taxes, nor shall such life insurance company invest any of its funds in its own stock or in the stock of any other insurance company. No such company shall invest in, acquire or hold directly or indirectly more than ten per cent of the capital stock of any corporation, nor shall more than ten per cent of its capital and surplus be invested in the stock of any one corporation. No such company shall subscribe to or participate in any underwriting of the purchase or sale of securities or property, or enter into any transaction for such purchase or sale on account of said company jointly with any other person, firm or corporation; nor shall any such company enter into any agreement to withhold from sale any of its property, but the disposition of its property shall be at all times within the control of its board of directors. 9. Nothing herein shall prevent such company from investing or loaning any funds not required to be invested as provided in subdivisions one to seven, inclusive, of this section in any manner that the directors of such life insurance company may determine: provided, however, that such funds shall not be invested in the purchase of stocks or evidence of indebtedness prohibited by sub-division eight of this section, and provided that no loan of such funds shall be made to an individual or firm unless it is secured by collateral security. acquired by sale or fore closure. 10. Nothing in this section shall prevent any such life insurance Property company from entering into an agreement for the purpose of protecting the interests of the company in securities lawfully held by it, or for the purpose of reorganization of a corporation which issued securities so held, and from depositing such securities with a committee or depositaries appointed under such agreement; nor from accepting corporate stock or bonds, or other securities, which may be distributed pursuant to any such agreement, or to any plan or reorganization; and nothing in this section shall prevent any such life insurance company from acquiring or holding any property that shall be acquired in satisfaction of any debt previously contracted, or that shall be obtained by sale or foreclosure of any security held by it: provided, however, that, if the property owned be such as is Proviso. herein prohibited for investment by such corporation, it shall dispose of such property if personal, within one year, and if real property within five years, from the date when it acquired title to the same, unless the insurance commissioner shall extend the time for such disposition for the reason that the interests of the company will suffer materially by a forced sale of such property. A record of such extension shall be made by the insurance commissioner, which shall state the time of the extension, and in that event the sale of said property may be made at any time before the expiration of the time of such extension. investments All property held by any domestic insurance company when this Prohibited act takes effect, the investment in or loan on which property by to be sold. such company is prohibited by the provisions of this section, shall be sold and disposed of within five years from the time when this act shall take effect, and such property shall not be held for a longer period, unless the time be extended by the insurance commissioner in the manner above provided. The fact that the bonds invested in are unauthorized does not prevent enforcement of their payment. (Chaffee v. Middlesex R.R., 146 Mass. 224, 1888; see also National Bank v. Whitney, 103 U. S. 99.) The capital stock and one-fourth of the reserve of a domestic life insurance company may be invested in loans to individuals or firms, secured by stock of a trust company or bank which is assessable, and also in loans secured by stocks, bonds or other collateral not designated in clauses 1 to 5 of section 37. (Op. A. G., 1908.) Impairment, Increase and Reduction of Capital. SECTION 38. If the net assets of the company do not amount to more than three fourths of its capital, it may make good its capital by assessment of its stock. 1872, 325, § 1. 1875, 27, § 6. P. S. 119, §§ 59-61. 1894, 522, § 35. Impaired capital made good, how. 1863, 249, 88 7-9. Shares on which such assessment is not paid within sixty days Forfeiture of after demand shall be forfeitable, and may be cancelled by a shares. Authority to do business to cease, when. Increase of capital. 1872, 375, §§ 13, 14. 1875, 27, § 5. 1878, 35, 88 2-4. P. S. 119, §§ 62, 70. 1887, 214, § 36. 1894, 522,836. vote of the directors, and new shares issued to make up the deficiency. If such company shall not, within three months after notice from the insurance commissioner, make good its capital as aforesaid, or reduce the same as provided in section forty, its authority to transact new business of insurance shall cease. SECTION 39.1 Such company may issue pro rata to its stockholders certificates of any portion of its actual net surplus it may decide to divide, which shall be deemed to be an increase of its capital to the amount of such certificates, and such company may, at a meeting called for the purpose, vote to increase the amount and number of shares of its capital stock, and to issue certificates thereof R. L. 118, § 36. when paid for in full. If a company shall vote to increase its capital in the second of the two ways set forth in this section, the directors shall fix the price, not less than par, at which, and the time, not less than thirty days after the date of such vote to increase, within which the new stock may be taken by the stockholders. And the directors shall forthwith give notice in writing to each stockholder who was such at the time of the vote to increase, stating the amount of the increase, the number of shares or fractions of shares of new stock that such stockholder is entitled to take, the price at which and the time within which such new stock may be taken. Within said time each stockholder may take at the price fixed as aforesaid his proportion of such new shares at the date of such vote to increase. If at the expiration of such time any shares remain untaken, the directors may sell the same for the benefit of the corporation in such manner and for such price, not less than the price fixed as aforesaid, - certificate of. as they may determine. However the increase is made, the com Reduction of P. S. 119, § 65. pany shall, within thirty days after the issue of such certificates, submit to the insurance commissioner a certificate stating the amount of the increase and the facts of the transaction, signed and sworn to by its president and secretary and a majority of its directors. If the commissioner finds that the facts conform to the law he shall indorse his approval thereof; and, upon filing such certificate so indorsed with the secretary of the commonwealth and the payment of a fee of five dollars for filing the same, the company may transact business upon the capital as increased and the commissioner shall issue his certificate to that effect. SECTION 40. If the capital stock of a company is impaired, such company may, upon a vote of a majority of the stock represented at a meeting legally called for that purpose, reduce its capiR. L. 118, § 37. tal stock and the number of shares thereof to an amount not less 1887, 214, § 37. 1894, 522, § 37. 1 As amended by chapter 396, Acts of 1912. than the minimum amount required by law. But no part of its assets and property shall be distributed to its stockholders. certificate of. of capital, 1875, 27, § 2. P. 8. 119, § 66. Within ten days after such meeting the company shall submit to Reduction the insurance commissioner a certificate setting forth the proceedings thereof and the amount of such reduction and the assets and liabilities of the company, signed and sworn to by its president, secretary and a majority of its directors. If the commissioner finds that the reduction is made in conformity to law and that it will not be prejudicial to the public, he shall indorse his approval upon the certificate. Company may transact busi ness upon basis of reduced capi Upon filing the certificate, so indorsed, with the secretary of the commonwealth, and paying a fee of five dollars for the filing thereof, the company may transact business upon the basis of such reduced tal, when. capital as though the same were its original capital, and its charter 1879.119367. shall be deemed to be amended to conform thereto; and the insur- R. L. 118, § 37. ance commissioner shall issue his certificate to that effect. 27, certificates of Such company may, by a majority vote of its directors, after Substitute such reduction, require the return of the original certificates of stock. stock held by each stockholder in exchange for new certificates P. S. 119, § 68. 1875, 27, § 4. which it may issue in lieu thereof for such number of shares as each R. L. 118, § 37. stockholder is entitled to in the proportion that the reduced capital bears to the original capital. Dividends. be made only etc. 1856, 252, 16. G. S. 58, § 34. 1872, 375, 17. 1875, 95. 1891, 289. SECTION 41. No stock company shall make a dividend, either Dividends to in cash or stock certificates, except from its actual net surplus from surplus, computed as required by law in its annual statement; nor shall 117, 120, § 2. any such company which has ceased to do new business of in- R. S. 37, § 15. surance divide any portion of its assets, except surplus, to its stockholders until it shall have performed or cancelled its policy obli- 1874, 222. gations. Any such company may declare and pay, annually or 1877, 36. 1878, 35, semi-annually, from its surplus, cash dividends to its stockholders $81, 2. of not more than ten per cent of its capital stock in a year; and if P. S. 119,, §§ 69, 70, 72. the dividends in any year are less than ten per cent, the difference 1887, 214, § 38. may be made up in any subsequent year or years from surplus accumulations; but any such company may pay such dividend as the directors may consider prudent out of any surplus that shall remain after charging in addition to all its liabilities, except unearned premiums, an amount equal to the whole amount of premiums on unexpired risks, and deducting from the assets all securities and book accounts on which no part of the principal or interest has been paid within the last year and for which foreclosure or suit has not been commenced for collection, or which after judgment obtained thereon shall have remained more than two years unsat 1894, 522, § 38. R. L. 118, § 38. 1903, 174. isfied and on which interest shall not have been paid, and also deducting all interest due and unpaid on any property of the company. In Atty. Gen. v. Mercantile Marine Ins. Co., 121 Mass. 524, 1877, on information in equity against the defendant for having paid in one year dividends exceeding ten per cent of its capital stock, it was held that 1874, chapter 222 (see Acts of 1907, chapter 576, section 41), authorizing “joint stock fire and marine insurance companies organized under the laws of this Commonwealth," did not apply to companies established, like the defendant, under special charters. A short time after this, 1877, chapter 36, section 1, was passed, providing that this clause should be held to apply to all companies, whether under special charter or the general laws, except mutual insurance companies having a guaranty capital. In computing surplus to determine if more than a ten per cent dividend may be paid by a stock company credit, may be given for reinsurance in authorized companies in ascertaining the whole amount of premiums on unexpired risks. (Op. A. G., 1914.) Issue of 1835, 147, § 5. G. S. 58, § 58. $39. 1896, 126. MUTUAL FIRE. SECTION 42. No policy shall be issued by a purely mutual fire insurance company organized subsequent to the twenty-third day of April in the year eighteen hundred and ninety-four, nor by a mutual fire insurance company with a guaranty capital of less than one hundred thousand dollars, until not less than one million dollars of insurance, in not less than four hundred separate risks upon property located in this commonwealth, has been subscribed for and entered on its books. No policy shall be issued under the provisions of this section until a list of the subscribers for insurance, with such other information as the insurance commissioner may R. L. 118, § 39. require, shall have been filed at the insurance department, nor until the president and secretary of the company shall have certified under oath that every subscription for insurance in the list so filed is genuine and made with an agreement with every subscriber for insurance that he will take the policies subscribed for by him within thirty days of the granting of a license to the company by the insurance commissioner to issue policies. If such officers shall take a false oath relative to such certificate they shall be guilty of perjury. 1897, 62. 1904, 300. Certain fire insurance to make further insurances without a license. No mutual fire insurance company operating on the cash precompanies not mium plan as provided in section forty-eight, nor any mutual fire insurance company with a guaranty capital of less than one hundred thousand dollars, either of which has become insolvent, or has reinsured or cancelled its risks so that it has on its books less than one million dollars of insurance in force, not reinsured, in not less than four hundred separate risks in this commonwealth, shall make any further insurances until it has secured applications for 1 As amended by chapter 403, Acts of 1912. |