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Minnesota Legislature

Office of the Revisor of Statutes

Key: (1) language to be deleted (2) new language

  

                         Laws of Minnesota 1991 

                         CHAPTER 58-H.F.No. 739 
           An act relating to corporations; deleting 
          consideration of the effect of insurance company 
          takeovers on shareholders and creditors; limiting 
          application of fair price provisions to domestic 
          corporations; deleting nexus requirements for 
          application of control share acquisition and business 
          combination statutes; exempting employee stock 
          ownership plans from takeover statutes; exempting 
          certain transactions from the control share 
          acquisition statute; modifying limitations on 
          corporate share purchases above market value; amending 
          Minnesota Statutes 1990, sections 60D.02, subdivisions 
          1, 2, and 4; 60D.06; 60D.08, subdivisions 1 and 2; 
          60D.11; 60D.12, subdivision 2; 302A.011, subdivisions 
          38, 39, 49, and by adding subdivisions; and 302A.553, 
          subdivision 3; proposing coding for new law in 
          Minnesota Statutes, chapter 302A; repealing Minnesota 
          Statutes 1990, sections 60D.02, subdivision 5; and 
          80B.06, subdivision 7. 
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA: 
    Section 1.  Minnesota Statutes 1990, section 60D.02, 
subdivision 1, is amended to read: 
    Subdivision 1.  [PREREQUISITES TO ACQUISITION OF CONTROL.] 
No person shall make a tender offer for or a request or 
invitation for tenders of, or enter into any agreement to 
exchange securities for, or otherwise seek to acquire, or 
acquire, any voting security issued by a domestic insurer or by 
a person which (1) is in control of a domestic insurer, and (2) 
is engaged primarily either directly or indirectly through its 
subsidiaries in the business of insurance, if such acquisition 
would result in a change in the direct or indirect control of 
the domestic insurer, unless prior thereto: 
    (1) The person proposing to make the acquisition shall have 
filed with the commissioner a statement containing the 
information required by this section and shall have furnished a 
copy of the statement to the domestic insurer for mailing to its 
shareholders pursuant to subdivision 5; and 
    (2) The proposed acquisition has been approved by the 
commissioner in the manner hereinafter prescribed. 
    Sec. 2.  Minnesota Statutes 1990, section 60D.02, 
subdivision 2, is amended to read: 
    Subd. 2.  [CONTENT OF STATEMENT.] The statement to be filed 
with the commissioner shall be made under oath or affirmation 
and shall contain: 
    (1) The name and address of each person by whom or on whose 
behalf the acquisition of control is to be effected (hereinafter 
called "acquiring party"), and 
    (i) if such person is an individual, that person's 
principal occupation and all offices and positions held during 
the past five years, and any conviction of crimes other than 
minor traffic violations during the past ten years; 
    (ii) if such person is not an individual, a report of the 
nature of its business operations during the past five years or 
for such lesser period as such person and any predecessors 
thereof shall have been in existence; an informative description 
of the business intended to be done by such person and such 
person's subsidiaries; and a list of all individuals who are or 
who have been selected to become directors or executive officers 
of such person, or who perform or will perform functions 
appropriate to such positions.  Such list shall include for each 
such individual the information required by paragraph (1) (i). 
    (2) The source, nature and amount of the consideration used 
or to be used in effecting the acquisition of control, a 
description of any transaction wherein funds were or are to be 
obtained for any such purpose, and the identity of persons 
furnishing such consideration, provided, however, that where a 
source of such consideration is a loan made in the lender's 
ordinary course of business, the identity of the lender shall 
remain confidential, if the person filing such statement so 
requests. 
    (3) Fully audited financial information as to the earnings 
and financial condition of each acquiring party and, if 
requested by the commissioner, its affiliates, for the preceding 
five fiscal years, or for such lesser period as such acquiring 
party and any predecessors thereof shall have been in existence, 
and similar unaudited information as of a date not earlier than 
90 days prior to the filing of the statement. 
    (4) Any plans or proposals which each acquiring party may 
have to liquidate such insurer, to sell its assets or merge or 
consolidate it with any person, or to make any other material 
change in the business or corporate structure or management. 
    (5) The number of shares of any security which each 
acquiring party proposes to acquire, and the terms of the offer, 
request, invitation, agreement, or acquisition, and a statement 
as to the method by which the fairness of the proposal was 
arrived at. 
    (6) The amount of each class of any security referred to in 
subdivision 1 which is beneficially owned or concerning which 
there is a right to acquire beneficial ownership by each 
acquiring party. 
    (7) A full description of any contracts, arrangements or 
understandings with respect to any security referred to in 
subdivision 1 in which any acquiring party is involved, 
including but not limited to transfer of any of the securities, 
joint ventures, loan or option arrangements, puts or calls, 
guarantees of loans, guarantees against loss or guarantees of 
profits, division of losses or profits, or the giving or 
withholding of proxies.  The description shall identify the 
persons with whom the contracts, arrangements or understandings 
have been entered into. 
    (8) A description of the purchase of any security referred 
to in subdivision 1 during the 12 calendar months preceding the 
filing of the statement by any acquiring party, including the 
dates of purchase, names of the purchasers, and consideration 
paid or agreed to be paid therefor. 
    (9) A description of any recommendations to purchase any 
security referred to in subdivision 1 made during the 12 
calendar months preceding the filing of the statement, by any 
acquiring party, or by anyone based upon interviews or at the 
suggestion of such acquiring party. 
    (10) Copies of all tender offers for, requests or 
invitations for tenders or exchange offers for, and agreements 
to acquire or exchange any securities referred to in subdivision 
1, and (if distributed) of additional soliciting material 
relating thereto. 
    (11) The terms of any agreement, contract or understanding 
made with any broker-dealer as to solicitation of securities 
referred to in subdivision 1 for tender, and the amount of any 
fees, commissions or other compensation to be paid to 
broker-dealers with regard thereto. 
    (12) Such additional information as the commissioner may by 
rule prescribe as necessary or appropriate for the protection of 
policyholders and securityholders of the insurer or in the 
public interest.  If the person required to file the statement 
referred to in subdivision 1 is a partnership, limited 
partnership, syndicate or other group, the commissioner may 
require that the information called for in this subdivision 
shall be given with respect to each partner of such partnership 
or limited partnership, each member of such syndicate group, and 
each person who controls such partner or member.  If any 
partner, member or person is a corporation or the person 
required to file the statement referred to in subdivision 1 is a 
corporation, the commissioner may require that the information 
called for in this subdivision shall be given with respect to 
the corporation, each officer and director of the corporation, 
and each person who is directly or indirectly the beneficial 
owner of more than ten percent of the outstanding voting 
securities of the corporation.  If any material change occurs in 
the facts set forth in the statement filed with the commissioner 
and sent to the insurer pursuant to this section, an amendment 
setting forth the change, together with copies of all documents 
and other material relevant to the change, shall be filed with 
the commissioner and sent to the insurer within two business 
days after the person learns of the change.  The insurer shall 
send the amendment to its shareholders.  
    Sec. 3.  Minnesota Statutes 1990, section 60D.02, 
subdivision 4, is amended to read: 
    Subd. 4.  [APPROVAL BY COMMISSIONER; HEARINGS.] (1) 
Pursuant to the powers granted under section 60A.03, subdivision 
2, the commissioner shall approve any acquisition of control 
unless, after a public hearing, the commissioner finds that the 
acquiring party has failed to sustain the burden of showing that 
none of the following conditions exist: 
    (i) after the change of control the domestic insurer would 
not be able to satisfy the requirements for the issuance of a 
license to write the line or lines of insurance for which it is 
presently licensed; 
    (ii) the effect of the acquisition of control would be 
substantially to lessen competition in insurance in this state 
or tend to create a monopoly; 
    (iii) the financial condition of any acquiring party might 
jeopardize the financial stability of the insurer, or prejudice 
the interest of its policyholders or the interests of any 
securityholders who are unaffiliated with the acquiring party; 
    (iv) the terms of the offer, request, invitation, agreement 
or acquisition are unfair and unreasonable to the 
securityholders of the insurer; 
    (v) the plans or proposals which the acquiring party has to 
liquidate the insurer, sell its assets or consolidate or merge 
it with any person, or to make any other material change in its 
business or corporate structure or management, are unfair and 
unreasonable to policyholders of the insurer and not in the 
public interest; or 
    (vi) (v) the competence, experience and integrity of those 
persons who would control the operation of the insurer are such 
that it would not be in the interest of policyholders of the 
insurer and of the public to permit the acquisition of control. 
    (2) The hearing shall be held within 60 days after the 
statement is filed, and at least 20 days' notice shall be given 
by the commissioner to the person filing the statement.  Not 
less than seven days' notice shall be given by the person filing 
the statement to the insurer and to any other persons as may be 
designated by the commissioner.  The insurer shall give notice 
of the hearing to its securityholders.  The commissioner shall 
make a determination within 30 days after conclusion of the 
hearing.  At the hearing, the person filing the statement, the 
insurer, any person to whom notice of hearing was sent, and any 
other person whose interests may be affected, has the right to 
present evidence, examine and cross-examine witnesses, offer 
oral and written arguments according to the procedure for 
contested cases under chapter 14.  The persons participating may 
conduct discovery proceedings in the same manner as prescribed 
for the district courts of this state.  All discovery 
proceedings shall be concluded not later than five days prior to 
the commencement of the public hearing. 
    Sec. 4.  Minnesota Statutes 1990, section 60D.06, is 
amended to read: 
    60D.06 [CONFIDENTIAL TREATMENT.] 
    All information, documents and copies thereof obtained by 
or disclosed to the commissioner or any other person in the 
course of an examination or investigation made pursuant to 
section 60D.05, and all information reported pursuant to section 
60D.03, shall be given confidential treatment and shall not be 
subject to subpoena and shall not be made public by the 
commissioner or any other person, except to insurance 
departments of other states, without the prior written consent 
of the insurer to which it pertains unless the commissioner, 
after giving the insurer and its affiliates who would be 
affected thereby, notice and opportunity to be heard, determines 
that the interests of policyholders, shareholders or the public 
will be served by the publication, in which event the 
commissioner may publish all or any part in such manner as the 
commissioner may deem appropriate.  
    Sec. 5.  Minnesota Statutes 1990, section 60D.08, 
subdivision 1, is amended to read: 
    Subdivision 1.  [INJUNCTIONS.] Whenever it appears to the 
commissioner that an insurer or any director, officer, employee 
or agent thereof has committed or is about to commit a violation 
of sections 60D.01 to 60D.13 or of any rule or order issued by 
the commissioner, the commissioner may apply to the district 
court for the county in which the principal office of the 
insurer is located or if such insurer has no such office in this 
state then to the district court for Ramsey county for an order 
enjoining such insurer or such director, officer, employee or 
agent thereof from violating or continuing to violate sections 
60D.01 to 60D.13 or any rule or order, and for such other 
equitable relief as the nature of the case and the interests of 
the insurer's policyholders, creditors and shareholders or the 
public may require.  
    Sec. 6.  Minnesota Statutes 1990, section 60D.08, 
subdivision 2, is amended to read: 
    Subd. 2.  [VOTING OF SECURITIES; WHEN PROHIBITED.] No 
security which is the subject of any agreement or arrangement 
regarding acquisition, or which is acquired in contravention of 
the provisions of sections 60D.01 to 60D.13 or of any rule or 
order issued by the commissioner may be voted at any 
shareholders' meeting, or may be counted for quorum purposes, 
and any action of shareholders requiring the affirmative vote of 
a percentage of shares may be taken as though such securities 
were not issued and outstanding; but no action taken at any such 
meeting shall be invalidated by the voting of such securities, 
unless the action would materially affect control of the insurer 
or unless the courts of this state have so ordered.  If an 
insurer or the commissioner has reason to believe that any 
security of the insurer has been or is about to be acquired in 
contravention of the provisions of sections 60D.01 to 60D.13 or 
of any rule or order issued by the commissioner, the insurer or 
the commissioner may apply to the appropriate court as 
designated in subdivision 1, to enjoin any offer, request, 
invitation, agreement or acquisition made in contravention of 
section 60D.02 or any rule or order issued by the commissioner, 
to enjoin the voting of any security so acquired, to void any 
vote of such security already cast at any meeting of 
shareholders, and for other equitable relief as the nature of 
the case and the interests of the insurer's policyholders, 
creditors and shareholders or the public may require.  
    Sec. 7.  Minnesota Statutes 1990, section 60D.11, is 
amended to read: 
    60D.11 [RECEIVERSHIP.] 
    Whenever it appears to the commissioner that any person has 
committed a violation of sections 60D.01 to 60D.13 which so 
impairs the financial condition of a domestic insurer as to 
threaten insolvency or make the further transaction of business 
by it hazardous to its policyholders, creditors, shareholders or 
the public, the commissioner may proceed as provided in chapter 
60B, to take possession of the property of such domestic insurer 
and to conduct the business thereof.  
    Sec. 8.  Minnesota Statutes 1990, section 60D.12, 
subdivision 2, is amended to read: 
    Subd. 2.  [STAY OF ACTION.] The filing of an appeal 
pursuant to this section shall stay the application of any order 
or other action of the commissioner to the appealing party 
unless the court, after giving such party notice and an 
opportunity to be heard, determines that a stay would be 
detrimental to the interests of policyholders, shareholders, 
creditors or the public.  
    Sec. 9.  Minnesota Statutes 1990, section 302A.011, 
subdivision 38, is amended to read: 
    Subd. 38.  [CONTROL SHARE ACQUISITION.] "Control share 
acquisition" means an acquisition, directly or indirectly, by an 
acquiring person of beneficial ownership of shares of an issuing 
public corporation that, except for section 302A.671, would, 
when added to all other shares of the issuing public corporation 
beneficially owned by the acquiring person, entitle the 
acquiring person, immediately after the acquisition, to exercise 
or direct the exercise of a new range of voting power within any 
of the ranges specified in section 302A.671, subdivision 2, 
paragraph (d), but does not include any of the following:  
    (a) an acquisition before, or pursuant to an agreement 
entered into before, August 1, 1984; 
    (b) an acquisition by a donee pursuant to an inter vivos 
gift not made to avoid section 302A.671 or by a distributee as 
defined in section 524.1-201, clause (10); 
    (c) an acquisition pursuant to a security agreement not 
created to avoid section 302A.671; 
    (d) an acquisition under sections 302A.601 to 302A.661, if 
the issuing public corporation is a party to the transaction; 
    (e) an acquisition from the issuing public corporation; or 
    (f) an acquisition for the benefit of others by a person 
acting in good faith and not made to avoid section 302A.671, to 
the extent that the person may not exercise or direct the 
exercise of the voting power or disposition of the shares except 
upon the instruction of others; 
    (g) an acquisition pursuant to a savings, employee stock 
ownership, or other employee benefit plan of the issuing public 
corporation or any of its subsidiaries, or by a fiduciary of the 
plan acting in a fiduciary capacity pursuant to the plan; or 
    (h) an acquisition subsequent to January 1, 1991, pursuant 
to an offer to purchase for cash all shares of the voting stock 
of the issuing public corporation: 
    (i) which has been approved by a majority vote of the 
members of a committee comprised of the disinterested members of 
the board of the issuing public corporation formed pursuant to 
section 302A.673, subdivision 1, paragraph (d); and 
    (ii) pursuant to which the acquiring person will become the 
owner of over 50 percent of the voting stock of the issuing 
public corporation outstanding at the time of the transaction. 
    For purposes of this subdivision, shares beneficially owned 
by a plan described in clause (g), or by a fiduciary of a plan 
described in clause (g) pursuant to the plan, are not deemed to 
be beneficially owned by a person who is a fiduciary of the 
plan.  All shares the beneficial ownership of which is acquired 
within a 120-day period, and all shares the beneficial ownership 
of which is acquired pursuant to a plan to make a control share 
acquisition, shall be deemed to have been acquired in the same 
acquisition.  
    Sec. 10.  Minnesota Statutes 1990, section 302A.011, 
subdivision 39, is amended to read: 
    Subd. 39.  [ISSUING PUBLIC CORPORATION.] "Issuing public 
corporation" means a corporation (a) which has at least 50 
shareholders, (b) which (1) has its principal place of business 
or its principal executive office located in this state or (2) 
owns or controls assets located within this state that have a 
fair market value of at least $1,000,000, and (c) which (1) has 
more than ten percent of its beneficial or record shareholders 
resident in this state, (2) has more than ten percent of its 
shares owned beneficially or of record by residents in this 
state, or (3) has more than 1,000 beneficial or record 
shareholders resident in this state. 
    Sec. 11.  Minnesota Statutes 1990, section 302A.011, 
subdivision 49, is amended to read: 
    Subd. 49.  [INTERESTED SHAREHOLDER.] (a) "Interested 
shareholder," when used in reference to any issuing public 
corporation, means any person (other than the issuing public 
corporation or any subsidiary of the issuing public corporation) 
that is (1) the beneficial owner, directly or indirectly, of ten 
percent or more of the voting power of the outstanding shares 
entitled to vote of the issuing public corporation or (2) an 
affiliate or associate of the issuing public corporation and at 
any time within the four-year period immediately before the date 
in question was the beneficial owner, directly or indirectly, of 
ten percent or more of the voting power of the then outstanding 
shares entitled to vote of the issuing public corporation.  
Notwithstanding anything stated in this subdivision, if a person 
who has not been a beneficial owner of ten percent or more of 
the voting power of the outstanding shares entitled to vote of 
the issuing public corporation immediately prior to a repurchase 
of shares by, or recapitalization of, the issuing public 
corporation or similar action shall become a beneficial owner of 
ten percent or more of the voting power solely as a result of 
the share repurchase, recapitalization, or similar action, the 
person shall not be deemed to be the beneficial owner of ten 
percent or more of the voting power for purposes of clause (1) 
or (2) unless: 
    (i) the repurchase, recapitalization, conversion, or 
similar action was proposed by or on behalf of, or pursuant to 
any agreement, arrangement, relationship, understanding, or 
otherwise (whether or not in writing) with, the person or any 
affiliate or associate of the person; or 
     (ii) the person thereafter acquires beneficial ownership, 
directly or indirectly, of outstanding shares entitled to vote 
of the issuing public corporation and, immediately after the 
acquisition, is the beneficial owner, directly or indirectly, of 
ten percent or more of the voting power of the outstanding 
shares entitled to vote of the issuing public corporation.  
    (b) Interested shareholder does not include: 
    (1) the issuing public corporation or any of its 
subsidiaries; or 
    (2) a savings, employee stock ownership, or other employee 
benefit plan of the issuing public corporation or its 
subsidiary, or a fiduciary of the plan when acting in a 
fiduciary capacity pursuant to the plan. 
     For purposes of this subdivision, shares beneficially owned 
by a plan described in clause (2), or by a fiduciary of a plan 
described in clause (2) pursuant to the plan, are not deemed to 
be beneficially owned by a person who is a fiduciary of the plan.
    Sec. 12.  Minnesota Statutes 1990, section 302A.011, is 
amended by adding a subdivision to read: 
    Subd. 52.  [OFFEROR.] "Offeror" means a person who makes or 
in any way participates in making a takeover offer.  Offeror 
does not include a bank or broker-dealer loaning funds to an 
offeror in the ordinary course of its business or a bank, 
broker-dealer, attorney, accountant, consultant, employee, or 
other person furnishing information or advice to or performing 
ministerial duties for an offeror and not otherwise 
participating in the takeover offer.  When two or more persons 
act as a partnership, limited partnership, syndicate, or other 
group pursuant to any agreement, arrangement, relationship, 
understanding, or otherwise, whether or not in writing, for the 
purpose of acquiring, owning, or voting shares of a target 
company, all members of the partnership, syndicate, or other 
group constitute "a person." 
    Sec. 13.  Minnesota Statutes 1990, section 302A.011, is 
amended by adding a subdivision to read: 
    Subd. 53.  [TAKEOVER OFFER.] (a) "Takeover offer" means an 
offer to acquire shares of an issuing public corporation from a 
shareholder pursuant to a tender offer or request or invitation 
for tenders, if, after the acquisition of all shares acquired 
pursuant to the offer: 
    (1) the offeror would be directly or indirectly a 
beneficial owner of more than ten percent of any class of the 
outstanding shares of the issuing public corporation and was 
directly or indirectly the beneficial owner of less than ten 
percent of any class of the outstanding shares of the issuing 
public corporation before commencement of the offer; or 
    (2) the beneficial ownership by the offeror of any class of 
the outstanding shares of the issuing public corporation would 
be increased by more than ten percent of that class and the 
offeror was directly or indirectly the beneficial owner of ten 
percent or more of any class of the outstanding shares of the 
issuing public corporation before commencement of the offer.  
    (b) Takeover offer does not include: 
    (1) an offer in connection with the acquisition of a share 
which, together with all other acquisitions by the offeror of 
shares of the same class of shares of the issuer, would not 
result in the offeror having acquired more than two percent of 
this class during the preceding 12-month period; 
    (2) an offer by the issuer to acquire its own shares unless 
the offer is made during the pendency of a takeover offer by a 
person who is not an associate or affiliate of the issuer; 
    (3) an offer in which the issuing public corporation is an 
insurance company subject to regulation by the commissioner of 
commerce, a financial institution regulated by the commissioner, 
or a public service utility subject to regulation by the public 
utilities commission. 
    Sec. 14.  Minnesota Statutes 1990, section 302A.553, 
subdivision 3, is amended to read: 
    Subd. 3.  [LIMITATION ON SHARE PURCHASES.] Except for 
redemptions under section 302A.671, subdivision 6, a publicly 
held corporation shall not, directly or indirectly, purchase or 
agree to purchase any shares entitled to vote from a person (or 
two or more persons who act as a partnership, limited 
partnership, syndicate, or other group pursuant to any written 
or oral agreement, arrangement, relationship, understanding, or 
otherwise for the purpose of acquiring, owning, or voting shares 
of the publicly held corporation) who beneficially owns more 
than five percent of the voting power of the publicly held 
corporation for more than the market value thereof if the shares 
have been beneficially owned by the person or persons for less 
than six months two years, unless the purchase or agreement to 
purchase is approved at a meeting of shareholders by the 
affirmative vote of the holders of a majority of the voting 
power of all shares entitled to vote or the publicly held 
corporation makes an offer, of at least equal value per share, 
to all holders of shares of the class or series and to all 
holders of any class or series into which the securities may be 
converted.  For purposes of determining the period that shares 
have been beneficially owned by a person: 
    (1) shares acquired by the person by gift from a donor are 
deemed to have first become beneficially owned by the person 
when the shares were acquired by the donor; 
    (2) shares acquired by a trust from the settlor of the 
trust, or shares acquired from the trust by a beneficiary of the 
trust, are deemed to have first become beneficially owned by the 
trust or the beneficiary when the shares were acquired by the 
settlor; and 
    (3) shares acquired by an estate or personal representative 
as a result of the death or incapacity of a person, or shares 
acquired from the estate or personal representative by an heir, 
devisee, or beneficiary of the deceased or incapacitated person, 
are deemed to have first become beneficially owned by the 
estate, personal representative, heir, devisee, or beneficiary 
when the shares were acquired by the deceased or incapacitated 
person. 
    Sec. 15.  [302A.675] [TAKEOVER OFFER; FAIR PRICE.] 
    Subdivision 1.  [FAIR PRICE REQUIREMENT.] An offeror may 
not acquire shares of a publicly held corporation within two 
years following the last purchase of shares pursuant to a 
takeover offer with respect to that class, including, but not 
limited to, acquisitions made by purchase, exchange, merger, 
consolidation, partial or complete liquidation, redemption, 
reverse stock split, recapitalization, reorganization, or any 
other similar transaction, unless the shareholder is afforded, 
at the time of the acquisition, a reasonable opportunity to 
dispose of the shares to the offeror upon substantially 
equivalent terms as those provided in the earlier takeover offer.
    Subd. 2.  [EXCEPTION.] Subdivision 1 does not apply if the 
acquisition of shares is approved by a committee of the board's 
disinterested directors before the purchase of any shares by the 
offeror pursuant to a takeover offer.  The provisions of section 
302A.673, subdivision 1, paragraph (d), relating to a committee 
of disinterested directors, apply to this section. 
    Sec. 16.  [REPEALER.] 
    Minnesota Statutes 1990, sections 60D.02, subdivision 5; 
and 80B.06, subdivision 7, are repealed. 
     Sec. 17.  [EFFECTIVE DATE.] 
    Section 9, paragraph (h), is effective the day following 
final enactment. 
    Presented to the governor May 1, 1991 
    Signed by the governor May 2, 1991, 4:35 p.m.