2023 District of Columbia Code › Title 31 - Insurance and Securities › Chapter 34 - Health Maintenance Organizations › § 31–3427. Acquisition of control of or merger of a health maintenance organization

§ 31–3427. Acquisition of control of or merger of a health maintenance organization.
(a) No person may make a tender for or a request or invitation for tenders of, or enter into an agreement to exchange securities for or acquire in the open market or otherwise, any voting security of a health maintenance organization, or enter into any other agreement if, after the consummation thereof, that person would, directly or indirectly (or by conversion or by exercise of any right to acquire), be in control of the health maintenance organization, and no person may enter into an agreement to merge or consolidate with or otherwise to acquire control of a health maintenance organization, unless, at the time any offer, request, or invitation is made or any agreement is entered into, or prior to the acquisition, unless, at the time any offer, request, or invitation is made or any agreement is entered into, or prior to the acquisition of the securities if no offer or agreement is involved, the person has filed with the Commissioner and has sent to the health maintenance organization the following information:
(1) The name and address of each person by whom or on whose behalf the merger or other acquisition of control referred to herein is to be effected (hereinafter called “acquiring party”); and
(A) If such person is an individual, his or her principal occupation and all offices and positions held during the past 5 years, and any conviction of crimes other than minor traffic violations during the past 10 years; or
(B) If such person is not an individual, a report of the nature of its business operations during the past 5 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 subparagraph (A) of this paragraph;
(2) The source, nature, and amount of the consideration used, or to be used, in effecting the merger or other 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 considerations; provided, 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 for the preceding 5 fiscal years of each such acquiring party (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 health maintenance organizations, to sell its assets, or merge or consolidate it with any person; or to make any other material change in its business or corporate structure or management;
(5) The number of shares of any security referred to herein which each acquiring party proposes to acquire and the terms of the offer, request, invitation, agreement, or acquisition referred to herein, 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 herein 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 herein 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. Such descriptions shall identify the persons with whom such contracts, arrangements, or understandings have been entered into;
(8) A description of the purchase of any security referred to herein 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 herein 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 of exchange offers for, and agreements to acquire or exchange any securities referred to herein, 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 herein for tender, and the amount of any fees, commissions, or other compensation to be paid to broker-dealers with regard thereto; and
(12) Such additional information as the Commissioner may by rule or regulation prescribe as necessary or appropriate for the protection of members and security holders of the health maintenance organization or in the public interest.
(b) If the person required to file the statement referred to in this section is a partnership, limited partnership, syndicate, or other group, the Commissioner may require that the information called for by subsection (a)(1) through (8) of this section shall be given with respect to each partner of such partnership or limited partnership, each member of such syndicate or group, and each person who controls such partner or member. If any such partner, member, or person is a corporation or the person required to file the statement referred to herein is a corporation, the Commissioner may require that the information called for by subsection (a)(1) through (8) of this section shall be given with respect to such corporation, each officer and director of such corporation, and each person who is directly or indirectly the beneficial owner of more than 10% of the outstanding voting securities of such corporation. If any material change occurs in the facts set forth in the statement filed with the Commissioner and sent to such health maintenance organization pursuant to this section, an amendment setting forth such change, together with copies of all documents and other material relevant to such change, shall be filed with the Commissioner and sent to such insurer within 2 business days after the person learns of such change. Such insurer shall send such amendment to its shareholders.
(Apr. 9, 1997, D.C. Law 11-235, § 29, 44 DCR 818; Mar. 24, 1998, D.C. Law 12-81, § 46(e), 45 DCR 745.)
Prior Codifications
1981 Ed., § 35-4527.