Requires inactive mutual benefit societies to dissolve and transfer their assets to the State.

A BILL FOR AN ACT

SECTION 1. The legislature finds that mutual benefit societies hold a unique position in the State's economy and business community. Mutual benefit societies are organized and carried on for the primary benefit of their members and their beneficiaries and not for profit and, as a result, are tax-exempt or receive preferential tax treatment. Mutual benefit societies are self-controlling and the operation of mutual benefit societies is in the sole and self-perpetuating control of the management. The management of a mutual benefit society does not have to answer either to shareholders or, in reality, to its members. In the event a mutual benefit society decides to no longer collect subscriptions and provide benefits, the assets are at the disposal of the management and there are no members entitled to question management disposal of the assets. The legislature finds that, under those circumstances, proper disposal of the assets is escheat to the State.

The purpose of this Act is to ensure that, in the event of the dissolution of a mutual benefit society, the assets shall escheat to the State of Hawaii and to authorize the insurance commissioner to provide, as parens patriae on behalf of the members of mutual benefit societies, equitable relief and legal remedies to prevent dissipation of the assets prior to dissolution.

SECTION 2. Chapter 432, article 1, Hawaii Revised Statutes, is amended by adding a new section to be appropriately designated and to read as follows:

"§432:1- Dissolution and escheat of assets. (a) Any mutual benefit society that no longer collects assessments or dues from its members or any mutual benefit society that ceases to provide benefits to members, within one year of ceasing to provide benefits to members, shall dissolve and turn over its assets to the State to be deposited into the general fund.

(b) The commissioner shall ensure that a mutual benefit society that no longer collects assessments or dues from its members or ceases to provide benefits to members shall not dissipate its assets prior to dissolution. To this end, the commissioner may remove board members or officers and appoint board members or officers of the society as reasonably required to preserve the assets pending dissolution. The commissioner may order other equitable relief appropriate to protect the rights of the members entitled to continuing benefits and to protect the rights of the State.

(c) In all cases where the assets of a mutual benefit society escheat to the State as required by this section, the attorney general, at the request of the commissioner, shall file a complaint or other appropriate pleading in the circuit court of the first circuit, setting forth the facts upon which the claim of the State to the escheat is based. Summons shall be issued as in other actions. The attorney general shall cause the summons to be served upon any officer of the society or any person in possession of the assets and shall also cause a copy thereof to be published once a month for three months in a newspaper of general circulation in the State. Upon the hearing of the matter, if the court finds that the mutual benefit society no longer provides benefits to members and that dissolution is required by this section, it shall enter a judgment dissolving the society and ordering the assets of the society to escheat to the State.

A stay of the commissioner's order shall only be granted if the court, after hearing, finds probable cause to believe that, in the event of a hearing pursuant to section (c), the society would not be subject to dissolution and the assets with respect to which the order is sought would not be subject to escheat."

SECTION 3. New statutory material is underscored.

SECTION 4. This Act shall take effect upon its approval.