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whole or any part thereof, and must be, so far as rejected, without effect. En. March 21, 1872.

Act relating to life, health, accident and annuity or endowment insurance: See post, Appendix, title “Insurance."

Incorporation of mutual insurance companies: See post, Appendix, title “Insurance.'

Section Cited.

Perkins v. Fish, 121 Cal. 317, 53 Pac. 901.

Annotation.

Construction of the Section.- A life insurance association, formed under sections 451 and 503 et seq. of the Civil Code, as an association, without profit of persons as members thereof, for the purpose of equalizing the risk of death, and to pay to the nominees of such nrembers as may die stipulated sums of money, to be collected from surviving members on the assessment or co-operative plan, has declared objects; and its articles being in due form of such a corporation, need not set forth any capital stock nor guarantee fund, such as is required of life insurance companies organized under this and following sections. (Perkins v. Fish, 121 Cal. 317, 53 Pac. 901.)

OF WHAT GUARANTEE FUND SHALL CONSIST.

Sec. 438, C. C. The guarantee fund mentioned in the preceding section must consist of the promissory notes of solvent parties, approved by the board of directors and by each other, payable to the corporation or its order, and at such times, in such modes, and in such sums, with or without interest, and conformable in all other respects to such requirements as the board of directors prescribe; but the amount of the notes given by any one person must not exceed in the whole the sum of five thousand dollars, exclusive of interest. Such notes must be payable absolutely and at the option of the corporation; they must be negotiable, and may be indorsed and transferred, or converted into cash, or otherwise dealt with by the corporation, at its discretion, without reference to any contingency of losses or expenses. Such notes, or the proceeds thereof, must remain with the corporation as a fund for the better security of persons dealing with it, and constitute the assets of the corporation, liable for all its debts, obligations, and indebtedness next after its assets from premiums and other sources, exclusive of capital stock, until the net earnings, over and above its expenses, losses, and liabilities, shall have accumulated in cash, or securities in which the net earnings have been invested, to a sum which, with the capital stock, is equal to the aggregate of the original amounts of the guarantee fund and of the capital stock. En. March 21, 1872.

WHAT CONSTITUTES, AND DEFICIENCY IN FIXED CAPITAL.

Sec. 439, C. C. The sum accumulated as provided in the preceding section, together with the capital stock, shall become and remain the fixed capital of the corporation, not subject to division among the stockholders or parties dealing with it, or to be expended in any manner otherwise than may be required in payment of the corporation's debts and actual expenses, until the business of the corporation is closed, its debts paid, and its outstanding policies and obligations of every kind canceled or provided for; and if from any cause a deficiency at any time occurs in such fixed capital, no further division of profits must take place until such deficiency has been made up. En. March 21, 1872.

DECLARATION OF FLXED CAPITAL TO BE FILED.

Sec. 440, C. C. Whenever the fixed capital of the corporation is obtained as hereinbefore provided, the president of the corporation and its actuary, or its secretary, if there is no actuary, must make a declaration in writing, sworn to before some notary public, of the amount of such fixed capital and of the particular kinds of property composing the same, with the nature and amount of each kind, which must be filed with the original articles of incorporation, and a copy, certified by the county clerk, must be published for at least four successive weeks, in a newspaper published in the county where the principal business of the corporation is situated. Upon the filing of such declaration the guarantee fund is discharged of its obligations, and all notes of the fund remaining in the

Corporation Laws-21

control of the corporation, and not affected by any lien thereon, or claim of that nature, must be surrendered by it to the make ers thereof, respectively, or other parties entitled to receive the

En. March 21, 1872.

same.

GUARANTEE NOTES AND INTEREST, HOW DISPOSED OF.

Sec. 441, C. C. Until the guarantee fund is discharged from its obligations, as provided in the preceding section, no note must be withdrawn from the fund, unless another note of equal solvency is substituted therefor, with the approval of the board of directors. The corporation must allow a commission, not exceeding five per cent, per annum, on all such guarantee notes while outstanding, and also interest on all moneys paid on such notes by the parties liable thereon, at the rate of twelve per cent per annum, payable half yearly until repaid by the corporation, unless the current rate of interest is different from this amount, in which case the rate payable may, from time to time, at intervals of not less than one year, be, increased or reduced by the board of directors, so as to conform to the current rate. En. March 21, 1872. Amd. 1873-74, 210.

Legislative History.

The original section reads as follows: “Until the guarantee fund is discharged from its obligations, as provided in the preceding seetion, no note must be withdrawn from the fund, unless another note of equal solvency is substituted therefor, with the unanimous approval of the board of directors then in office, and of the other parties liable on the rest of the notes comprising the guarantee fund. The corporation must allow a commission of five per cent per annum on all such guarantee notes while outstanding, and also interest on all moneys paid on such notes by the parties liable thereon, at the rate of twelve per cent per annum, payable half yearly, until repaid by the corporation. But such rate of interest mray, from time to time, at intervals of not less than one year, be increased or reduced by the board of directors, so as to conform to the then current rates of interest."

INSURED TO BE ENTITLED TO VOTE, WHEN.

Sec. 442, C. C. After the filing of the declaration of the fixed capital, as in this article provided, the holders of policies of life insurance for the term of life, on which the premiums are not in default, may vote at the election of directors, and have one vote for each one thousand dollars insured by their policies, respectively. En. March 21, 1872.

NUMBER OF DIRECTORS MAY BE ALTERED, HOW.

Sec. 443, C. C. The number of directors specified in the articles of incorporation may be altered from time to time during the existence of the corporation by resolution, at the annual meeting of a majority of those entitled to vote at the election of di. rectors, but the number must never be reduced below five. En. March 21, 1872.

INVESTMENT OF CAPITAL STOCK.

Sec. 444, C. C. Life, health and accident insurance corporations may invest their capital stock as follows:

1. In loans upon unencumbered and improved real property within the state of California, which shall be worth at the time of the investment at least forty per cent more than the eum loaned.

2. In the purchase of or loans upon interest-bearing bonds, and other securities of the United States and of the state of California.

3. In the purchase of or loans upon interest-bearing bonds of any of the other states of the Union, or of any county, or incorporated city, or city and county in the state of California.

4. In the purchase of or loans upon any stocks of corporations formed under the laws of this state, except of mining corporations, which shall have, at the time of the investment, à value, in the city and county of San Francisco, of not less than sixty per cent of their par value, and shall be rated as first-class securities; but no loans shall be made on any securities specified in subdivisions three and four of this section, in any amount beyond sixty per cent of the market value of the securities, nor shall any loan be made on the stock of the corporation, or notes or other obligations of its corporators. En. March 21, 1872. Amd. 1873-74, 211.

Legislative History.

The original section is as follows: "Life, health, and accident insurance corporations may invest their capital stock as follows:

1. In loans upon unencumbered and improved real estate within the state of California, which shall be worth, at the time of the investment, at nearly fifty per cent more than the sum loaned;

"2. In the purchase of or loans upon interest-bearing stocks, bonds, and other securities of the United States, and of the states thereof;

"3. In the purchase of or loans upon interest-bearing bonds of any incorporated city, or city and county, in the state of California;

"4. In the purchase of or loans upon any stocks of companies and corporations formed under the laws of this state, except mining stocks, which shall have at the time of the investment, a value, in the city and county of San Francisco, of not less than sixty per cent of their par value, and shall be rated as first-class securities.

“But no loans shall be made on any securities specified in subdivisions 2, 3, and 4 of this section, in any amount beyond sixty per cent of the market value of the securities, nor shall any loan be made on the stock of the corporation making the loan.”

LIMITATIONS TO THE HOLDING OF STOCK AND IN OTHER

PARTICULARS MAY BE PROVIDED FOR IN BY-LAWS. Sec. 445, C. C. The corporation may, by its by-laws, limit the number of shares which may be held by any one person, and make such other provisions for the protection of the stockholders and the better security of those dealing with it as to a majority of the stockholders may seem proper, not inconsistent with the provisions of this title or part. En. March 21, 1872.

PREMIUMS, HOW PAYABLE.

Sec. 446, C. C. All premiums must be payable wholly in cash, or one-half or a greater proportion in cash, and the reinainder in promissory notes bearing interest, as may be provided for by the by-laws. Agreements and policies of insurance made by the corporation may be upon the basis of full or partial participation in the profits, or without any participation therein, as may be provided by the by-laws and agreed hetween the parties. En. March 21, 1872.

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