California Code, Insurance Code - INS § 1558

In the event a domestic reciprocal insurer is merged, is consolidated, or is part of a reorganization pursuant to the procedures specified in this article and the surviving, consolidated, or continuing company is a stock incorporated insurer, the plan shall provide for the manner of converting or exchanging the equity interests of current subscribers in the reciprocal insurer's equity into (a) shares, interests, or other securities of the surviving corporation, and (b) if any interests of the subscribers are not to be converted solely into shares, interests, or other securities of the surviving corporation, cash, property rights, interests, warrants, options, premium credits, or securities that may be in addition to, or in lieu of, shares, interests, or other securities of the surviving corporation. However, notwithstanding the foregoing, the equity interests of current subscribers in the reciprocal insurer's equity may be converted or exchanged solely into premium credits if the plan and agreement so provide but only at the subscriber's election. The conversion or exchange of the equity interests of subscribers shall be on terms fair, just, and equitable to the parties to the transaction, their subscribers, shareholders, owners, and creditors, as approved by the commissioner, and the commissioner shall require an opinion as to the fairness of those terms and an appraisal of the fair value of the domestic reciprocal insurer, together with the respective equity interests therein, by one or more qualified disinterested persons appointed by the reciprocal insurer with the approval of the commissioner, unless the commissioner finds that such an opinion or appraisal is not necessary to protect the interest of current subscribers of the reciprocal insurer. The expense of any such opinion and appraisal shall be borne by the reciprocal insurer. Any person holding a subscription note or other debt instrument evidencing a capital contribution to the domestic reciprocal insurer shall be entitled upon demand to have redeemed that note or debt instrument for cash or securities if securities are offered to current policyholders as part of the transaction. The plan may authorize the sale of securities to members of the governing board, officers, or employees of the domestic reciprocal insurer or its attorney-in-fact, or to subscribers or former subscribers of the domestic reciprocal insurer, in accordance with the provisions of Article 8 (commencing with Section 820) of Chapter 1 of Part 2 of Division 1. Nothing in this section shall preclude the issuance of different securities, subject to the approval of the commissioner, provided that comparable securities shall be issued at prices not less than the conversion or exchange values of any such securities distributed to current subscribers. The conversion or exchange shall constitute full payment and discharge of the subscribers' equity interests in the domestic reciprocal insurer, and the subscribers shall have no other rights with respect thereto, except for rights relating to a continuing debt or equity interest that a former subscriber holds in the surviving insurer.