The Insurance Regulatory and Development Authority of India (IRDAI) on July 23, 2020 has issued a circular for the transfer of shares of the Insurance Companies. To bring in more clarity on certain issues relating to the transfer of shares, the authority decided to issue the following guidelines.
Following guidelines have been issued by the Authorities:
• For acquisition of more than 1% and up to 5% of the paid up share capital along with the existing holding - fit and proper declaration as specified in the IRDAI (Listed Indian Insurance Companies) Guidelines, 2016 shall be provided to the insurance company.
• Where the transfer of shares by the transferor, cumulative with his relatives, associate enterprises and persons acting in concert will/is likely to exceed 5% of the paid up share capital, such transferor shall seek the prior approval of the IRDAI as per section 6A(4)(b)(iii) of the Insurance Act, 1938 read with provisions of IRDAI (Listed Indian Insurance Companies) Guidelines, 2016.The application for this purpose shall be filed through the concerned insurance company.
• For the purpose of reckoning the quantum of transfer/acquisition of shares, scenarios where transfer is executed in favour of one or more parties, whether in a single or multiple transactions aggregating to excess of 1 per cent or 5 per cent, the cumulative transfers made during a given financial year shall be considered. Accordingly, whenever the specified limits are likely to exceed in a financial year, the entity shall be under obligation to seek the prior approval of the Authority.
• It is clarified that the provisions relating to transfer of shares as contained in Section 6A(4)(b) of the Insurance Act, 1938, and IRDAI (Transfer of Equity Shares of Insurance Companies) Regulations, 2015 shall apply mutatis-mutandis to the creation of pledge or any other kind of encumbrance over shares of an insurance company, by its promoters.
• Insurance companies shall immediately inform the Authority if any non-compliance is observed regarding the provisions of the Insurance Act, the regulations and guidelines framed there under and the circulars issued regarding the transfer of shares by the Authority. Further, where transactions are executed beyond the stipulated threshold limits by the shareholders, without the prior approval of the Authority.
[Circular No. IRDAI/F&A/CIR/TRSH/195/07/2020]
