IRDA regulations for Issuance of Capital by Indian Insurance Companies

By | December 23, 2015

Insurance Regulatory and Development Authority of India (Issuance of Capital by Indian Insurance Companies transacting other than Life Insurance Business) Regulations, 2015 Notification No [ADVT-III/4/Exty./161/15(292)] Ref No F. No. IRDAI/Reg/21/111/2015.—  Dated   15th December, 2015 

What is the approval requirement for issuance of Shares by by Indian Insurance Companies transacting other than Life Insurance Business ?

Prior Written Approval by the Authority :-

No Indian insurance company transacting the General insurance or Health insurance or Reinsurance business shall approach the SEBI for public issue of shares and for any subsequent issue, by whatsoever name called, under the ICDR Regulations without the specific previous approval of the Authority in writing under these Regulations.

What is the  Manner and Procedure  of  issuance of Shares  by Indian Insurance Companies transacting other than Life Insurance Business ?

These Regulations shall be applicable to the Applicant Company to raise funds under the ICDR Regulations ( SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2009 as amended and modified from time to time ) through any of the following options :

i. Divestment of equity by one or more of the promoters or the investor (s) through a public offer for sale under the ICDR Regulations; or

ii. Issue of Capital under ICDR Regulations; or

iii. Both (i) and (ii)

Provided that any issue of capital other than as specified at (i), (ii) and (iii) above, including any transfer of shares beyond the specified limits as laid down under section 6A (4)(b)(ii)/(iii) of the Act, shall require the specific prior approval of the Authority. Such transfer of shares and approvals thereof shall be governed by the IRDAI (Transfer of Equity Shares of Insurance Companies) Regulations, 2015.

(2) An applicant company proposing to raise share capital through a public issue in terms of these Regulations may do so at any time from the date of grant of Certificate of Registration.

Provided that promoters and/or investors shall abide by the lock in period, if any, specified by the Authority at the time of grant of Certificate of Registration.

Provided further that General Insurance Corporation of India and the insurance companies specified under section 10A of the General Insurance Business (Nationalization) Act, 1972 can apply for approval of the Authority only on satisfactory compliance with the provisions of section 10B of General Insurance Business (Nationalization) Act, 1972.

(3) The application for approval of the Authority shall be filed in Form ‘A’ of these Regulations.

(4) The Applicant Company may issue shares as fully paid up or partly paid up shares. Where partly paid up shares have been issued, the Applicant Company shall not allow any period exceeding one year for payment of calls on shares.

What the IRDA authority will consider before grant of approval  for Issuance of Capital by Indian Insurance Companies transacting other than Life Insurance Business ?

(1)The Authority shall consider the applicant company’s overall financial position, its regulatory record, the application for issue/offer for sale, the capital structure post issue/offer for sale, and the purposes for which the share capital proposed to be raised, will be applied.

(2) Without prejudice to the generality of (1) above, the Authority shall consider the following aspects for grant of approval:

i. The period for which the applicant company has been in general insurance or health insurance or reinsurance business;

ii. The history of compliance with the regulatory requirements by the applicant company;

iii. The maintenance of the prescribed regulatory solvency margin as at the end of the preceding six quarters commencing from the quarter immediately prior to the date of filing the application;

iv. Compliance with the disclosure requirements mandated under IRDA Circular No. IRDA/F&I/CIR/F&A/012/01/2010 dated 28th January, 2010 as amended and modified from time to time;

v. Compliance with the Corporate Governance Guidelines;

vi. Compliance with the requirements of “Indian owned and controlled” as defined under section 2(7A) (b) of the Act read with the Indian Insurance Companies (Foreign Investment) Rules, 2015 and any guidelines issued by the Authority in this regard; and

vii. The record of policyholder protection of the applicant company.

What the IRDA authority may consider prescribe  while granting  approval for  Issuance of Capital by Indian Insurance Companies transacting other than Life Insurance Business ?

While according its approval, the Authority may prescribe the following:

i. The extent to which the promoters and the investors shall dilute their respective shareholding;

ii. The maximum subscription which may be allotted to any class of foreign investors;

iii. Minimum lock-in period for the promoters and the investors from the date of allotment of shares. The lock in period shall be without prejudice to the requirements which may be in place under the ICDR Regulations;

iv. Disclosures in the Prospectus/Offer document as indicated at Schedule 1 of these Regulations, in addition to such disclosures as may be prescribed by SEBI;

v. Modification in the Articles of Association of the Applicant company so as to explicitly provide that no transfer beyond the limit specified in Section 6A of the Act shall be registered without the prior approval of the Authority; and

vi. such other conditions as may be deemed fit by the Authority.

(2) Any approval by the Authority under these Regulations shall not in any manner be deemed to be or serve as a validation of the representations by the applicant company in any offer document. This fact shall be disclosed in bold letters in the offer document

When the IRDA authority will refuse to grant the approval for  Issuance of Capital by Indian Insurance Companies  transacting other than Life Insurance Business for issuance of Shares ?

The Authority shall not accord its approval if it is of the opinion that:

(a) The applicant company is not compliant with the regulatory framework; or

(b) Consequent upon the dilution of shareholding by the promoter(s) and/or Investor(s) or issue of fresh capital, the applicant company shall not be Indian owned and controlled; or

(c) The grant of approval may be detrimental to the interests of policyholders; or

(d) The grant of approval may not be in the interest of the insurance business in the country

What time the IRDA authority will take  to grant the approval for  Issuance of Capital by Indian Insurance Companies transacting other than Life Insurance Business ?

Timelines for approval by the Authority

The Authority shall process and grant approval on the application as expeditiously as possible, and the applicant company shall ensure prompt response to the queries and requests for information from the Authority for processing the application.

What is the validity of approval given by IRDA authority  for  Issuance of Capital by Indian Insurance Companies transacting other than Life Insurance Business ?

The approval granted by the Authority shall be valid for a period of one year from the date of issue of the approval letter, within which the applicant company shall file the Draft Red Herring Prospectus (DRHP) with SEBI under the ICDR Regulations subject to compliance of these Regulations.

Provided that the Authority may, on receipt of a written request from applicant company, extend the validity by a further period of six months.

Can the IRDA issue direction to the Indian Insurance Company  to get listed on the stock exchange(s) ?

Power to issue Direction 

The Authority may direct an Indian Insurance Company transacting general insurance or health insurance or reinsurance business to get listed on the stock exchange(s) if the circumstances so warrant. Such company shall, notwithstanding the lock-in period, within a period of one year from the date of such directions, comply with the directions issued by the Authority.

What if any difficulties/ clarifications is required in interpretation of any of the provisions of these regulations ?

Power to remove difficulties and issue clarifications 

11. In order to remove any doubts or the difficulties that may arise in the application or interpretation of any of the provisions of these regulations, the Chairperson of the Authority may issue appropriate clarifications or guidelines as deemed necessary.

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