Hyderabad:
The insurance regulator IRDAI has issued detailed guidelines with a view to bringing more clarity on certain issues relating to transfer of shares of re/insurance companies by promoters/shareholders,
The provisions relating to transfer of shares of insurance companies are governed by section 6A of the Insurance Act,1938 read with IRDAI (Transfer of Equity Shares of Insurance Companies) Regulations, 2015 and IRDAI (Listed Indian Insurance Companies) Guidelines,2016.
Transfer of Shares of more than 1% and up to 5% of the paid up share capital:
-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 has to be provided to the insurance company;
-Transfer of more than 1% but less than 5% of the paid up share capital – the transferor shall inform the Insurer immediately on execution of the transaction. The transferor is required to ensure compliance for any transaction(s) aggregating to more than 1 per cent of the paid-up capital.
Transfer of Shares above 5% of the paid up share capital:
It is reiterated that in line with the provisions of the Insurance Act, 1938 –
-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. The application for this purpose has to be filed through the concerned insurance company,
-Similarly, any proposal for acquisition whereby the transferee’s holding is likely to exceed 5% of the paid up share capital of the insurance company, has to be submitted for prior approval to the IRDAI through the concerned insurance company.
Determination of extent of transfer – Listed and Unlisted Insurance companies:
-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 will be considered.
Accordingly,whenever the specified limits are likely to exceed in a financial year, the entity has to seek the prior approval of the IRDAI..
-Listed companies: The existing provisions will be applicable only with respect to the promoters/ promoter group. Further, transfer includes Offer for Sale as per SEBI (ICDR) Regulations by the existing shareholders, whether such shareholder is part of the promoter/promoter group or not.
Pledging of Shares:
The existing provisions relating to transfer of shares as contained in (i) Section 6A(4)(b) of the Insurance Act, 1938, and (ii) IRDAI (Transfer of Equity Shares of Insurance Companies) Regulations, 2015 will apply automatically to the creation of pledge or any other kind of encumbrance over shares of an insurance company, by its promoters
Suspension of the voting rights
Insurance companies has to immediately inform the IRDAI if any non-compliance is observed with regard to the provisions of the Insurance Act, the regulations and guidelines as enshrined in the existing circulars issued regarding the transfer of shares by the IRDAI…urther, where transactions are executed beyond the stipulated threshold limits by the shareholders, without the prior approval of the IRDAI
-the transferee shall not have any voting rights in any of the meetings of the insurance company;
-the transferee will promptly dispose of the excess shares acquired, beyond the specified threshold limits.
Any transfer of shares beyond the stipulated threshold limits without the prior approval of the IRDAI will attract appropriate regulatory action, said the IRDAI