The Insurance Regulatory Authority of India on 23rd July 2020 has issued clarity on certain issues relating to transfer of shares of insurance companies by promoters/shareholders. The provisions relating to the transfer of shares of insurance companies are governed under 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.
It has been clarified that for acquisition of more than 1% and up to 5% of the paid up share capital, a declaration as specified in the IRDAI (Listed Indian Insurance Companies) Guidelines, 2016 has to be provided to the insurance company and for 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.
It
has been clarified that the provisions related to transfer of shares
“shall apply mutatis-mutandis to the creation of pledge or any other kind
of encumbrance over shares of an insurance company, by its promoters.
In
case of transactions without the prior approval of the IRDAI, the transferee
will not have any voting rights in any of the meetings of the insurance
company. Also, the transferee will be required to promptly dispose of the
excess shares acquired, beyond the specified threshold limits.
Further in case of any non-compliance is observed with regard to the provisions of the Insurance Act, the regulations and guidelines framed thereunder and the circulars issued regarding the transfer of shares, the same shall be informed to the authority by the insurance company.
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