The Authority, in exercise of the powers conferred by sub (1) of Section 14 of Insurance Regulatory and Development Authority of India Act, 1999, read with clause (b) of sub-section (4) of Section 6A of the Insurance Act, 1938, hereby, issues the following guidelines.

 

                    i.            These Guidelines shall be in addition to, and should be read with any other law for the time being in force, including the IRDAI (Issuance of Capital by Indian Insurance Companies transacting Life Insurance Business) Regulations, 2015 and IRDAI (Issuance of Capital by Indian Insurance Companies transacting other than Life Insurance Business) Regulations, 2015.

                  ii.            These Guidelines shall be called Insurance Regulatory and Development Authority of India (Listed Indian Insurance Companies) Guidelines, 2016

                iii.            These Guidelines shall be applicable to all insurers whose equity shares are listed on the stock exchanges and to the allotment process pursuant to the public issue.

                 iv.            These guidelines shall come into effect on the day of their issuance.

 

 

 

                         i.        “Act” means Insurance Act, 1938 (4 of 1938);

 

                       ii.        “Acquisition” means, directly or indirectly, acquiring or agreeing to acquire shares or voting rights in the concerned insurer;

 

                     iii.        “Authority” means the Insurance Regulatory and Development Authority of India established under sub-section (1) of Section 3 of Insurance Regulatory and Development Authority Act, 1999 ( 41 of 1999);

 

                     iv.        “Aggregate Holding” means the total holding including through “acquisition” and the shares held by the applicant, his relatives, associate enterprises and persons acting in concert with him;

 

                       v.        “Associate enterprise” means a company, whether incorporated or not, which,-

a.              is a holding company or a subsidiary company of the applicant; or

b.              is a joint venture of the applicant; or

c.               controls the composition of the Board of Directors or other body corporate governing the applicant; or

d.              exercises, in the opinion of the Authority, significant influence on the applicant in taking financial or policy decisions.

 

                     vi.        “Concerned Insurer” means the insurer in which the “acquisition” is being made;

 

               vii.             “Person acting in concert” means persons who for a common objective or purpose of acquisition of shares or voting rights along with the applicant, pursuant to an agreement or understanding (formal or informal), directly or indirectly, cooperate for acquiring or agreeing to acquire shares or voting rights in the concerned insurer and without prejudice to the generality of the foregoing, includes an associate enterprise, relative, promoter, promoter group, and director of the said applicant or the associate enterprise;

 

                 viii.        “Relative” has the same meaning as defined in section 2 (77) of the Companies Act, 2013 and Rules made thereunder;

 

                     ix.        “Major shareholder” means shareholder having  or likely to have an “aggregate holding” to the extent of 5 percent or more of the paid up equity share capital of the insurer;

 

                       x.        “Major shareholding” means “aggregate holding” resulting in / likely to result in the applicant acquiring 5 percent or more of the paid-up equity share capital of the insurer;

 

                     xi.        All words and expressions used herein and not defined, but defined in the Insurance Act, 1938 (4 of 1938) or in the Insurance Regulatory and Development Authority Act, 1999 (41 of 1999), or in any Rules or Regulations made thereunder, shall have the meaning respectively assigned to them in those Acts or Rules or Regulations.

 

 

 

3.             Every person who intends to make any transfer or any agreement to transfer the paid up equity shares capital of the concerned insurer, may do so subject to compliance of the lock-in period requirement, if any,  specified by the Authority.

 

4.             Every person who intends to make any transfer or any arrangement or agreement to transfer 1 percent or more but less than 5 percent of the paid up equity share capital of the concerned insurer, may do so, subject to compliance of Fit and Proper criteria.  A self certification for “Fit & Proper” shall be filed with the respective insurance company. Such self-certification of the Fit and Proper criteria of the acquirer and filing with the concerned insurer shall be considered as deemed approval of the Authority for the purpose of Section 6A (4) (b) (iii) of the Act. If the concerned insurer has any doubt about the fulfillment of ‘Fit and Proper’ criteria by the acquirer, it may approach the Authority for seeking clarity.

 

Such self certification shall be required to be filed once and for the first time when a purchaser / acquirer intends to purchase / acquire equity shares resulting in shareholding of 1 percent or more but less than 5%. For purchase / acquisition of shares of the concerned insurer in the case of public offering, appropriate disclosure of this requirement shall be made in the offer document and appropriate declaration shall be obtained in the application form for purchasing such equity shares.

 

5.             Every person who intends to acquire or make an arrangement or agreement for acquisition which will / is likely to take the aggregate holding of such person together with shares held by him, his relatives, associate enterprises and persons acting in concert with him, to 5 per cent or more of the paid-up equity share capital of the concerned insurer or entitles him to exercise 5 per cent or more of the total voting rights of the concerned insurer, shall seek prior approval of the Authority in the manner specified in these guidelines.

 

6.             Every person referred to in clause 5 above shall make an application to the Authority along with the Declaration in Form A specified in the Schedule to these Guidelines. The applicant shall also file draft of the definitive agreement(s) for acquisition of shares, if any, proposed to be entered into between the transferor and the acquirer, along with the application.

 

7.             The Authority may undertake due diligence on the applicant to assess his “fit and proper” status. It will be open to the Authority to seek additional information / documents from the applicant / concerned insurer, including but not limited to shareholders’ agreements and make such enquiries with regulator/s, revenue authorities, investigation agencies, credit rating agencies, etc. as may be considered appropriate.

 

8.             The decision of the Authority to accord or deny permission for acquisition of a lower quantum than that has been applied for, shall be conveyed to the applicant and the concerned insurer, and the decision of the Authority shall be binding on the applicant and the concerned insurer. If the decision is to grant approval, the concerned insurer shall register the transfer / purchase, as the case may be, in the name of the applicant. If the decision is to reject the application, the concerned insurer shall not give effect to such acquisition. In the event of the Authority according permission for acquisition of lower quantum of equity shares or voting rights, the concerned insurer shall register the transfer / purchase only to such lower quantum of shares or voting rights.

 

 

9.             Any fresh acquisition by an existing major shareholder, who has already obtained prior approval of the Authority for having a major shareholding in the concerned insurer, shall be subject to the provisions of clauses 10 and 11 below as the case may be.

 

10.        If any fresh acquisition referred to in clause 9 results in the aggregate holding of the major shareholder along with the persons acting in concert to reach upto 10 per cent of the shares or voting rights of the concerned insurer, prior approval of the Authority is not necessary,

 

Provided that the major shareholder furnishes the details of the source of funds for such incremental acquisition to the concerned insurer, before such acquisition.

Provided further that the concerned insurer shall report the incremental acquisitions by the major shareholders in its quarterly shareholding pattern furnished to the Authority regarding continuance of “fit and proper” status of its major shareholders, as referred to in clause 13 of these Guidelines.

11.        Where the acquisition referred to in clause 9 results in the aggregate holding of the major shareholder along with the persons acting in concert exceeding 10 per cent of paid up equity share capital or voting rights of the concerned insurer, the applicant shall seek a fresh prior approval of the Authority for the proposed aggregate holding in the manner specified in clause 6 of these Guidelines along with additional information specified in Form A. Without prejudice to the generality of the factors that may determine the grant or refusal of approval for such acquisition by the Authority, approval for acquisition of shares or voting rights in excess of 10 per cent shall be considered at the discretion of the Authority taking into account the following factors :  

                         i.              The details of the promoters/promoter group of the concerned insurer ;or ?

                       ii.               If the acquirer is a regulated financial institution, whether such a financial institution, is well diversified and listed in a Financial Action Task Force (FATF) compliant jurisdiction.; or

                     iii.              Whether the acquirer is a Government or a public sector undertaking; or ?

                     iv.              Existence of exceptional circumstances; or

                       v.              Whether acquisition is in the public interest; or

                     vi.              Whether acquisition shall ensure proper management of the concerned insurer;

                   vii.              Whether acquisition is in the interest of consolidation in the insurance sector; etc. ?

In determining whether the applicant is “fit and proper” to be a major shareholder, the Authority may take into account all relevant factors, as appropriate, including, but not limited to the following :

          i.          For acquisition of 5 per cent or more upto 10 per cent in the concerned insurer

a)        The applicant’s integrity, reputation and track record in financial matters and compliance with tax laws;

b)        Whether the applicant has been subject of any proceedings of a serious disciplinary or criminal nature, or has been notified of any such impending proceedings or of any investigation which may lead to such proceedings;

c)         Whether the applicant has a record or evidence of previous business conduct and activities where the applicant has been convicted for an offence under any legislation designed to protect members of the public from financial loss due to dishonesty, incompetence or malpractice;

d)        Whether the applicant or persons acting in concert or any of its promoters or promoter group has indulged in insider trading, fraudulent and unfair trade practices or market manipulation;

e)        Whether the applicant has achieved a satisfactory outcome as a result of due diligence conducted with the relevant regulator, revenue authorities, investigation agencies and credit rating agencies etc., as considered appropriate;

f)          Whether the applicant has a record of any serious financial misconduct, bad loans or whether the applicant was adjudged to be bankrupt;

g)        The source of funds for the acquisition;

h)        Where the applicant is a body corporate, its track record or ?reputation for operating in a manner that is consistent with the standards of good corporate governance, financial strength and integrity in addition to the assessment of individuals and other entities holding more than 1 percent of the capital of the body corporate as enumerated above. ?

 

        ii.          For acquisition in excess of 10 per cent in the concerned insurer

a)        All aspects as laid down in clause 12 (i) of these Guidelines;

b)        Details in respect of the conglomerate, in case the applicant belongs to a conglomerate group;

c)         Sources and stability of funds for acquisition and the ability to access financial markets as a source of continuing financial support for the insurer

d)        The business record and experience of the applicant including any experience in acquisition of business;

e)        The extent to which the corporate structure of the applicant will be in consonance with effective supervision and regulation of the insurer;

f)          Whether the applicant is a widely held entity, publicly listed and a well-established regulated financial entity in good standing in the financial community;

g)        Whether the applicant is a Government or a public sector undertaking;

h)        The acquisition is in public interest;

i)          The acquisition is to secure the proper management of any insurer;

j)          The desirability of diversified ownership of insurer;

k)        Track record of the applicant;

l)          Shareholder agreements and their impact on control and management of the insurer.?

 

CONTINUOUS MONITORING ARRANGEMENTS?

13.             It is the responsibility of the concerned insurer to ensure that all its major shareholders are fit and proper and for this purpose every insurer shall,

 

                    i.            obtain, within one month of the close of financial year, an annual declaration from all its major shareholders in Form B as specified in the Schedule to these Guidelines: and

 

                  ii.            deliberate on the declarations, obtained from the major shareholders, at its Board meetings and make an assessment about the “fit and proper” status of such shareholders in the light of information provided through the declarations and its own investigations; and

 

                iii.            furnish a certificate, within 2 months from the end of the each financial year, to the Authority regarding continuance of the “fit and proper” status of all its major shareholders. In case any major shareholder is assessed to be not “fit and proper”, the concerned insurer shall report the same immediately in Form C specified in the Schedule to these Guidelines to the Authority.

 

Apart from the annual review as specified in the above clause, every insurer shall examine any concern / information regarding the major shareholders that may come to its notice that could render such shareholders not “fit and proper” to hold such shares or voting rights and the insurer shall immediately furnish the report on the same to the Authority.

 

If the major shareholders do not satisfy the “fit and proper” criteria within 6 months of the close of financial year, then the Authority shall initiate appropriate action against such major shareholder, as it deems fit, including a direction for such shareholder to transfer its shareholding to any other ‘Fit and Proper’ person.

 

 

 

14.             Notwithstanding anything contained in these guidelines, even when the acquisition / aggregate holding is proposed to be less than 5 per cent and if the concerned insurer suspects that dubious methods have been adopted to get over the ceiling of 5 per cent to camouflage the real purpose of these Guidelines by individuals / groups with a view to acquire controlling interest in the insurer, a reference shall be made to the Authority by the concerned insurer. In such cases, it shall be in order for the Authority to require such shareholders to comply with the procedure referred to in Chapter III and IV of these Guidelines.

15.             The prior approval from the Authority for having major shareholding by a foreign investor or any subsidiary thereof, in the insurer will be subject to compliance with FEMA 1999 and other applicable laws and regulations, by the acquirer / Investor.

 

16.             It is clarified that an insurer who is neither listed nor to be listed shall continue to be governed by the provisions of IRDAI (Transfer of Equity shares of Insurers) Regulations, 2015.

 

 

17.             The minimum shareholding by promoters / promoter group shall at all times be maintained at 50 percent of the paid up equity capital of the insurer. However, where the present holding of the promoters is below 50 percent, such holding shall be the minimum holding.

 

18.             Ownership limits for all shareholders, other than promoters/ promoter group, in a definitive time frame as may be specified by the Authority, shall be based on categorization of the shareholders under two broad categories viz. (i) natural persons (individuals) and (ii) legal persons (entities/institutions). Further, non-financial and financial institutions, and among financial institutions, diversified and non-diversified financial institutions shall have separate limits for shareholding as under:

 

 

 

 

The matrix of shareholding is as under

 

 

 

 

19.        Every insurance company which intends to go for listing shall convert its equity shareholding in Demat format. Every insurance company shall submit necessary documentary proof to this effect.

 

20.        An Insurer may invest in the equity share capital of another listed Insurer or in the public issue pursuant to RHDP filed by an insurer subject to the exposure norms as specified in IRDA (Investment) Regulations, 2000 as amended from time to time.

 

21.        As per IRDAI (Registration of Indian Insurance Companies) Regulations, 2000, subsidiary of a company shall not be allowed to invest in an insurance company. However, for the purpose of these Guidelines, the Authority permits a subsidiary company to invest in a listed insurance company, provided it complies with all the provisions as may be applicable for such an investment under applicable laws.

 

22.      Every listed Insurance company shall put in place necessary systems to ensure compliance of Regulation 11 of IRDAI (Registration of Indian Insurance Companies) Regulations, 2000.

 

23.        Every Insurance company shall ensure that :

                    i.            the foreign investment in the Insurance company at any point of time is in accordance with the limits allowed under the Insurance Act, 1938 read with the Foreign Direct Investment Policy of India and the provisions of FEMA 1999; and

 

                  ii.            the company is compliant with “Indian owned and controlled” Guidelines issued by the Authority.

 

24.        The above guidelines shall also be applicable to an insurance intermediary registered by the Authority provided that such insurance intermediary is drawing more than 50 percent of its revenue from insurance related business.

 

 

(V R Iyer)