Not more than 10% paid-up shares in insurance firms: IRDAI

The IRDAI in lieu of the backdrop of the recent hike in the upper cap of foreign direct investment in insurance companies from 26 per cent to 49 per cent have decided that no Indian investor will be allowed to hold shares exceeding 10 per cent of the paid-up equity shares in an insurance company.

As per the Transfer of Equity Shares of Insurance Companies Regulations, 2015 which were notified recently, all investors (where there are one or more investors in an insurance company) jointly should not hold more than 25 per cent of the paid-up equity share capital of the insurance company.

Adding to the developments the proposals pertaining to the transfer of shares in insurance companies, the authority further reported that Indian promoters as well as foreign investors to have a minimum lock-in period for infusion of additional capital as a pre-condition for approval.

It will also carry out its own ‘due diligence’ declaration from a proposed shareholder whether the shares are proposed to be held for his own benefit or as a nominee, whether jointly or severally, or on behalf of others as one of the important measures  before approving any deal for transfer of shares of insurance companies.

Therefore no registration of transfer of shares or issue of equity capital of insurance company will result in change in the shareholding even though the transfer the total paid-up holding of the transferee in the shares of the insurance company is exceeds 1 per cent of its paid-up equity capital as per the notifications.