No insurance company shall assist its directors or shareholders or their families or persons connected with them in obtaining loans from any bank or financial institution or any other person by keeping assets or investments as security. At the same time, Insurance Development and Regulatory Authority (IDRA) approval should be obtained for the appointment of Chief Financial Officer (CFO) and Secretary of insurance companies. Even the CFO-Secretary cannot be fired or dismissed without the approval of IDRA.
IDRA has taken the initiative to amend the Insurance Act by adding such new clauses. The regulatory body of the insurance sector has sought the opinion of the concerned stakeholders, experts and the public on the draft amendment made in this regard. This opinion has been asked to be given by e-mail by next 24th April.
Section 44 (1) of the Insurance Act 2010 in force at present states – ‘No insurer shall grant any advance, loan or financial benefit on the security of his own shares.’ This section has been slightly amended and it has been said in the draft – ‘No insurer shall provide any advance loan or financial facility on the security of its own shares. In this case, the investment will also be under the scope of financial benefits.
Along with this amendment, two new clauses have also been added. In one of the clauses it is stated – ‘Insurer cannot provide assistance in obtaining loans from any bank or financial institution or anyone else to its directors or shareholders or their families or persons related to them by keeping its assets or investments as collateral.’
The second section states – ‘Without the approval of the authority, the insurer shall not grant any loan or otherwise provide financial benefits from the company or subsidiary company under its control to its directors or shareholders or their families or persons related to them.’
An initiative has also been taken to amend the section regarding the constitution of the board of directors of the insurance company. According to the Insurance Act currently in force, the number of directors of an insurance company cannot exceed 20 persons. If there are 20 directors, there is a provision to have 12 invited directors, 6 public shareholding attendants and 2 neutral directors.
Now by amending this section, if there are 20 directors, an initiative has been taken to keep 4 independent directors. However, if the number of directors is less than 10, the number of independent directors will be 2 and if more than 10, the number of independent directors will be 4.
In the draft amendment, a new clause has been added to seek IDRA’s approval for the appointment and removal of CFOs and company secretaries. In this regard, 4 sub-sections have been added in the draft amendment. These include-
>> Any person with the qualifications prescribed by the authority should be appointed as the CFO or company secretary of the insurance company with the approval of the authority.
>> No Chief Finance Officer and Company Secretary authorized by the Insurer under sub-section (1) shall be dismissed or dismissed without the prior approval of the Authority. In such cases, the authorities shall dismiss the concerned Chief Accountant and Company Secretary and Insurer or not by written order giving an opportunity to defend themselves whether they have done any work that harms the interests of the company or not. Thus he will not be eligible for employment in any insurance company for 5 years after his dismissal.
>> The Insurer shall inform the Authority in writing within 15 days of coming to know of any person becoming Chief Financial Officer and Company Secretary or not.
>> The post of Chief Financial Officer and Company Secretary of an insurance company cannot be left vacant for more than 3 months together. Provided that the Authority may extend the said period by one month each time in view of exigent circumstances.
In addition to taking the initiative to bring these amendments, initiatives have been taken to bring some other amendments in the law. Some new clauses have been added in the draft amendment, while others have been deleted. At the same time, new topics have been added in some sections.
MAS/KSR/MS
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