Kathmandu: As per the Insurance Act, there are two types of share structure in insurance companies. The min and max of promoter share is 51 and 70 per cent of the total paid up capital respectively.
Public share can be easily traded in the secondary market but promoters share can not be traded like public share in the secondary market. There are certain parameter to be followed before proceeding for the sale of promoters share.
As per the directives of insurer’s promoter share trading issued by Beema Samiti, a promoter is not eligible to sale it’s share unless the completion of 1 year of revoked from the blacklist of Credit Information Bureau of Nepal. Respectively, the internal or external auditor of the insurer too cannot sale the promoter share.
Here are the terms and conditions for the trading of promoter shares:
- Serving as legal or any other advisor of the insurer.
- Being a partner in any kind of contract with the insurer.
- Failure to update Tax Clearance Certificate and Permanent Account Number.
- Incase of legal action taken by court in relation to the business of insurer.
- If there’s no provision of share trading mentioned on buyer’s memorandum of association.
- If the buyer organization has not been operating with accumulated profit since last two year.
- Failure to submit the documents regarding Anti-money Laundering and Terrorism Act.
- If the share investment capital is raised through lending of Bank or Financial Institute.
- Share broker or Market Maker or Cooperative Organization.
- Incase the promoter share exceeds one third of the total promoter shares.
- If the promoter couldn’t have bachelor or equivalent academic degree.
- Member of Board of Directors, Chief Executive Officer, Company Secretary, an individual who is directly involved in the Financial Account keeping of the company Or unless after 1 year from the date of completion of their tenure.
Except above mentioned conditions, incase of purchase of promoter share, the fit and proper test of the investor must be done. After such test, an application should be submitted to the regulator,Beema Samiti. For the sales of promoter share, minute of the BOD of insurer, Citizenship, Tax Clearance Certificate, Demat Account Details, MoA and AoA (incase of organizational investor), PAN Certificate, Clearance Letter issued by Credit Information Bureau of Nepal.
For the sales of promoter share, minute of BOD, Citizenship Certificate, Tax Clearance, Clearance Letter from Credit Information Bureau, Proof of Income Disclosure, Form provided by Beema Samiti. Incase, of transfer of right share, right share nomination form, declaration letter of not exceeding the total holding of 15 percent of the paid up capital after the transfer.