Kathmandu:In the current Fiscal Year 2078/79, no insurance companies will be allowed to issue right shares.The Insurance Board has instructed all insurance companies not to propose for right shares issue. Although, the Board has not yet issued any written instructions, it has instructed not to bring any proposal for the rights during the talks with the CEOs.
Some insurance companies are preparing to issue shares internally.However, they have been instructed not to make such preparations the current fiscal year, said Raju Raman Poudel, executive director of the Board.
The Board has requested the insurance companies not to plan for the right share issue in the policy and program to be prepared for the current FY.There is a provision that the policies and programs prepared by the insurance companies have to be submitted to the Board.
In such policies and programs,insurance companies mention the future plan to expand branches, recruit staff, business plan, investment in infrastructure. If there is any plan to increase the capital by issuing right shares in the scheme, it has been instructed to omit it.
The Board has taken such a step to control the sale of right shares for the purpose of increasing the price in the secondary stock market. Earlier, the Board had restricted Ajod Insurance Company for right share issue on the ground that insider trading done in the secondary market.
Such a move by the Board has embarrassed companies that really need capital while trying to stop the ill intention of the top management and BOD of some other companies.
The Board has made an arrangement to get the approval of the Board before issuing the right shares. Companies are issuing right shares without justification of need of additional capital. On the other hand, insurance companies that need capital have been issuing right shares time and again.There are many examples in the secondary market for insurance company managers and employees with the idea of keeping their company’s share price high and making money by playing on the same information. Even now, some companies have floated information of the right share issuance plan to manipulate the stock price in the secondary market.s.t.t.d.d.dary market.