SEBON Creates Hindrance for Insurers to Raise Paid-up Capital

Kathmandu: The capital increment plan of some of the life insurance companies could not go as planned amid the denial of the Securities Board of Nepal (SEBON) to raise funds through initial public offerings(IPOs) at a premium. The regulatory authority of the insurance industry, Nepal Insurance Authority, has already given permission to some insurance companies to issue IPOs at a premium.

SEBON has been denying to allow insurance companies to issue IPOs at premium prices citing the absence of provision for IPOs at a premium price in the existing Insurance Act 2079 and Bylaws 2049. But life insurance companies IME Life, Reliable Nepal Life, Citizen Nepal Life, and Sun Nepal Life have planned to raise capital through IPOs at a premium based on the provision of Section 29 of the Company Act 2063. According to the Company Act, any limited company with profit for the last three consecutive financial years is eligible to issue to IPOs at a premium price. Reliable Nepal Life has already submitted an application to SEBON seeking approval to issue IPOs at Rs.212 with a face value of Rs.100. The company aims to issue 12 million shares.

The executive director of SEBON, Muktinath Shrestha argued that some of the insurers have knowingly delayed their IPOs in order to get benefits from premium prices. He also said that since banks and financial institutions are not allowed to issue their share at a premium, the same rule will be applied to the insurers as well. Section 25 of the Securities Registration and Issuance Regulations provides that IPOs can be issued at a premium.

Nepal Insurance Authority has given a deadline to the insurance companies to meet minimum paid-up capital. The life insurance company must maintain at least Rs. 5 billion by the end of Chaitra 2079. Only two months left for the insurers to meet the deadline.

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