 "Norms for shareholding changes in insurance brokers tightened")
Irda’s Insurance Brokers Regulations, 2013, lay down regulatory obligations for insurance brokers in case of any change in shareholding. The Act states brokers shouldn’t register any transfer of shares exceeding five per cent without the prior written approval of the authority.
With the recent change, a transfer of less than five per cent of the paid-up capital, too, will need Irda’s nod.
“The authority has been receiving frequent requests for changes in the shareholding pattern by broking entities. Such frequent changes are not viewed in good light by the authority, as these reflect financial volatility of companies,” Irda said.
Owing to the need for long-term players in the market, Irda said there was a need for stipulations in this regard.
For changes in the shareholding pattern (including those arising out of induction of capital) in which after the transfer, the new individual/entity’s total paid-up equity holding is likely to exceed 50 per cent of its paid-up capital/contribution, the applicant and the proposed shareholders will be subjected to the due diligence applicable to fresh applications for insurance broking licences.
Apart from fresh applications and fit-and-proper undertakings, for any further changes in the shareholding pattern, there will be a lock-in period of three years.
In case of changes in shareholding pattern, through which after the transfer, the total paid-up equity holding of the new entity/individual is likely to be between five and 50 per cent of its paid-up capital, there will be a lock-in period of a year.
All the norms come into force with immediate effect.