Customer Care No.

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IRDA issues new guidelines

to regulate acquisitions in
Listed Insurers
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Introduction
It is quite common that acquisitions are regulated by the
sectoral regulator in addition to market regulator, SEBI.
RBI governs acquisition or transfer of control of NBFCs,
amalgamation, issue and pricing of shares by of private
sector banks, etc. Similarly, the Insurance Regulatory and
Development Authority of India ('IRDA') has come up with
the Insurance Regulatory and Development Authority of
India (Listed Indian Insurance Companies) Guidelines,
2016('Guidelines, 2016') vide notification dated August 05,
2016. The Guidelines, 2016 are to be read along with any
other law for the time being in force [e.g., Companies Act,
2013, SEBI (ICDR) Regulations, 2009, Listing Regulations
issued by SEBI, Consolidated FDI Policy, etc.] including the
IRDAI (Issuance of Capital by Indian Insurance Companies
transacting Life Insurance Business) Regulations, 2015 and
IRDAI (Issuance of Capital by Indian Insurance Companies
transacting
other
than
Life
Insurance
Business)
Regulations,
2015.
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In this article Guidelines, 2016 of the IRDA have been summarized.
Applicability of IRDA Guidelines, 2016
2. Clause 1(iii) of the Guidelines, 2016 of IRDA expressly provides for the applicability of the
guidelines. As per the mentioned clause, Guidelines, 2016 will be applicable to:
(i)all insurers whose equity shares are listed on the stock exchanges, and
(ii)to the allotment process pursuant to the public issue.
Guidelines, 2016 are effective from the date of issuance, i.e., 5th August, 2016. An insurer who
is neither listed nor to be listed shall continue to be governed by the provisions of the IRDAI
(Transfer of Equity shares of Insurers) Regulations, 2015.
Further, Guidelines 2016 shall also be applicable to an insurance intermediary registered by
IRDA, provided such insurance intermediary is drawing more than 50 percent of its revenue
from insurance related business.
Scope of IRDA Guidelines, 2016
3. These Guidelines, 2016 are divided into following 3 parts:
Part A deals with compliances to be ensured in case of acquisition of shares or voting rights,
illustrative criteria for determining "fit and proper" status and continuous monitoring
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Part C specifies foreign holding and other requirements.
Guidelines, 2016 v. SAST
4. Guidelines, 2016 are in addition to SEBI (Substantial Acquisition of Shares and Takeovers)
Regulations, 2011('SAST'). Guidelines, 2016 have introduced certain concepts like Major
shareholder, Major shareholding and has defined the terms 'Acquisition' 'Person acting in
concert' instead of linking the same with relevant clause as defined by SEBI under SAST/ ICDR.
'Acquisition' and 'persons acting in concert' have been defined to mean acquisition of shares or
voting rights and not acquisition of control.
Acquisition of shares or voting rights for the purpose of gaining control in an insurer is
governed by Chapter VI of Guidelines, 2016. Where acquisition/aggregate holding in proposed
to be less than 5%, and, concerned insurer suspects that dubious methods have been adopted
to get over the ceiling of 5 per cent to camouflage the real purpose of these Guidelines by
individuals / groups with a view to acquire controlling interest in the insurer, a reference shall
be made to IRDA. In that case IRDA may require the acquirer to obtain prior approval and
comply with the "fit and proper" criteria.
As per the Guidelines, 2016 the terms Major shareholder and Major shareholding are defined
as follows:
Customer
No. 91-11www.taxmann.com
""MajorCare
shareholder"
means shareholder having or likely to have an "aggregate
holding" to the

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Foreign Holding and Other requirements
Mandatory DEMAT holding: Every insurance company intending to go for listing to convert its
equity shareholding in Demat format and to submit necessary documentary proof to this effect;
Investment in other listed insurer: shall be subject to the exposure norms as specified in IRDA
(Investment) Regulations, 2000 as amended from time-to-time. Further, subsidiary companies
shall also be permitted to invest in listed insurance company, subject to compliance of
applicable provisions on such investments;
FDI compliance: Every insurance company to ensure that the foreign investment in the
company at any point of time is in accordance with the limits allowed under the Insurance Act,
1938, read with the Foreign Direct Investment Policy of India and the provisions of FEMA 1999
and the company is compliant with "Indian owned and controlled" Guidelines issued by IRDA.
Conclusion

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