“…compensation to the shareholders whose rights against the acquiring insurer has been reduced…shall be paid based on the residual value of the assets,” mentioned the publicity draft on which the Insurance Regulatory and Development Authority of India (IRDAI) has invited feedback from the stakeholders by November 20.
The residual worth, it added, will probably be equal to the worth of the property of the acquired insurer as on the day instantly earlier than the appointed day, much less the overall quantity of liabilities.
Further, the compensation shall be “paid either in cash and/or in kind or partially in cash and partially in kind”, it mentioned.
Under Section 37A (4A) of the Insurance Act, 1938, the shareholders and members whose rights have been adversely impacted by the scheme of amalgamation or merger can be entitled to compensation.
IRDAI (Manner of Determination of Compensation to Shareholders on Merger of an Insurer underneath a Scheme Prepared underneath Section 37A) Regulations, 2020 additionally proposes for separate provisions for fee of compensation for merger/amalgamation of the department of a overseas reinsurer.
The draft mentioned that the place the quantity of compensation supplied is just not acceptable to holders of not lower than 10 per cent of the paid up fairness capital of the acquired insurer to whom the compensation is payable, such aggrieved individuals could desire an attraction to the Securities Appellate Tribunal.
The time interval for attraction could also be specified by IRDAI which shouldn’t be lower than 30 days from the date of intimation of compensation.
The goal of the proposed laws is to supply for the way of willpower of compensation for the shareholders “whose interests in, or rights against, the insurer” ensuing from amalgamation are lower than his curiosity in, or rights in opposition to the unique insurer.