Pay adequate compensation to shareholders during mergers, IRDAI tells insurers

Insurance Regulatory and Development Authority of India (IRDAI) on November 5 said that in merger cases between two insurers, adequate compensation must be paid to shareholders of the acquired insurers.

In draft guidelines on compensation payable during insurers' mergers, IRDAI said that shareholders of acquired insurer will be eligible for compensation. Here, IRDAI said that the residual value of the assets shall be the total quantum available for payment of compensation.

Depending on the merger terms, the compensation details will have to be worked out. Entities that are against the compensation terms especially in cases of foreign insurers can approach the Securities Appellate Tribunal to seek relief.

IRDAI said the shareholder compensation has to be equal to the same proportion as the amount of paid-up capital of the shares held by them. If the equity shares of one or more shareholders are not fully paid-up, the unpaid portion on such equity shares will be deducted from the compensation payable.

Similarly, in cases where the preference shares of acquired insurer have not been taken over by the acquiring insurer, such preference shareholders will get priority over equity shareholders.