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Home / IRDA Update 

Private Companies registration allowed by IRDA

The Insurance Regulatory and Development Authority (IRDA) has permitted the Registrar of Companies (RoCs) to register names of private sector companies wishing to enter the insurance sector.

The authority has recently written to the Department of Company Affairs (DCA) granting approval for removal of the earlier restriction on the RoCs.

Consequent to the green signal by the IRDA, the RoCs would now be allowed to register companies under the Companies Act, 1956, incorporating the words 'insurance' and 'risk corporation' in their names, the officials said.

The registration of names of private companies involving these words were not allowed earlier, since transaction of insurance business was restricted to the Government-owned companies.

The IRDA Act, 1999, had removed the monopoly clauses granting exclusivity to the Life Insurance Corporation (LIC) and the General Insurance Corporation (GIC) to transact insurance business in India. The Act had also said that all Indian insurance companies would have to be registered under the Companies Act, 1956.

As a run-up to the eventual opening up of the insurance sector for private competition, the Union Government, on its part, had permitted the RoCs to register the names of companies having insurance business-related words, after consultation with the IRDA and the Reserve Bank of India. The guidelines in this regard were issued on May 13, 1999.

The guidelines, however, could not become operational earlier, since the IRDA had reserved its permission till the time it attained statutory status. The communication permitting RoCs to register names was among the first act of the Authority after its statutory status was formally notified by the Government recently.

IRDA officials said that the RoCs would be fully empowered to register the names on its own after satisfying itself of the necessary documentation by the applicant.

However, they pointed out that the RoCs might still choose to revert to the Authority for vetting the applications before finally registering the name, since the formality of seeking the Authority's approval has been prescribed in the Government guidelines.

In the coming days, only a handful of companies are expected to register their names with the RoCs, since a number of hopefuls for the entry into the insurance sector are yet to concretise their tie-ups.

It is understood that many tie-ups planned earlier, mostly involving banks and non-banking financial companies (NBFC), are having to be reworked in view of the recent guidelines issued by the RBI. The Central Bank guidelines have proposed restrictions on the equity participation by banks and NBFCs in the JVs, forcing them to rework the holding patterns in the proposed companies.

However, the numbers might increase as the time for the announcement of the regulations for the sector approaches. According to the IRDA's time-table, the regulations are likely to be announced by end-June, while the first set of licenses are expected to be issued during the last quarter of the calendar year.

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