Requirements as to Capital Structure and Voting Rights and Maintenance of Registers


According to section 6A of the Insurance Act, 1938, the following provisions should be made with regard to the requirements as to capital structure and voting rights and maintenance of registers:

1. A public company limited by shares having its registered office in India, shall carry on life insurance business only, if it satisfies all the following conditions, namely:

i. that the capital of the company consists only of ordinary shares each of which has a single face value

ii. that the paid-up amount is the same for all shares whether existing or new, except during any period not exceeding one year allowed by the company for payment of calls on shares;

2. The voting right of every shareholder of any public company as aforesaid shall in all cases be strictly proportionate to the paid-up amount of the shares held by him.

3. A public company which carries on life insurance business shall not issue any shares other than ordinary shares of the nature specified in sub-section (i)

4. public company as aforesaid which carries on life insurance business:

a. shall maintain, in addition to the register of members der the Indian Companies Act, 1913, a register of shares in which shall be entered the name, occupation and address of the beneficial owner of each share, and shall incorporate therein any change of beneficial owner declared to it within un fourteen days from the receipt of such declaration

b. shall not register any transfer of its shares

i. unless, in addition to compliance being made with the provisions of section 34 of the Indian Companies Act, 1913, the transferee furnishes a declaration in the prescribed form as to whether he proposes to hold the shares for his own benefit or as a nominee, whether jointly or severally, on behalf of others and in the latter case giving the name, occupation and address of the beneficial owner or owners, and the extent of the beneficial interest of each

ii. where, after the transfer, the total paid-up holding of the transferee in the shares of the company is likely to exceed five percent of its paid-up capital or where the transferee is a banking or an investment company, is likely to exceed two and a half percent of such paid- up capital, unless the previous approval of the Authority has been obtained to the transfer;

iii. where, the nominal value of the shares intended to be transferred by any individual, firm group, constituents of a group, or body corporate under the same management jointly or severally exceeds one percent of the paid-up equity capital of the insurer, unless the previous approval of the Authority has been obtained for the transfer

Cost of capital 

The concept of cost of capital is very important for an insurance company in deciding the methods of financing. When an investor supplies capital to an insurance company, he expects a return on his investment. This return given to the investor is known as the cost of capital from the point of an insurance company. A company should always try to raise funds at the lowest cost. This will help to increase the profit of the company. Thus, cost of capital has a significant role in determining the profitability of an insurance company. 

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