The board of directors of the Insurance Board took the decision on Sunday. [break]
The decision means the company will not be able to sell new policies from Monday.
“It will also have to seek the IB´s permission before settling claims,” Binod Aryal, board member of the IB, told Republica.
But the company will be allowed to collect premiums on policies that were sold earlier.
The IB had taken the action after the company distributed dividends among promoters and some shareholders despite the regulator´s clear instruction against doing so. The company´s tussle with the IB started earlier this year when it announced 28 percent dividend distribution from net profit earned in the previous fiscal year. The decision drew the IB´s attention as the company had not sought the regulator´s approval prior to making the decision.
“We then partially halted the company´s business transaction,” Aryal said. “But after the company acknowledged its mistake and pledged not to distribute dividend, we allowed it to do business as usual.”
Then around a month ago, the company again approached the IB and asked whether it can distribute dividend to its shareholders. This application came at a time when the IB, in Sept, had directed all life insurance companies not to distribute cash dividend unless they raise their paid-up capital to Rs 500 million from the existing Rs 250 million.
“In response, we asked them to make decisions in line with existing laws and instructions given by the IB,” Aryal said.
But the company assumed the IB´s reply as a green signal for dividend distribution and made public announcement to share the profit it had earned among its shareholders.
“To clear the misunderstanding, we then asked the company to revert on its decision and stop all procedures of dividend distribution,” Aryal said. “But later we came to know it had already given away the cash to all its promoters and few public shareholders.”
Now, the IB has said it will ask all its promoters and shareholders who had received the dividend to return back the money.
“We will not allow it to resume its business operations until it heeds the IB´s instructions,” Aryal said. “If it does not do so, we will be forced to terminate its operating license.”
Asian Life Insurance, which has a capital of Rs 360 million, generated a revenue of Rs 935 million last fiscal year and Rs 218 million in the first quarter of this fiscal year.
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