The IB will issue this instruction on Thursday during a meeting with promoters and top officials of the company.
Asian Life is currently prevented from selling new policies. It also has to seek the Board´s permission before settling claims, although it is allowed to collect premium on policies sold in the past. [break]
The business activities of the company were suspended on Sunday after it distributed dividends flouting the Board´s instructions.
The latest IB investigation has unveiled that the company had distributed Rs 45.2 million as dividend among promoters and Rs 186,000 among public shareholders.
“The money was distributed despite the regulator´s moratorium on dividend distribution,” Binod Aryal, one of the board members of the IB, who is heading the investigation on the case, told Republica.
Earlier in September, the IB had issued a directive asking all life insurance companies to stop distribution of dividend until they prop up paid-up capital to Rs 500 million from the existing provision of Rs 250 million. Since the insurance company has a capital of Rs 360 million, it was also barred from distributing profit among shareholders. Yet Asian Life did not care.
“We now want all the promoters and public shareholders of the company to return back the money as soon as possible,” Aryal said, adding, “The decision is aimed at protecting the interest of clients, who have spent their hard-earned money to purchase policies from the company.”
If the company cannot recoup the money from promoters and shareholders, the company´s board members will be responsible for raising the fund and putting it back in its coffers, according to the IB.
Asian Life has until Sunday to do this. “If it fails to meet the deadline it will be given another 15 days to return the money, but with interest,” Shekhar Kumar Aryal, acting director of the IB, told Republica. “If not, we will be forced to take other severe actions, which could even result in termination of its operating license.”
Asian Life Insurance, however, has stuck to its stance that it has not violated any rules of the IB. “We had distributed the money from premium collected through sales of foreign employment policies which had expired, and not from annual profits,” Bijaya Kumar Sarawagi, the company´s chairman, reiterated on Wednesday.
Asian Life is among a company that sells foreign employment policies to people who go abroad for employment purpose. These policies, which cost as less as Rs 1,025, provide coverage of up to Rs 600,000 in case of policyholders´ death and up to Rs 550,000 in case of partial or full disability.
These policies mature after a maximum of three years, meaning policyholders or their kin who do not claim for compensation within this period cannot lay their claim on the payment later. “Since the money we distributed as dividend had come from this source, on which we have no liabilities, we still think we are not at fault in giving away the money to our promoters and shareholders,” Sarawagi told Republica, adding, “we are now coordinating with lawyers to check the legality of our action.”
The Insurance Board has, however, said premiums on which the company has no liability has to be entered into balance sheets as profit and not given away to shareholders. “So what Asian Life has done is in clear violation of our directive on dividend distribution,” Shekhar Kumar Aryal said.
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