Kathmandu. The Supreme Court’s verdict on the IPO issued by Himalayan Reinsurance Company at a premium price has raised questions about the amount of shares issued by the other four companies.

Raising questions on the morality of the Insurance Authority and the Securities Board of Nepal, the court ruled that the authority responsible for not acting in accordance with the law by allowing Himalayan Reinsurance Company to issue its shares at a premium price. Likewise, the Securities Board of Nepal (SEBON) and the Insurance Authority of Nepal (SEBON) have been directed to work in coordination with each other to manage the amount issued at premium price as a reserve fund.

Clause 45950 of the Insurance Act, 2079 has a clear legal provision that an insurer should demand only at the face value while inviting applications for the purchase of shares from the general public. IME Life Insurance, Citizen Life Insurance, Sun Nepal Life Insurance and Reliable Nepal Life Insurance were allowed to issue their shares at a premium price as per Rule 25 of the Securities Registration and Issue Regulations, 2073.

In its verdict, the Supreme Court has ruled that since the Insurance Act is a special Act, the General provisions of the Companies Act and securities laws cannot be attracted to the issues barred by the Special Act.

“The Securities Board has not fulfilled its legal obligation to permit the public issue of securities only if it is found appropriate and reasonable to grant permission for the public issue of securities only if it is found appropriate and reasonable to permit the public issue of securities in order to protect the interest of the investors. Contrary to Section 45 (5) of the Insurance Act, 2079, the defendant Himalayan Reinsurance Company has sought permission to sell the shares at a premium and the Securities Board of Nepal (SEBON) has sought permission to sell the shares at a premium and the Securities Board of India (SEBON) has sought permission to issue securities under the prevailing law only if it is found appropriate and lawful on examination of the prospectus and other documents submitted by the defendant Himalayan Reinsurance Company seeking permission to issue securities at a premium. The Securities Board of Nepal (SEBON) has also not acted as per the provisions of the Securities Act, 2063 and the Securities Registration and Issue Rules, 2073 BS. “The defendant insurance authority has also recommended to the Securities Board of Nepal to sell the shares to Himalayan Reinsurance Company at a premium price against the law,” reads the verdict.

The Supreme Court has ruled that the Securities Board of Nepal (SEBON) and the Nepal Insurance Authority (NIA) have not fulfilled their legal obligations in the Himalayan Rica case. The judgment found that Section 39 of the Insurance Act, 2063 has also addressed the provision of the company to deposit the amount received by selling the shares at a premium price contrary to the law and deposit the amount more than the face value by opening a premium account as per Section 29 (2) and (3) of the Companies Act, 2063 and the provision that the company can use such amount has also been addressed by Section 39 of the Insurance Act, 2079. The defendants are Insurance Authority, Securities Board of Nepal and Himalayan Reinsurance Ltd. A directive order has been issued in the name of the petitioner.

The court has given this decision as a complaint was filed against Himalaya Reema. Now they have to keep additional amount of premium in the fund.

So far, no complaint has been received against the 4 insurance companies that issue shares at a premium. Now the question has arisen whether these companies will also manage the fund according to the court’s decision in Himalayan Reema or remain silent. The question is what kind of directive the authority and SEBON will give.

IME Life Insurance Company had raised Rs 2,842.29 million by issuing shares at Rs 236.91 per share by adding a premium of Rs 136.91 to the face value.

IME, however, had raised only Rs 1.20 billion from the market if it issued the shares at the face price. The company has collected an additional Rs 2.83 billion in premium.

Similarly, Citizen Life Insurance Company has issued Rs 244 per share at a premium of Rs 144 to the face value. Out of the issued capital of Rs 3.75 billion, the company is issuing 1,125,000 units of shares worth Rs 1.12 billion. The company has collected Rs 1.62 billion more from the IPO issuance at a premium price.

Similarly, Sun Nepal Life Insurance Company has issued Rs 239 per share with a premium of Rs 139 on the face value of Rs 100. The company is issuing 9.6 million units of shares worth Rs 960 million at the rate of 30% of the issued capital of Rs 3.20 billion. The company has issued a total of Rs 239 per share, adding a premium of Rs 139. With the addition of Rs 139 premium, an additional Rs 1.33 billion was charged.

Likewise, Reliable Nepal Life Insurance has issued Rs 257 per share with a premium of Rs 157 on face value. The company is issuing 12 million units of shares worth Rs 1.20 billion at the rate of 30% of the issued capital of Rs 4 billion. The company earned Rs 1.88 billion in addition to face value of Rs 157.