Can a company provide an insurance policy to its shareholders?

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NEW DELHI : Deepak Nitrite, the company that manufactures chemical intermediates to serve the national and international market, offers its shareholders an investor social protection plan. This is an individual accident insurance policy which covers the risk of death and permanent disability (total / partial) suffered as a result of an accident by a shareholder of the company.

Police coverage

The policy covers death and permanent disability (total / partial). Here, permanent total disability means loss of sight in both eyes or actual loss through physical separation of two whole hands or two whole feet. Likewise, permanent partial disability means the loss of sight in one eye or the actual loss by physical separation of a whole hand or a whole foot.

All shareholders between the ages of 18 and 65 will benefit from the coverage. In addition, the sum insured is offered according to the number of shares held. For example, those who hold up to 1,500 shares will get the sum assured of ??40,000. If a shareholder holds shares between 1,501 and 5,000, he obtains an insured sum of ??60,000. For those who hold shares greater than 5,000, the sum insured is ??80,000. This means that if you own shares of ??29.25 lakh, or 1,500 shares currently trading at ??1,950, you get personal accidental coverage of only ??40,000.

If you hold shares for ??97.5 lakh, or 5,001 shares currently traded at ??1,950, you get personal accidental coverage of only ??80,000. On the other hand, if a thirty-something had taken out individual accident insurance with a private insurer for an insured amount of ??1.5 lakh, it would suffice for him to pay a premium of about ??380 per year.

“This is a curious case where various laws of two regulators, the Indian Insurance Regulatory and Development Authority (Irdai) and the Indian Securities Council (Sebi), interact. Usually, the insurance premium or sum insured cannot be calculated. in the form of shares listed on the stock exchange. The objectives of insurance and investment are also distinct. In the past, Sebi and Irdai clashed over a fundamental issue: Unit-linked insurance policies were insurance products or securities.

A listed company offering such a scheme by calculating the sum insured on the float value of listed shares may raise eyebrows for both regulators unless the company has requested an exemption or approval from them. Regulators would like to ensure that such an innovation is not an incentive, ploy or contrivance to protect shareholders and policyholders. Under company and securities laws, a company is generally prohibited from inducing the purchase, sale or holding of securities and the financing of such activities by the company or its promoters, ”Sumit said. Agrawal, founder of Regstreet Law Advisors and former executive of Sebi.

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