Indian Insurance Company Act India [Section 2(7A)].

The Amendment Act substitutes the definition of Indian insurance company in clause ( 7A) of section 2 of the Act so as to raise the foreign equity investment cap in Indian insurance company from 26 per cent to 49 per cent.

The Amendment Act, however, does not raise the foreign direct investment cap of 26 per cent for insurance cooperative societies.

The Amendment Act has substituted clause (7A). Substituted clause ( 7A) defines Indian insurance company as under: 

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Indian insurance company” means any insurer, being a company which is limited by shares, and:

Which is formed and registered under the Companies Act, 2013 (18 of 2013) as a public company or is converted into such a company within one year of the commencement of the Insurance Laws (Amendment) Act, 2015;

In which the aggregate holdings of equity shares by foreign investors, including portfolio investors, do not exceed forty-nine per cent of the paid up equity capital of such Indian insurance company, which is Indian owned and controlled, in such manner as may be prescribed.

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Explanation for the purposes of this sub-clause, the expression “control” shall include the right to appoint a majority of the directors or to control the management or policy decisions including by virtue of their shareholding or management rights or shareholders agreements or voting agreements.

Whose sole purpose is to carry on life insurance business or general insurance business or re-insurance business or health insurance business.

The Insurance Laws (Amendment) Bill, 2008 originally proposed a revised definition of Indian insurance company as under (7A) “Indian insurance company” means any insurer, being a company which is limited by shares, and,

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Which is formed and registered under the Companies Act, 1956 as a public company or is converted into such a company within one year of the commencement of Insurance Laws (Amendment) Act, 2008;

In which the aggregate holdings of equity shares by a foreign company, either by itself or through its subsidiary companies or its nominees, do not exceed forty-nine per cent paid-up equity capital of such Indian insurance company

Whose sole purpose is to carry on life insurance business or general insurance business or re-insurance business or health insurance business.

Explanation for the purposes of this clause, the expression “foreign company” shall mean a company or body established or incorporated under a law of any country outside India and includes Lloyd’s established under the Lloyd’s Act, 1871 (United Kingdom).

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The Amendment Act makes the following changes to the re-vised clause ( 7A) as originally proposed in the Amendment Bill.

The reference to Companies Act, 1956 replaced by refer­ence to Companies Act, 2013 since Companies Act, 2013 replaces Companies Act, 1956.

The foreign equity cap which was FDI cap of 49 per cent changed to composite foreign equity cap of 49 per cent which would cover all forms of FDI and foreign portfolio

Indian ownership and control of Indian insurance company expressly stipulated.

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Definition of ‘Control’ inserted in section 2(7A) to clarify the concept of Indian control.

The Bill had originally proposed an Explanation in clause (7A) of section 2 of define ‘foreign company’. The Amendment Act has dropped the Explanation from clause (7A) and incorporated the Explanation in new clause (9) of sec­tion 2 instead.

The Amendment Act has inserted new clause (aaa) in sec­tion 114(2) of the Act. New clause (aaa) empowers the Central Government to prescribe by Rules the manner of ownership and control of Indian insurance company un­der sub-clause (19) of clause ( 7A) of section 2.

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The above changes were made based on the recommendations made by the Select Committee of the Rajya Sabha in its report dated 10-12-2014.

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