chhatramani/Nepal-Legal-Text-Corpus-44laws huggingface dataset:
Insurance Act 2079

Chapter-5 Provision on Capital Fund and Shares Allotment of Insurer

Section 39: Compulsory Reserve Fund
1) Every insurer shall maintain a reserve fund, as specified by the Board, for liability relating to the insurance business.
2) Amounts to be deposited to compulsory reserve fund (CRF) Life Insurer in accordance with sub-section (1):
(a) An amount not less than the total liability as determined by the Actuary on the basis of the Insurance Policies published by the insurer of the Life Insurance Business within Nepal.
(b) An amount not less than the amount specified by the Nepal Insurance Authority for the net insurance premium shown in the income and expenditure of a non-life insurance business.
(c) Fifty percent of the profit earned until the amount equals the paid-up capital of the insurer operating the Non-life insurance business.
3) An insurer may establish other reserve fund for operation of business, as deemed necessary,
4) Other provisions relating to the compulsory reserve fund to be maintained by re-insurance companies shall be as prescribed.
5) Other provisions related to compulsory reserve fund or other reserve funds shall be as prescribed.

Insurance Act 2079

Chapter-5 Provision on Capital Fund and Shares Allotment of Insurer

Section 40: Catastrophic Fund
1) Every insurer shall maintain a catastrophic fund for any losses that may be incurred due to catastrophes that may occur in future.
2) Other arrangements related to the catastrophic fund shall be as determined by the Authority.

Insurance Act 2079

Chapter-5 Provision on Capital Fund and Shares Allotment of Insurer

Section 41: Claim Payable Fund and Reserve Fund
1)  Every insurer shall maintain a claim payable fund and reserve fund and deposit following amounts in those funds:
(a) The amount of the liability for non-payment of the claim within the prescribed period,
(b) Amount for insurance claims, in respect of which an event has occurred in relation to the property and liability insured by the insurer but has not been reported to the insurer (recorded but not reported) or has not been reported sufficiently,
(c) Amount for unexpired risks reserve of the insurer.
2) Other provisions related to claim payable fund and reserve fund shall be as prescribed in sub-section (1).

Insurance Act 2079

Chapter-5 Provision on Capital Fund and Shares Allotment of Insurer

Section 42: Assets to be maintained more than liabilities
1) The total assets of the insurer shall be more than the total liabilities.
2) For the purposes of sub-section (1), the solvency margin (ratio of total assets to total liabilities) of insurer shall be as prescribed by the Nepal Insurance Authority.
3) The insurers undertaking insurance business and branches of foreign insurers existing at the time of commencement of this act shall, within the time prescribed by the Nepal Insurance Authority, maintain the solvency margin as prescribed in sub-section (2).
4) For the purpose of this section, the valuation of total assets and total liabilities shall be as prescribed.
Insurance Act 2079

Chapter-5 Provision on Capital Fund and Shares Allotment of Insurer

Section 43: Restriction on Distribution of Dividend
1) Notwithstanding anything contained in the prevailing laws, no insurer shall be allowed to declare and distribute dividends to shareholders unless:
(a) All its preliminary expenses are recovered and all losses sustained until the previous year are recovered and all the funds prescribed by this act and the Nepal Insurance Authority are provisioned,
(b) Paid-up Capital pursuant to section 36 is maintained,
(c) Solvency Margin Ratio pursuant to section 42 is maintained,
(d) Shares allotted to the general public are completely sold and paid up.
2) Every insurer must obtain the approval of the Nepal Insurance Authority before declaring and distributing dividends, as per prevailing law.

Insurance Act 2079

Chapter-5 Provision on Capital Fund and Shares Allotment of Insurer

Section 44: Allotment of Shares
1) The insurer shall set aside at least thirty percent of its total issued capital for subscription to the general public.
Provided that insurers registered as branch offices of foreign insurers shall not issue and sell their shares.
2) The insurer may allocate five percent of the shares set aside for the general public to its employees pursuant to sub-section (1).
3) The insurer may reduce the shareholding of the promoter shareholders to not less than fifty-one percent of the total issued share capital by converting the remaining shares to public shares.
4) Notwithstanding anything mentioned elsewhere in this section, the provision related to the allotment of shares of insurance companies incorporated with ownership of the Government of Nepal or the provincial government shall be as prescribed by the Government of Nepal.
5) Other provisions related to the issue and allotment of shares of the insurer shall be as prescribed in the prevailing acts related to securities.

Insurance Act 2079

Chapter-5 Provision on Capital Fund and Shares Allotment of Insurer

Section 45: Prospectus and Issue of Shares
1) An insurer shall, before making a public offer of its securities, have to submit the prospectus duly approved by the Securities Board to the Nepal Insurance Authority.
2) Unless the prospectus is submitted pursuant to sub-section (1), the said insurer or anyone on its behalf shall not be allowed to publish the prospectus of such insurer.
3) Notwithstanding anything contained in subsection (1), unless the Nepal Insurance Authority receives a written notification of the approval from the securities board to register the prospectus, the authority shall not register such prospectus.
4) An insurer shall issue its shares to the general public only after competition of one year of its insurance business. While making such an issue, the insurer shall have completed an audit of its previous year.
5) Notwithstanding anything mentioned in prevailing laws, an insurance company, while calling upon application from the general public for subscription of its shares, shall demand payment of a hundred per cent amount of the face value of its shares along with its application.
Insurance Act 2079

Chapter-5 Provision on Capital Fund and Shares Allotment of Insurer

Section 46: Restriction on sold, mortgaged, or transferred
1) The promoter of the insurance company shall not be entitled to sell or pledge any share registered under his/her ownership for at least five years from the date of incorporation of such company.
Provided that if any person had, before commencement of this act, hold shares more than the prescribed limit provided by this act, such person shall, within two years of commencement of this act, sell such excess shares.
2) Notwithstanding anything contained in sub-section (1), in case of a special circumstance due to the emergence of any obstruction or hindrance in the operation of the insurance business or the promoter shareholder is included in the blocklist as per prevailing laws, shares may be sold or brought amongst promoters by obtaining approval from the Nepal Insurance Authority.
Explanation: For the purpose of this Section, “special circumstance” means failure to hold a meeting of the Board of Directors due to lack of quorum for a consecutive period of three times or a situation of indecision because of disputes amongst Directors.
3) If the promoter of the insurance company wishes to sell or pledge the shares held in their name after five years he may sell or pledge such shares by complying the terms and conditions prescribed by the Nepal Insurance Authority.
4) The Chief Executive Officer, Auditor, Company Secretary or the person directly involved in management and account of insurer shall not buy or sell, mortgage or cause to be mortgaged, transfer or transact or give or accept as donation the securities of the concerned insurance company or of its subsidiary company in his/her name or in name of member of his/her family or a firm, company or institution under the control of such person or to any other person until he/she is in such position or until one year from the date of retirement from such position.
Provided that this sub-section shall not hinder to buy and sell securities while issuing bonus shares, rights shares or the shares allotted for employees or issuing new shares or while merging or amalgamating insurance companies in each other according to provisions made in Chapter-14 or while acquiring all assets or liabilities of one insurer by another insurer or while carrying out purchase or sale of securities with the approval of the Nepal Insurance Authority.
5) Other provisions relating to the sale or purchase or other insurer shall be as prescribed by prevailing laws.
Insurance Act 2079

Chapter-6 Board of Directors and Chief Executive

Section 47: Formation of Board of Directors
1) Notwithstanding anything mentioned in prevailing laws, every insurance company shall have a Board of Directors, along with one independent director, consisting of not less than five and not more than seven Directors.
2) The insurance company directors shall be appointed by the general meeting of the insurance company pursuant to sub-section (1).
Provided that,
(a) The Board of Directors should be appointed by promoters until the first annual general meeting.
(b) In the event of any vacancy in the post of a director prior to the holding of the Annual General Meeting, the Board of Directors should appoint the director at the next General Meeting.
(c) In case shares are held by the Government of Nepal or province government or another insurance company or another corporate body or company or foreign insurer. The concerned Government of Nepal or province government another insurance company or another corporate body or company or foreign insurer may appoint director(s) in a number proportionate to the value of the shares held by it. The concerned government of Nepal, province government, another insurance company, corporate body, company, or foreign insurer shall also appoint an alternate director to work without such a director.
3) No two or more persons from the same family can become directors in the same insurance company or a similar insurance company.
4) The board of directors shall appoint at least one independent (professional) director from the persons with qualifications and experience provided under section 49 and inform about such appointment at the first annual general meeting.
5) A director chosen by the directors from among themselves by a majority decision shall be the chairperson of the Board of Directors.
Provided that an independent (professional) director cannot be chairperson of the Board of Directors.
6) The person appointed as Chairperson of the Board of Directors shall take the oath of honesty and secrecy before the Chairperson of Nepal Insurance Authority, and the members of the Board of Directors shall take the oath of honesty and confidentiality before the Chairman of the Board of Directors in the format as provided in annexure.
7) In case the office of the Board of Directors becomes vacant for any reason, the Board of Directors shall appoint another person as a member until the next General Meeting within thirty-five days of such vacancy.

Insurance Act 2079

Chapter-6 Board of Directors and Chief Executive

Section 48: Term of Office of the Director
A director’s term of office is a maximum of four years, and such person may also be re-nominated or reappointed.
Provided that the independent director may be appointed for only a single tenure of office.
Insurance Act 2079

Chapter-6 Board of Directors and Chief Executive

Section 49: Qualifications of Directors
1) The person to be appointed to the office of Director shall have to possess the following qualifications:
(a) Having gained at least five years of experience as a director or at the executive level in national or foreign insurance companies or banks or financial institutions or corporate bodies in related fields or at the officer level of Nepal Government or corporate bodies,
(b) Having acquired at least a bachelor’s degree and gained at least three years of experience as a director or at executive level in national or foreign insurance companies or banks or financial institutions or corporate bodies in related fields or as officer level of Nepal Government or corporate bodies, or
(c) Chartered Accountant or person with a master’s degree in the subject of insurance, monetary or banking finance, economics or management, public administration or statistics, mathematics or economics or commercial law.
2) Notwithstanding anything mentioned in sub-section (1), a person with a master’s degree or equivalent in the subject of insurance monetary or, banking or finance, economics, the management or public administration, statistics or mathematics, economics or commercial law and has gained at least five years of experience as a director or in executive level in national or foreign insurance companies or corporate bodies in a related the field, shall be qualified to be appointed as an independent director.
Provided that the director or family member of such director auditor,   Advisor or substantial shareholder, or any person with a financial interest in the insurance company shall not be qualified to be appointed as an auditor or Advisor or substantial shareholder or any person with a financial interest in the insurance company, shall not be qualified to be appointed as an independent director.
Insurance Act 2079

Chapter-6 Board of Directors and Chief Executive

Section 50: Disqualifications of Directors
The following persons shall not be eligible to become a director of the insurance company:
(a) One who has not attained the age of 25 years,
(b) One who is unable to work as a director due to physical or mental illness,
(c) One has been declared bankrupt, as per prevailing laws,
(d) One has been blocked as per prevailing laws, and a period of at least three years has not lapsed after the removal of one’s name from the blocklist,
(e) An incumbent/serving director or an employee of any corporate body carrying out transactions of insurance or banking or financial transactions or any institution collecting any type of deposits or incumbent (existing) director with substantial shareholding or carrying out transactions related to insurance,
(f) An incumbent auditor or an advisor of the concerned insurance company or a person, firm or company who/which is a partner in any kind of contract with the concerned insurance company or has personal interests
(g) Who has acquired the membership in the Stock exchange to act as a securities broker or a merchant banker,
(h) Incumbent Director of another insurance company,
(i) A person who has not subscribed to a minimum number of shares required to subscribe to be eligible for appointment as a director pursuant to the Articles of Association of the insurance company,
(j) A person who has not subscribed to the qualification shares required to hold the position of director,
(k) A person holding any constitutional post or incumbent employee of the Government of Nepal, or a corporate body having ownership of the Government of Nepal, or the Nepal Insurance Authority or of any insurance company, bank or  financial institution,
Provided that nothing in this clause shall prevent from nominating a director in a different c category of insurance company of which shares has been purchased by the Government of Nepal or an institution having under the ownership of the Government of Nepal or insurance company,
(l) Who, having a liability to pay taxes pursuant to the laws in force, has failed to pay such taxes,
(m) If one has not completed a period of five years after serving out the sentence upon being convicted of an offence involving theft, cheating, forgery, fraud, corruption, any offence involving moral turpitude or offence related to insurance or banking or money laundering from a court of Nepal or that of a foreign country,
(n) If action had been taken against a person by a regulatory agency as per the law for committing an act in c contravention of the law and if they have not completed a period of five years after being taken such action,
(o) If one has not served the full sentence or is yet to clear the dues of the fine imposed by a court of law or if one is in arrears to pay a government due,
(p) If one has not completed a period of three years after serving out the sentence provided by the Nepal Insurance Authority due to non-compliance with the directions of the Authority.
Insurance Act 2079

Chapter-6 Board of Directors and Chief Executive

Section 51: Discontinue to hold the office of Director
1) No person shall continue to hold the office of a director in any of the following circumstances:
(a) If they are disqualified, pursue to Section 50,
(b) In cases where a motion to remove from the office of a Director is adopted by a majority of the General Meeting at the recommendation of the group from which he/she was appointed to the office of Director that is passed by the shareholders having representation of at least fifty-one percent of the shares of the same group,
Explanation: For the purpose of this Section, “group” means a group of promoters and shareholders from the general public.
(c)  If the resignation tendered by a director from their position is approved,
(d) If the Nepal insurance authority directs the removal of such person from the office, stating that they have carried out activities against the rights and interests of the insured or insurer.
2) If any insurance company has reasons to believe that any of its directors is disqualified from continuing to hold the office of director or any of its directors no longer holds his office, the insurance company shall give a written notice about such disqualification to the Nepal insurance authority within 15 days.
3) On receipt of written notice under sub-section (2), the Nepal insurance authority may issue necessary directions after necessary inquiry and examination.
Insurance Act 2079

Chapter-6 Board of Directors and Chief Executive

Section 52: Meetings of Board of Directors
1) The meetings of the board shall be held at least six times in a year.
Provided that the interval between any two meetings shall not exceed two months.
2) The chairperson shall convene a Board of Directors meeting at any time when at least one-fourth of the directors request in writing to convene the meeting and mention the agenda to be discussed in the meeting.
3) The chairperson shall specify the place, date, and time of the board meeting.
4) The chairperson shall preside over board meetings. In the absence of the senior most director shall preside over the meeting chairperson, the meeting shall be presided over by the senior most director.
5) No meeting of the board shall be held unless it is attended by at least fifty-one percent of the total number of directors.
6) The decision of a majority in the board meeting shall be binding, and only in the event of a tie may the chairperson exercise the casting vote.
7) A Separate book shall be maintained for the minutes of the meeting, recording the names of directors present, subject matters discussed, and decisions taken. The book should be duly signed by all the members present.
Provided that if any director puts forward any opinion opposed to or differing from the decision in the course of discussions on any subject in a meeting, they may mention the same in the minute book.
8) Where any agenda in which any member director has a direct or indirect personal interest is to be discussed at the meeting of the board, such a member shall give information as to such interest to the board prior to the commencement of discussion on such matter, and such member shall not take part in such meeting.
9) The board of directors may, if necessary, invite any national or foreign expert in a related field to attend the meeting as an observer.
10) The member of the board of directors shall receive meeting and other allowances, as prescribed by the general meeting within the purview of the directives issued by the Nepal Insurance Authority, for his presence in the meeting.
Insurance Act 2079

Chapter-6 Board of Directors and Chief Executive

Section 53: Functions, Duties and Powers of the Board
1) All functions to be performed and all powers to be exercised by the insurance company, other than those to be performed by the general meeting of shareholders, shall be performed and exercised by the Board, subject to this Act, laws in force and the memorandum of association and articles of association.
2) It shall be the duty of directors to operate an insurance company in the interest of insured or general public shareholders by managing and mitigating overall risks, maintaining proper corporate governance, and guaranteeing that there will be no obstruction in the insurance company’s day-to-day operation.
3) The other functions, duties and powers of the board of directors shall be:
(a) For systematic performance of the operation of the insurance company in a well-managed manner, to prepare and implement necessary rules, regulations, work plans, directives, etc. under this act, relevant laws or Nepal Insurance Authority directives,
(b) To prevent risks or risky situations in the operation of  the insurance  company and to prepare guidelines for risk management, claim payment, management of assets and liabilities, internal control system  budget and other necessary matters as per policies and strategies of the insurance company,
(c) To prepare policies for all activities to be performed by the insurance  company and to supervise the daily operations to manage the insurance company efficiently,
(d) To maintain the capital, capital fund or other moveable and immovable assets as prescribed by the Nepal Insurance Authority,
(e) To regularly monitor the policies adopted by the insurance company, analyse them and provide necessary directions to the management of the insurance company,
(f) To present the audited financial report to the general meeting and
(g) To perform other functions as directed by the Nepal Insurance Authority from time to time.

Insurance Act 2079

Chapter-6 Board of Directors and Chief Executive

Section 54: Committee or sub-committee may be formed
1) Except otherwise expressly provided for in this Act that particular work shall be carried out by any particular agency or official, the Board of Directors may form one or more sub-committee/s for any specific purpose subject to the directives of the Nepal Insurance Authority.
2) The functions, duties, powers and rules of procedure of the sub-committee formed and the remuneration or allowances receivable by the member for attending its meetings shall be as prescribed by the Board of Directors in accordance with sub-section (1).

Insurance Act 2079

Chapter-6 Board of Directors and Chief Executive

Section 55: Delegation of Powers
The board may delegate some of its powers by disclosing the purpose and reasons to any director, a subcommittee formed pursuant to Section 54, the chief executive, or any person acting as the chief executive of the insurance company, on the condition that such power shall be exercised under its supervision or direction.
Provided that management rights shall not be delegated to the board of directors.
Insurance Act 2079

Chapter-6 Board of Directors and Chief Executive

Section 56: Management of Insurance Company
1) The insurance company may hire employees as necessary to operate its insurance business.
2) Notwithstanding anything mentioned in sub-section (1), a person with financial interest in the insurance company shall not be hired as employee.
3) While making management expenses during the operation of the insurance business by the insurer, the interest of the insured shall be protected.
4) The limit of management expenses and other provisions pursuant to sub-section (3) shall be as determined by the Authority.