IRDAI issued an order bearing reference number: IRDAI/F&I/ORD/MISC/73/05/2024 dated April 02, 2024, in the matter of M/s. Go Digit General Insurance Limited. (“Insurer”) .
Background
1. Prior to grant of the Certificate of Registration, the Company had submitted the Joint Venture Agreement (‘ JV Agreement’ ) dated May 30, 2017, amongst the following individuals/entities:
i. Mr. Kamesh Goyal,
ii. M/s Oben Ventures Private Limited
iii. M/s FAL Corporation
iv. M/s Oben Services Private Limited [Later named as M/s Go Digit Info works Services Private Limited (‘ GDISPL ’)]
v. M/s Oben General Insurance Limited [Later named as M/s Go Digit General Insurance Limited]
2. GDISPL was the promoter of the insurer as on December 31, 2023 holding 83.41% equity capital of the insurer. Following are the key features of the JV Agreement dated May 30, 2017:
a. GDISPL was authorised to issue 63,00,000 compulsorily convertible preference shares (CCPS) to FAL Corporation.
b. Each CCPS shall be cumulatively converted into 2.324 equity share at par, subject to the maximum permissible limit under Applicable Laws and the provisions of the Agreement.
3. The said JV agreement was amended on August 11, 2022. Due to this, instead of 63,00,000 CCPS, a total 78,00,000 CCPS has been issued by GDISPL in four tranches at different conversion rate.
Tranche
Date of
allotment
Number of CCPS
CCPS Conversion Ratio [CCPS:Equity]
(As per JV Agreement dated May 30, 2017)
(As per JV Amendment Agreement dated
August 11, 20122)
1.
May 31, 2017
31,50,000
1 : 2.324
2.324: 1
2.
July 06, 2018
31,50,000
1 : 2.324
2.324: 1
3.
March 29, 2019
7,50,000
–
3.55: 1
4.
June 29, 2019
7,50,000
–
3.55: 1
For the purpose of listing of the Company, it issued a Draft Red-herring Prospectus (DRHP), in which it was observed that the DRHP contains disclosure regarding the change in conversion ratio. Accordingly, the insurer was advised to provide details of the same. In response to which, the insurer, vide its response dated July 17, 2023, provided the details of the said change.
In consideration of the response, the Authority observed the following violations on the part of the Company and rendered decision as per the following table:
Charge No
Violation
Observations of the Authority
Decision of the Authority
1
Section 26 of the Insurance Act, 1938
Whenever any alteration occurs or is made which affects any of the matters which are required under the provisions of sub-section (2) of section 3 to accompany an application by an insurer for registration, the insurer shall forthwith furnish to the Authority full particulars of such alteration. All such particulars shall be authenticated in the manner required by that sub-section for the authentication of the matters therein referred to, and where the alteration affects the assured rates, advantages, terms and conditions offered in connection with life insurance policies, the actuarial certificate referred to in clause (f) of the said sub-section shall accompany the particulars of the alteration.
Regulation 5(2)(iv) of IRDA (Registration of Indian Insurance Companies) Regulations, 2000 – “Every requisition for registration application shall be accompanied by a certified copy of the shareholders’ agreement between Indian Promoters and Foreign Investors of the applicant.”
The insurer has done an undue delay in filling the particulars of JV Amendment Agreement which inter alia contains details of:
- Change in conversion ratio
- Total Number of CCPS as 78,00,000 as against 63,00,000 CCPS authorised by JV agreement dated 30.05.2017.
The Authority has imposed a penalty of Rs. 1 Crore for the violation.
The Authority has directed the Insurer to:
- Remit the penalty of Rs. 1,00,00,000/- (Rupees One Crore only) within a period of 45 days from receipt of this Order.
- The Insurer has been directed to charge the said penalty amount to its shareholders’ account.
- The Insurer has been advised to place a copy of this order before the next Board Meeting within 15 days of the said meeting and shall submit a copy of the minutes of discussion to the Authority.
A copy of the order is attached for your ready reference.
Source category: IRDAI
Attachments
- /2024/387_IRDAI_Order_In_the_matter_of_Go_Digit_General_Insurance_Limited.pdf
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