Non-life insurance association draws SEBON’s attention to ‘impractical’ regulation provision

Kathmandu, Dec. 22

The Non-Life Insurance Association of Nepal has drawn the attention of the Securities Board of Nepal (SEBON) to a provision barring directors of the non-life insurance companies from selling their shares in the respective institutions for one year after resigning.

According to Regulation 38 (1a) of the Securities Registration and Issuance Regulations, 2079, directors are prohibited from buying or selling shares of the concerned company during their tenure and for a year following their departure.

In a statement issued on Sunday, the association has termed this rule 'impractical'.

"The provision regarding the sale of shares is extremely impractical. Directors, like other shareholders, are investors who represent shareholders in the board of directors. Restricting their ability to sell shares solely on this basis is unjust," read the statement.

A delegation led by the association's president, Rajendra Malla, who is also the former president of the Nepal Chamber of Commerce, met SEBON Chairperson Santosh Narayan Shrestha on Sunday to request an amendment to the provision.

Malla said that from an investment perspective, there is no difference between the financial interests of directors and other shareholders. The association also argued that directors, being shareholders themselves, should not be deprived of utilising their investments like others.

Malla further stated that prohibiting a businessperson from selling movable assets could hinder diversification efforts, entrepreneurial activities, and even essential household financial needs.

The association informed in the statement that it proposed the regulation be amended to allow directors to sell up to 50 per cent of their shareholding while still holding their position. It noted that the current restriction not only hampers the investment climate but could also negatively impact foreign investment prospects.

"Restricting any individual from buying or selling shares for a year after leaving their position is unreasonable. This provision should be revised to facilitate a more favourable investment environment," the statement read.  

Published in The Rising Nepal daily on 23 December 2024.