The government is going to issue new rules putting a cap on holding of shares of insurance companies by individuals, families, and companies at maximum 10 per cent, officials said.
Shareholders having less than 2.0 per cent of shares would not be allowed to act as director of an insurance company, a draft of the rules also said.
The ministry of finance (MoF) last week sent a draft gazette of the rules, under the Insurance Act 2010, to the Ministry of Law, Justice and Parliamentary Affairs for vetting before publication.
Presently, there is no mention of the limit of shareholding by individuals, families, and companies in the Insurance Act 2010.
Chairman of the Insurance Development and Regulatory Authority (IDRA) M Shefaque Ahmed told the FE presently the limit is being enforced under 'registration provision' of insurance companies.
The cap came into force for the first time when licenses were provided to 16 new insurance companies, he said and added, "Now we are preparing the rules of the Insurance Act 2010 putting the limit."
Mr Ahmed said the government does not want banks and financial institutions to go under the grip of some individuals or families. That's why the limit is being put, he said.
However, the IDRA chairman could not confirm if the limit of shareholding is being strictly enforced in all insurance companies.
A senior official of the MoF told the FE the rules are being framed to regulate share-holding by individuals and companies so that no quarter can take those under its grip.
He said it will help protect interest of small shareholders of the companies who bought those from stock markets.
Chairman of Rupali Life Insurance Mahfuzur Rahman Mita, MP told the FE Friday the Securities and Exchange Commission (SEC) for first time enforced the shareholding limit using its power under section 2CC of the SEC Ordinance, 1969 after the stock market scam in late 2010.
He said the limit of share holding has no mention either in bank company act or in the insurance act. The SEC could enforce the limit since the companies are listed on the stock exchanges.
Mr Mita said directors of several companies, having less than 2.0 per cent shares, filed cases in the High Court protesting the SEC's order. However, the court verdict went in favour of the SEC decision, he said.
Replying to a query, he said none of the directors of his company holds over 10 per cent and less than 2.0 per cent of shares. Vice president of the Bangladesh Insurance Association Ahasanul Islam Titu told the FE probably there is no insurance company where any individual, family, or company holds more than 10 per cent of shares.
He said the limit is already in force despite the absence of rules under the insurance act in this regard.
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