A proposed Bangladesh-Japan life insurance company hits snags, as the regulator has detected many 'deviations' in the revised proposal of the joint venture (JV), principally regarding its originally-quoted size of investment.
The latest proposal on the maiden JV in this sector in the country trimmed down the volume of paid-up capital by one-fifth to Tk 300 million, according to official sources.
The life-insurer - Taiyo Summit Life Insurance Company - initially wanted to invest some Tk 1.5 billion. The amount was to be raised to Tk 2.5 billion by floating shares, according to the original plan.
Besides, in the latest proposal, the Japanese investor's stake in the JV has come down to nearly 20 per cent from its primary plan of holding 57 per cent or Tk 855 million.
The stake of Summit Group was 39 per cent in the original plan. The remaining 4.0 per cent belonged to others.
Moreover, the company wants to reconstitute its board with the cooption of a new director with 10 per cent stakes.
In the application for getting licence, the company board consisted of nine members with three from the Japanese investor.
But, in the latest proposal, there will be no representation from Japan side in the board.
Sources at the Insurance Development and Regulatory Authority (IDRA) said there is no provision of changing shares within three years of licensing.
They also said they communicated with the higher authorities concerned about the JV, as it had wanted to invest Tk 1.5 billion.
"We want investment in joint venture, as it will help develop local insurance sector, but the latest proposal has demoralised us," said a senior official at IDRA.
Meanwhile, a team from the Tokyo-based Taiyo is likely to visit Bangladesh later this month and meet the IDRA officials.
People familiar with the JV insurance company told the FE that the Japanese counterpart has backtracked from its primary investment plan.
Because many changes took place in the board of Taiyo Life Insurance Company, a venture that has roots stretching back to the late 1800s, they also said.
The torching of at least four Buddhist temples in Cox's Bazar in 2012 also disheartened them from making big investment in Bangladesh, they added.
Against this backdrop, IDRA has sent a letter to the proposed company to remind it that it has been given approval on fulfilment of certain criteria.
"Any changes in the shareholding will off-balance those criteria," the letter mentioned.
The entrepreneurs were also reminded that during the submission of application, they had declared that they would not transfer their shares in the company in next three years.
IDRA issued letter of consent in favour of the company in July 2013. But, the entrepreneurs did not apply for licence soon after the issuance of the letter. After the lapse of one year, they applied for the registration certificate to the regulator in May.
In August, the company sent a letter to IDRA with the latest proposal with changes that the regulator found objectionable.
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