Exercise of Employee Stock Options (ESOPs) – Applicability of provision of Section 6A (4) (b) of the Insurance Act, 1938

Last updated: 12 May 2021

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This notification clarifies the application of Section 6A(4)(b) of the Insurance Act, 1938, to the exercise of Employee Stock Options (ESOPs) by Key Managerial Personnel (KMPs) in insurance companies. It reiterates that all ESOP grants should be reported to the IRDAI, and their exercise is subject to the provisions of the Insurance Act and related regulations. Insurers must seek prior approval from the Authority if the exercise of ESOPs by KMPs exceeds the specified threshold limits.

INSURANCE REGULATORY AND DEVELOPMENT AUTHORITY OF INDIA Ref. No:IRDA/FI/MISC/CIR/134/05/2021 Date:11-05-2021 To The CMDs/ CEOs of All Insurers Exercise of Employee Stock Options (ESOPs) Applicability of provision of Section 6A (4) (b) of the Insurance Act, 1938 Reference is drawn to (i) para 7 of Insurance Regulatory and Development Authority of India (Remuneration of Chief Executive Officer / Whole-time Director /Whole-time Director/Managing Director of Insurers) Guidelines,

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FAQ :

The notification concerns the exercise of Employee Stock Options (ESOPs) and its compliance with Section 6A(4)(b) of the Insurance Act, 1938.

All ESOPs, at the time of grant, must be reported to the IRDAI, preferably as part of the application filed under the IRDAI (Remuneration of Chief Executive Officer / Whole-time Director / Managing Director of Insurers) Guidelines, 2016.

Prior approval from the IRDAI is required before the exercise of ESOPs if the exercise by one or more KMPs, individually or jointly, exceeds the threshold limits specified in Section 6A(4)(b) of the Insurance Act, 1938.

Yes, if a specific trust has been formed by an insurer for issuing ESOPs, the issue of shares to the trust and the exercise of options by employees will also fall under the ambit of Section 6A of the Insurance Act, 1938, read with the relevant regulations.

The relevant regulations include the IRDAI (Remuneration of Chief Executive Officer / Whole-time Director / Managing Director of Insurers) Guidelines, 2016, and the IRDAI (Transfer of Equity Shares of Insurance Companies) Regulations, 2015.

Notification No : IRDA/F&I/MISC/CIR/134/05/2021
Source : https://www.irda.gov.in/ADMINCMS/cms/Circulars_Layout.aspx?page=PageNo4482

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