Rastriya Beema Sansthan, the state-controlled insurer, has forwarded its audited balance sheets of fiscal years 2003/04, 2004/05 and 2005/06 to the Insurance Board, after the latter sought clarification on its decision to hold annual general meeting (AGM) and distribute dividend without taking the consent of the insurance sector regulator.
The Board has confirmed delivery of the audited balance sheets. It has, however, said it is yet to make a decision on whether to allow the insurer to hold AGM and distribute dividends as it has not thoroughly gone through the financial reports.
As per the Insurance Board directive on financial report, no insurance company can announce the date of AGM without getting its balance sheet endorsed by the Board.
But flouting this rule, the state-controlled insurer, couple of days ago, made public its decision to hold AGMs of the three years on October 10. At that time, it also said it was extending 39 percent bonus shares from net earnings made in the fiscal year 2003/04, another 39 percent bonus shares from profit generated in 2004/05 and 15 percent bonus shares from earnings made in 2005/06.
The insurer is distributing these bonus shares from earnings made by the non-life insurance business of the company, which is listed in Nepal Stock Exchange (Nepse) and is 12.27-percent owned by the public. The rest of the shares in the non-life wing of the company is held by the government and Employees Provident Fund.
Nidhan Raj Lamichhane, a high-ranking official of Beema Sansthan, told Republica that it was not trying to violate the Insurance Board´s instructions by making announcements on distribution of bonus shares and holding of annual general meetings.
“We have always followed the Insurance Board´s instruction and will continue to do so in the days to come. But since our balance sheets are audited by state-owned Financial Comptrollers General Office, we, like in the previous years, did not think it was necessary to forward the financial reports to the Board to get approval to hold the meetings and distribute dividend,” he said. "But since it has sought clarification we have forwarded the balance sheets as demanded from us."
Although Lamichhane claimed the company has always been playing by the rules set by the Insurance Board, this has never been the case as it always tries to take benefit of its status as the state-backed company.
Taking advantage of this position, it has failed to separate life and non-life businesses, which is mandatory for all insurance companies. It has also failed to audit its balance sheets since the fiscal year 2003/04, although the Insurance Act clearly says insurance companies must have their balance sheets audited by an authorized chartered accountant within 10 months of completion of every fiscal year.
Because of its failure to audit the balance sheets, the Insurance Board has denied to renew the operating license of the company, which means Beema Sansthan is operating its entire business illegally.
source: republica,30 Sept 2012
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