Exercise of Employee Stock Options (ESOPs) – Applicability of provision of

• I~ ~,(Jl~ ~ PctPi~,11~ ~ m ~ I INSURANCE REGULATORY AND ir.lai DEVELOPMENT AUTHORITY OF INDIA ~'1-f"B.: ~~~&~~'311$lNl~/~~'1ITT/134/05/2021 Ref. No: IRDA/F&I/MISC/CIR/134/05/2021 ~ / Date:11-05-2021 q~q:;t Circular Wd /To, "ffifi ciftJ..tlcfjcildil ~ aj)~J..t~~3ff The CMDs/ CEOs of All Insurers q;s:fo1:ft ~ Rlq;eq"'i ~ajrcfu cm~ -tftm ~-1938 ~ ~1-i:OG 6R:(4)@D ~ 'IDcfCUR ct)- \.ltil~dl Exercise of Employee Stock Options (ESOPs) - Applicability of provision of Section 6A (4) (b) of the Insurance Act, 1938 ~ ~ ruRll1J..tcfj 3fR mm ~ c41J..t1cfjar3it ~ ~ cplrfcp1t1 ~1 g_ufcfjlf&lcp Ra~lcp/q_Dlcplf&lcp Ra~lcp/~~ Ra~lcfj ~ -cnft~ h-f.:@rr, 2016 ~ (1)4f'xaj~ 1 3[R ~~~ ~ $qfrlq'i ~~~cpl ~HhH0I) ruRlll-1 2O1 s ~ fclRlll-1 2 ~ (ii) ~ (1T) cfft 3fR ~'1-f ~ fcp-qr \JfTill % ~ f.nr m<f~ i: Reference is drawn to (i) para 7 of Insurance Regulatory and Development Authority of India (Remuneration of Chief Executive Officer/ Whole-time Director/ Whole-time Director / Managing Director of Insurers) Guidelines, 2016; and (ii) Clause (c) of Regulation 2 of IRDAI (Transfer of Equity Shares of Insurance Companies) Regulations, 2015 which provide as under: 1. ~~~ (isl1J..tlcfjcil3IT ~ ~ cfjll[cfjlil ~;g_ufcplf&lcp Ra~1cp;q_utcplf&lcp Ra~1cfj1~~ Ra~1cfj ~m~ h-~, 2016 cpl qfxaj~ 7. Para 7 of I ROAi (Remuneration of Chief Executive Officer / Whole-time Director / Whole-time Director/ Managing Director of Insurers) Guidelines, 2016 "WW w pcr rnfreftrcff cfft TfTlRT # ~ mr TflIT t &fc/i;:r trmw cfft eftrrr d${i1ld iPfl~t ~{rm.Jitrftitf<mul, ef/RJcpiff JFfi!tff/7.t fclct?UJ).itkf[!f.tW& Jlcp c!Jcp? VJ qf}- .Jf/clf(4c/Jd/ it~ rnfi!rrr 'Jft ~ "lifR ~/ "ESOP is kept outside the computation of the total remuneration but the extent of ESOP should be reasonable. The details of ESOP granted should a/so be disclosed in terms of the disclosure requirements stipulated for the financial statements of the Insurers. ~ efmr ~ it ~ trmw it ~ * J/6/ff RJf(1cp11J&f cp1w1tJ Jff?rcprf/;gy{cp/klcp RJf(Jcp)' qi! w fcpq 7TT! t dW: In case the shares of the insurance company are offered as ESOPs to Managing Director I Chief Executive Officer I Whole Time Directors, then: i. ~ "JJ&:l cp7efcp7tJ Jff?rcprf/ ffiZf/ff RJf(Jcp 19..ufcp7f2Jcp RJf(Jcp Fct#l iJJf)c? ;RJf(Jcp lTT iJJf)c? ##ti}~ f dW J-#eft (0£/lT ffei)tt lif1fl ~ fc/Rql-/, 2002 "frlT[f- 1 Wf'f. 115/1, ~~. '11'1efil..1+1<j:SI, ~-500 032, 'lffi\, I Survey No.115/1, Financial District, Nanakramguda, Hyderabad-500 032, India C}) : +91-40-2020 4000 ~ : www.irdai.gov.in (1) : +91-40-2020 4000 Website : www.irdai.gov.in "f/lTll ff{ lf2/T ~ WlR7' $ l-j/l/icfi--t # ~ ~ .31/J~c}d, W"EfefRT mf ~ ~/ WlRl' i/i J.J,fllicfi--1 cfiT ffffc!i!"cfif wf?rcRur cfiT Jfffrlr ~ #-<g&lffl R/iln "\i/77!1TTI i. If the CEO/MOIWTOs is one of the promoters I investors or directly related to the promoters, then the same will be governed by the provisions of SEBI (Issue of Sweat Equity) Regulations, 2002 as amended from time to time except those relating to pricing of shares. The manner of pricing of shares shall be disclosed upfront to the Authority. II. '3RT"JlTITc7T'Jl, W#eft$"~.Jitr/t~-~"ffRT~~/" ii. In other cases, the same will be governed by the SE Bi's ESOP guidelines." 2. ~~~ ~ cb4Rll"'i ~~~cpl ~HhH0I) RIRllA, 2015 ~ RIRllA 2 cf5t 'URT(lT) Clause (c) of regulation 2 of IRDAI (Transfer of Equity Shares of Insurance Companies) Regulations, 2015 ""!fflRT cfiT ~.-//rd?IJ/" "Jl c/dJ-11.-/ -wR"f/Trc!i # .3RI "ixlfcirr cfiT WlRl' "cfiT ~.-/hND/ .3{R" {tiftmlq?J° "cfiT &@ct?UJ cr ;:rl[T PJ✓ti./--1 ~nfi:tc1 ~ "lifT fcpm effl:rr ~ ~ -wR"mmrT fJc;:f "ll<SIC:fllc/ cfR# ~/ "Transfer of Shares" includes transfer of shares from existing shareholder to another person and includes transmission and fresh issuance of equity shares which lead to change in the shareholding pattern of an insurance company. mRrcITT1Jl q_uT<P1Riq5 R~~lcf5, ~ q51lfq51.fl R~~lcf5 JfR~<q~~°CTTft~"cf51 :«Dcpffi ~ ~ ~ ~'3?rcfi ~ cfiR JfR/m ~ cfiR "CR 'l.ft ~ cITTcTT % I c=rzrrfo;, ~ lll11ffi *, ~ 1:f1llT 1TllT % fcp- ~ <TT ~ cpQ1~i:i ~ ~'3ITcft cpl w:rrr ~~~<TT ~~~mm~, 193s~~61{(4)~iiR1Rm~ ~m~~t1 ctGj~R, ~ ~'3ITcft~w:rfTTcpl q~OIIA 3cffi ~~mcTm:=TT~ '3fl@R*i@T%1 The Authority, while approving the remuneration of Whole-time Director, Chief Executive Director and Managing Director, is also considering the granting and / or vesting of ESOPs. However, in a few cases, it has been observed that the exercise of ESOP by one or more KMPs whether singly or jointly is beyond the threshold limits specified in Section 6A (4) (b) of Insurance Act, 1938. Accordingly, the exercise of such ESOPs results in invocation of the provisions of the said section. 3. ~~Ri~ ~ filJ"WPR ~lt;-!llll ufffiT %: It is therefore reiterated as under: q)_ ~'l.ft~~, ~~~ ~~~ ~Alcf5ctl'3IT~ ~ q51lfq51~ ~1crorq51ffiq5 R~~1q5;q_orq51ffiq5 R~~1cf5~'q R~~1q5 cfj" m~ ~- ~ 2016 ~ 3@l@ ~ ~ cfiR ~ ~ 3flT ~~*~cpl roni ~~; a. All ESOPS, at the time of grant, shall be reported to the Authority preferably as a part of the application filed under IRDAI (Remuneration of Chief Executive Officer / Whole-time Director / Whole-time Director / Managing Director of Insurers) Guidelines, 2016; ~- ~'3ITcft cpl w:rrl, ~~~ ~I cb4Rll"'i cf5" ~~cpl ~Hl~-!0I) RlRllA, 2015 ~m~1TT3c=rmm ~, 1938 ~ ~ 61{(4) ~ ~mcf'q"f,,~ 3@1@%; 2 b. Exercise of ESOP is subject to provision of Section 6A (4) (b) of Insurance Act, 1938 read with IRDAI (Transfer of Equity Shares of Insurance Companies) Regulations, 2015; Tf. ~ islll-ll¢dl ~ '3fIR cpJ.f'ql~lJ"\icITT~~~ f.:PTJ-H ~~~-;:qfficpl Tfo-f fcl5"trT ~ % ~ -;:qrn cm 1<flR f.'rfu ~ '3fR ~ m ~ cpJ.fil 1~lJ1 ~ fclcp &q cpl wfrT ~ ~~~ ~ ct, q f.°llJ"'i cp1 ~~cpl~ H hH □I Rlf.°lllJ-J, 201s ~mtr%xf~~, 1938 ~ ~ 6~~~if '3f@T%1 c. Where specific trust has been formed by an insurer for issuance of ESOPs to their employees, the issue of shares to such trust and exercise of option by one or more employees shall also fall within the ambit of the Section 6A of the Insurance Act, 1938 read with I ROAi (Transfer of Equity Shares of Insurance Companies) Regulations, 2015; tl. ~~IIT~cbQJ-Jq) rnl~Ftf~IIT~Ftr~,~~, 1938 ~ ~ 6~(4)~ if Fclf.'lfe;~ ~ "W-TT ~~~~cpl wfrT fcl5"trr \JJ"@T %, ~ wfrT ~ ~ ~ cp1 ~ «ncpfa ffi ~ I d. Where exercise of ESOP by one or more KMPs whether singly or jointly is beyond the threshold limit specified in Section 6A (4) (b) of Insurance Act, 1938, the prior approval of the Authority shall be sought before such exercise. ~ift is11J-Jl¢cil3ITcITT~cft~%~ Jq,?1ctd cpl, J-ljYltH ~~-;:rrccR1 All insurers are advised to take note of the above for compliance. ~ant, I Sd/- (ID. lll«IT ~ I Dr. Mamta Suri) ~ fl(;IQ~UcP [C;Q) & ~ / Chief General Manager (F&A) 3