Question

answer as soon as possible .

Adam insurance company wants to get license to operate as a Takaful insurance provider. Discuss the process of getting registered for a Takaful product under Insurance Ordinance 2000. Also list the possible options that the company has regarding the products it can offer.

Answer 1

Legal form of the Company: The following forms of companies are eligible to establish and commence operation as an insurance company   in Pakistan:

(a) a public limited company; or

(b) a body corporate incorporated under laws of Pakistan (not being a private company or a subsidiary   of a private company).  

The law does not permit any company to transact composite insurance business in Pakistan.

Objective of the Company:  

Registered insurers cannot carry on activities other than in connection with or for the purposes of its insurance business.  All the objectives of the company are defined in the company’s Memorandum of Association, which is duly approved by the SECP before incorporation of the company.  

Foreign Investors:   In the year 2007, the government encouraged liberalization and 100% foreign ownership and control of insurance companies was permitted to foreign investors. The minimum equity requirement being US$4 million; not less than US$2 million should come from abroad and an equivalent amount to be raised from the local market.

The following are the requirements for incorporation of a company under the Companies Ordinance 1984.  

Phase I.

Reservation of Name:   Promoters desirous of forming a company should make sure that the name chosen is not otherwise inappropriate, deceptive or designed to exploit or offend the religious susceptibilities of the people and neither it’s identical nor closely resembling with the name of an existing company. Original paid challan in the prescribed amount may be deposited in any of the authorized branches of MCB Bank Limited being the prescribed fee for this purpose has to submitted vide an application to the Incharge, CRO, for seeking availability of a name.    Upon receipt of a confirmation from the CRO, the prospective company has to proceed with Phase II.     The applications of foreign investors are subject to screening/approval Ministry of Interior.  

Phase II. Incorporation:   Whilst the proposed insurance company shall be incorporated under the Companies Ordinance 1984 by the concerned CRO.

Statutory forms & documents that are required to be submitted to the registrar are listed hereunder:  

1. Declaration for compliance with the requirements for incorporation of the company;

2. Situation of Registered Office;   

3. Particulars of Directors;  

4. The memorandum and articles of association should be in line with the requirements of the Companies Ordinance 1984.  It should explicitly have 5 specific clauses viz.   − Name clause,   − Registered Office clause,   − Object clause,   − Limited Liability clause and   − Capital clause.    The Memorandum and Articles of Association, at the time of submission, is to be signed by each subscriber in original in the presence of one witness;

5. A copy of the original paid Challan deposited in the authorized branches of MCB Bank Limited or a Bank Draft/Pay Order drawn in favour of Securities and Exchange Commission of Pakistan of the prescribed amount. Fee is calculated on the basis of Authorised Capital as per 6th Schedule;  

6. Proposed pattern of shareholding for meeting the prescribed minimum paid up capital requirement. The minimum paid‐up capital of a newly proposed non‐life insurer & general takaful operator is Rs.300 million and for life insurance/family takaful operator it is Rs.500 million;   7

. Legible copies of Computerized National Identity Card or passport, in case of foreigner, of the Promoters and witnesses;

8. Copy of the letter confirming the Availability of Name issued by SECP;

9. A Business Proposal.