Nepal Supreme Court Bars Insurers from Issuing Premium-Priced IPOs

The Supreme Court of Nepal has ruled that insurance companies are not permitted to issue initial public offerings (IPOs) at a premium price, stating that doing so violates the provisions of the Insurance Act, 2022. The verdict was delivered by a joint bench of Justices Dr. Manoj Kumar Sharma and Srikanta Poudel while hearing a writ petition challenging the premium-priced IPO of Himalayan Reinsurance Limited. Although the court dismissed the petition seeking to invalidate the IPO, as the shares had already been allotted, it issued a directive prohibiting regulators from approving similar premium-priced IPOs by insurance companies in the future. The court emphasized that the issue directly concerns public interest and investor protection. In its verdict, the Supreme Court questioned the roles of the Securities Board of Nepal (SEBON) and the Nepal Insurance Authority, stating that they had failed to properly enforce the Insurance Act. The court interpreted Section 45(5) of the Act as requiring insurers to offer public shares strictly at face value, holding that the special provisions of the Insurance Act override the general provisions of the Companies Act and securities regulations. It further warned that allowing premium-priced IPOs could undermine investor confidence and weaken corporate governance. Regarding the premium already collected by Himalayan Reinsurance, the court ordered that the amount exceeding the face value be transferred to a separate premium reserve account and managed through a statutory reserve fund in accordance with the Companies Act and the Insurance Act. SEBON, the Nepal Insurance Authority, and Himalayan Reinsurance have been directed to jointly implement the necessary arrangements.