Insurance Regulatory and Development Authority (“IRDA”) has vide its circular dated June 11, 2010[1] has mandated all insurance companies to furnish to the IRDA the details of the remuneration paid to any person by way of commission or otherwise, if the payment exceeds a sum of Rs. 100,000/-.
Prior to this circular, vide a circular dated May 9, 2003, the insurers were required to furnish as a part of their Directors Report as well as the financial statements submitted with the IRDA the details of all payments made in excess of the limits prescribed under the Section 217 (2A)(a) of the Companies Act, 1956. Under Section 217 (2A)(a) of the Companies Act, following limits have been prescribed:
a) if a person has been employed through out the financial year, a limit of Rs. 24,00,000/- for the aggregate remuneration paid during the financial year;
b) if the person has been employed for a part of the financial year, a limit of Rs. 2,00,000/- per month; or
c) if the person holds by himself or alongwith his spouse or dependent children at least 2% equity in the company, the limit equal to the remuneration drawn by the managing director, whole time director or manager.
While the above provision of the Companies Act applied to the employees of the company, by virtue of the above mentioned circular, in case of insurance companies the limits could have also applied to the payments made to third parties. The position has now been clarified, whereby all payments in excess of Rs. 1,00,000/- are required to be reported in the format specified by the IRDA.
It may be mentioned that under Section 31B(2) of the Insurance Act, 1938 (“Act”) every insurer shall before the close of the month following every year, is required to submit to the IRDA a statement showing the remuneration paid, whether by way of commission or otherwise, to any person in excess of the prescribed limits. The IRDA has been empowered to prescribe the format as well as the limit.
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