IRDAI Orders Care Health to Buy Back ESOPs from Chairperson Saluja

The Insurance Regulatory and Development Authority of India (Irdai) has instructed Care Health Insurance Ltd (CHIL) to repurchase employee stock ownership plans (ESOPs) granted to its non-executive Chairperson, Rashmi Saluja. Additionally, Irdai imposed a fine of Rs 1 crore on CHIL for breaching its regulations.

Representative image

According to Irdai's order, the 2016 Remuneration Guidelines mandate that non-executive directors, including chairpersons, should not receive any remuneration other than profit-related commissions and sitting fees. This guideline was violated by CHIL when it granted ESOPs to Saluja.

Violation of ESOP Guidelines

CHIL is a subsidiary of Religare Enterprises, where Saluja serves as the executive chairperson. The issuance of ESOPs to Saluja in her capacity as the executive chairperson of Religare Enterprises contravenes legal provisions. The order dated July 23 highlighted this violation.

The law prohibits any form of payment to non-executive directors other than profit-related commissions and sitting fees. Consequently, CHIL must buy back 75,69,685 shares allotted to Rashmi Saluja at Rs 45.32 per share, adhering to the Companies Act, 2013.

Compliance Requirements

CHIL has been directed to complete the buyback within 30 days from the date of the order. Any unexercised or unvested stock options granted to Saluja must be cancelled and revoked. Furthermore, CHIL must ensure no further grants or allotments are made to her.

To ensure proper management, any decision by CHIL's Board regarding remuneration or benefits for any member, including the MD & CEO, requires prior approval from Irdai. This directive aims to maintain regulatory compliance and governance standards.

Penalty Imposed

Irdai also imposed a penalty of Rs 1 crore on CHIL for its violations. The insurer must deposit this amount within 45 days from the date of the order. This penalty underscores the importance of adhering to regulatory norms in the insurance sector.

Saluja is currently engaged in a dispute with Dabur group promoters Burmans over control of Religare Enterprises. This conflict was triggered by an open offer bid from Burmans to acquire a 26% stake from public shareholders.

Conflict with Burmans

The Burmans hold around 25% of Religare Enterprises through entities such as MB Finmart, Puran Associates, VIC Enterprises, and Milky Investment and Trading Co. They announced their open offer on September 25, 2023.

Following this bid, Burmans lodged complaints with the Securities and Exchange Board of India (Sebi) regarding insider trading violations by Saluja and her board appointments. They also raised concerns about the ESOPs granted to her by CHIL.

Irdai's actions against CHIL highlight the regulator's commitment to enforcing compliance within the insurance sector. The directives issued aim to rectify governance issues and ensure adherence to established guidelines.