Reinsurance businesses with charter capital lower than the minimum charter capital according to regulations Can we increase capital?

Can a reinsurance enterprise with a charter capital lower than the minimum charter capital according to the new regulations increase its capital?

According to the provisions of Clause 4, Article 35 of the Decree 46/2023/ND-CP, reinsurance enterprises must have the following minimum charter capital:

(1) Reinsurance business, non-life reinsurance transfer or both types of non-life reinsurance and health reinsurance: VND 500 billion.

(2) Reinsurance business, life reinsurance transfer or both life reinsurance and health reinsurance: 900 billion VND.

(3) Reinsurance business, accepting reinsurance for all three types of life reinsurance, non-life reinsurance and health reinsurance: 1,400 billion VND.

Whether a reinsurance enterprise has a charter capital lower than the minimum charter capital according to the new regulations will increase its capital, according to the provisions of Clause 5, Article 35 of Decree 46/2023/ND-CP as follows:

Minimum charter capital

…

5. Insurance enterprises and reinsurance enterprises established, organized and operating before the effective date of this Decree and with a charter capital lower than the minimum charter capital prescribed in this Article must complete the addition of charter capital and deposits according to regulations before January 1, 2028.

Accordingly, if a reinsurance enterprise established, organized and operating before July 1, 2023 has a charter capital lower than the minimum charter capital prescribed above, before January 1, 2028, it must complete the addition of sufficient charter capital and deposit according to regulations.

Can shareholders of a reinsurance enterprise use loan capital to contribute capital to the enterprise?

Can shareholders of a reinsurance enterprise use loan capital to contribute capital to this enterprise, according to the provisions of Article 64 of the Law on Insurance Business 2022 as follows:

General conditions for issuance of establishment license and operations of insurance enterprises and reinsurance enterprises

1. Conditions for shareholders and members contributing capital to establish:

a) Organizations and individuals have the right to establish and manage enterprises in Vietnam according to the provisions of the Enterprise Law;

b) The organization has legal status and is operating legally; In case of contributing 10% or more of charter capital, the business must be profitable for the last 3 consecutive financial years up to the time of submitting the application for license and meet the financial conditions according to the Government’s regulations;

c) Insurance enterprises and reinsurance enterprises that have been licensed to establish and operate in Vietnam must contribute capital to establish a new insurance enterprise or reinsurance enterprise and must have been profitable for the last 3 consecutive financial years up to the time of submitting the application for license and meet the capital adequacy ratio as prescribed by this Law.

2. Capital conditions:

a) charter capital is contributed in Vietnam Dong and is not lower than the minimum level as prescribed by the Government;

b) Shareholders and founding members are not allowed to use loan capital or investment trust capital from other organizations or individuals to contribute capital.

3. Personnel conditions: have a Chairman of the Board of Directors or Chairman of the Board of Members, Director or General Director, legal representative, Actuarial expert expected to meet the conditions and standards of management capacity, experience and professional expertise specified in Article 81 of this Law.

4. Have an organizational form according to the provisions of this Law and have a draft charter consistent with the provisions of the Enterprise Law.

According to the above regulations, shareholders of a reinsurance enterprise are not allowed to use loan capital to contribute capital to this enterprise.

How many institutional shareholders must a reinsurance enterprise have at least?

The minimum number of shareholders of a reinsurance enterprise is prescribed in Article 66 of the Law on Insurance Business 2022 as follows:

Conditions on the structure of shareholders contributing capital to establish an insurance enterprise or reinsurance enterprise in the form of a joint stock company

The establishment of an insurance enterprise or reinsurance enterprise in the form of a joint stock company must meet the general conditions specified in Article 64 of this Law and the following conditions:

1. There are at least 02 shareholders who are organizations and each shareholder meets the following conditions:

a) Must contribute 10% or more of the charter capital of the insurance enterprise or reinsurance enterprise;

b) Conditions specified in Article 65 of this Law;

2. An individual shareholder may not contribute more than 10% of the charter capital of an insurance enterprise or reinsurance enterprise.

Thus, a reinsurance enterprise in the form of a joint stock company must have at least 02 institutional shareholders and each shareholder meets the conditions specified in Clause 1, Article 66 above.