Can capital contributing members of a reinsurance company use loan capital to contribute capital to establish the company?

Is the reinsurance company organized as a limited liability company?

The form of organization and operation of a reinsurance company is prescribed in Article 62 of the Law on Insurance Business 2022 as follows:

Forms of organization and operation of insurance enterprises and reinsurance enterprises

1. Joint stock company.

2. Limited liability company.

Accordingly, reinsurance companies can still be organized in the form of limited liability companies.

Can capital contributing members of a reinsurance company use loan capital to contribute capital to establish the company?

Whether capital contributing members of a reinsurance company can use loan capital to contribute capital to establish a company, according to the provisions of Article 64 of the 2022 Law on Insurance Business as follows:

General conditions for licensing the establishment and operation 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, capital contributing members of a reinsurance company are not allowed to use loan capital to contribute capital to establish the company.

Capital contributing members of a reinsurance company must be an organization, right?

Capital contributing members of a reinsurance company must be an organization, according to the provisions of Article 65 of the Law on Insurance Business 2022 as follows:

Conditions for members contributing capital to establish an insurance enterprise or reinsurance enterprise in the form of a limited liability company

Members contributing capital to establish an insurance enterprise or reinsurance enterprise in the form of a limited liability company must be an organization that meets the general conditions specified in Article 64 of this Law and the following conditions:

1. Conditions for organizations established under foreign laws:

a) Being an insurance enterprise, reinsurance enterprise, foreign financial or insurance corporation;

b) Be certified by a foreign competent authority that the insurance enterprise, reinsurance enterprise, foreign financial or insurance corporation has not seriously violated the provisions of law on insurance business of the country where the enterprise is headquartered within the latest 03 consecutive years up to the time of submitting the application for license;

c) The field expected to request a license to perform in Vietnam is the field that the insurance enterprise, reinsurance enterprise, foreign financial or insurance corporation is directly implementing or has a subsidiary implementing for at least the last 07 consecutive years;

d) Have total assets of not less than 02 billion US dollars in the year immediately preceding the year of submitting the application for an establishment and operation license;

d) Commitment to support in finance, technology, corporate governance, risk management, operations and operations for insurance enterprises and reinsurance enterprises expected to be established in Vietnam; ensure that these insurance enterprises and reinsurance enterprises comply with regulations on financial safety and risk management according to the provisions of this Law;

e) Insurance enterprises, reinsurance enterprises, foreign financial and insurance corporations that meet the conditions specified in Points b, c, d and dd of this Clause may authorize a subsidiary specializing in performing the function of investing abroad to establish insurance enterprises and reinsurance enterprises in Vietnam. Subsidiaries specializing in performing the function of investing abroad must meet the conditions specified in Point d of this Clause;

2. Conditions for economic organizations established under the provisions of Vietnamese law: have total assets not less than 2,000 billion VND in the year immediately preceding the year of submitting the application for license;

3. Pursuant to the provisions in Point d, Clause 1 and Clause 2 of this Article, the Government specifically stipulates the minimum total assets appropriate to each period.

Thus, capital contributing members establishing a reinsurance company in the form of a limited liability company must be an organization, and meet the general conditions specified in Article 64 and Article 65 of the Law on Insurance Business.