Central Bank to freeze NLICL's accounts

The Nepal Rastra Bank (NRB) has decided to freeze the bank accounts of the National Life Insurance Company Ltd (NLICL) following a dispute in the board of the company
“The central bank received a letter from the Beema Samiti to take action against the NLICL. Taking a cue from the missive, the NRB has written to all financial institutions to put transactions of the insurance company on hold with immediate effect. A circular will be sent out tomorrow,” said the NRB source.
“Due to the dispute in the NICL’s board, the Beema Samiti got in touch with the NRB to stop all transactions,” said a board member of the Beema Samiti. Over the past six years, the NLICL board — comprising seven members — has been engaged in inter-personal bickering.
As the internal feud spun out of control, the insurance firm’s board was forced to take the harsh decision as both the splinter groups — one led by ex-chairman Dambar Bahadur Malla and the other by the incumbent Prema Rajya Lakshami Singh — staked their majority in the management. Of the seven board members, four owe their allegiance to Singh and three have thrown their lot behind Malla.
This is yet another example of lack of corporate culture and good governance in the companies.
To make matters worse, the NICL is yet to comply with the minimum paid up capital norms that is pegged at Rs 250 million. The firm’s paid up capital stands at only Rs 130.2 million. “Despite the board’s repeated efforts, the company failed to increase its capital as per the Insurance Act,” said the source. In a bid to shore up its liquidity, the NLIC had announced 1:1 rights shares — through the Citizen Investment Trust (CIT
Though the Security Board of Nepal (Sebon) approved the move on February 9, the allotment of the rights shares is yet to see the light of the day. “We are looking into the issue of the non-allotment of rights shares," said Niraj Giri, director, Sebon
Meanwhile, sources in the troubled insurance company maintained that the rights shares — amounting to the equivalent amount of the paid up capital — had not been issued due to the growing management tussles. Both Malla and Singh’s faction had applied separately for approval from the Company Registrar Office, queering the procedural pitch. The NLIC has the following break up of stakes — promoters own 45 per cent, 10 per cent belongs to foreign joint investor, 35 per cent to the public and the rest 10 per cent is in the custody of the Raastriya Banijya Bank(RBB).
"Interestingly, the Beema Samiti has absolutely no clue who the foreign joint-investor is,” added the source.