The government has allowed increase in the authorised share capital and paid-up capital of State Life Insurance Corporation (SLIC) to meet requirement of United Arab Emirates (UAE) government due to continuous drop in local currency.
The Commerce Division briefed the cabinet that SLIC was established under the Life Insurance (Nationalisation) Order, 1972. The federal government had 100% equity in the corporation.
SLIC is also operating in the UAE through its zonal office. It provides life insurance coverage to Pakistanis living in UAE. SLIC had informed vide letter dated September 11, 2019 that under the UAE laws, the paid-up capital of insurance companies operating in the UAE should not be less than AED 100 million.
Due to continuous drop in the exchange rate of rupee against the UAE dirham, the existing paid-up capital of SLIC had fallen short of the mandatory threshold of AED 100 million.
The SLIC board of directors, in a meeting held on August 1, 2019, approved enhancement in the authorised share capital and paid-up capital of the corporation from Rs5,000 million to Rs6,000 million and Rs4,000 million to Rs4,750 million, respectively, which was forwarded to the Finance Division for grant of necessary concurrence, before formal approval of the federal cabinet could be obtained in the matter.
However, instead of enhancing the paid-up capital to the requested amount of Rs4,750 million, the Finance Division in its letter on December 24, 2019 enhanced the paid-up capital from Rs4,000 million to 4,300 million by allowing retention of Rs300 million instead of Rs750 million from dividends to be declared for FY2019-20.
In response, the SLIC management informed that the said enhancement was not sufficient and reiterated that paid up capital may be enhanced to Rs4,750 million, which had been approved by the board in their 270th meeting held on August 1, 2019.
Accordingly, the Finance Division was requested to re-examine the request of SLIC and grant the requisite approval. The Finance Division on December 30, 2020 enhanced the paid-up capital to Rs4,600 million by allowing retention of further Rs300 million. It allocated Rs200 million from reserves and Rs100 million from the un-appropriated profits payable to the federal government for FY2020-21 to meet the regulatory requirement of the UAE authorities.
The federal government is the competent forum to accord approval regarding increase in the authorised share capital and paid-up capital of the corporation.
The Ministry of Commerce endorsed the request of SLIC to be read with recommendation of the Finance Division on December 24, 2019 and December 30, 2020 for enhancement of paid-up capital from Rs4,000 million to Rs4,300 million and from Rs4,300 million to Rs4,600 million, respectively.
It further recommended the cabinet to approve increase in authorised share capital from Rs5,000 million to Rs6,000 million. It also recommended increasing paid-up capital from Rs4,000 million to Rs4,300 million by retaining Rs300 million from dividends to be declared for FY2019-20 and from Rs4,300 million to Rs4,600 million by retaining Rs300 million.
The cabinet considered the summary titled ‘Increase in the authorised share capital and paid-up capital of SLIC to meet requirement of UAE government’ and approved the proposal.
Published in The Express Tribune, June 20h, 2021.