In Short:
Insurance regulator IRDAI has instructed Care Health Insurance Ltd to repurchase 7.57 million shares issued to Rashmi Saluja, non executive Chairperson of Religare Enterprises Ltd, at ₹45.32 each. They imposed a ₹1 crore fine and cancelled remaining stock options. IRDAI deemed the issuance of stock options a violation of regulations. Approval was denied in 2021 when Saluja was with Care Health as a non-executive director. Compliance with IRDAI guidelines is necessary.
IRDAI Directs Care Health Insurance to Buy Back Shares Issued to Rashmi Saluja
Hey there! Big news in the insurance world today. The Insurance Regulatory and Development Authority of India (IRDAI) has instructed Care Health Insurance Ltd (formerly known as Religare Health Insurance) to repurchase 7.57 million shares issued to Rashmi Saluja, who is the non-executive Chairperson of Religare Enterprises Ltd (REL). These shares were initially priced at ₹45.32 each.
But wait, that’s not all. IRDAI has also slapped a fine of ₹1 crore on Care Health (a subsidiary of REL) and ordered the cancellation of Employee Stock Options (ESOPs) that have not been exercised or are still unvested by Saluja. Tough times for Care Health!
The Verdict
In a recent order dated July 23, IRDAI made it clear that granting stock options of Care Health to Saluja, in her role as the executive chairperson of REL, goes against the Insurance Regulatory and Development Authority Act of 1999 and its related regulations. Not looking good for Care Health, right?
And there’s more – Care Health is now barred from offering any future stock options to anyone. Ouch, that’s gotta hurt!
History of ESOPs
Let’s rewind a bit to 2021. Care Health had sought approval from IRDAI to issue stock options to Saluja, who was serving as a non-executive director of the health insurance company. However, IRDAI rejected this request due to remuneration guidelines that prohibited the payment of “profit-related commission” to non-executive directors. Despite this rejection, Care Health went ahead and issued a whopping 22.7 million ESOPs, out of which Saluja managed to exercise 7.57 million by October 2023. Sneaky, huh?
When questioned by IRDAI, Care Health defended its decision by stating that Saluja received ESOPs because of her executive role at Religare Enterprises Limited, not as a non-executive director at Care Health. But IRDAI wasn’t having any of it and ruled that Care Health had indeed violated the regulations.
IRDAI pointed out that any payments made to Saluja, who holds multiple positions, including being a non-executive director and chairperson at Care Health, required prior approval from the authority. Looks like someone missed that memo!
“It doesn’t matter that Rashmi Saluja was also the executive chairperson of REL. Rules are rules, and they must be followed,” stated the IRDAI order. Tough luck for Care Health!
