Section 4 of The General Insurance Business (Nationalisation) Act, 1972
- (1)On the appointed day, all the shares in the capital of every Indian insurance company shall, by virtue of this Act, stand transferred to and vested in the Central Government free of all trusts, liabilities and encumbrances affecting them.
- (2)Out of the shares so transferred and vested, the Central Government shall, immediately thereafter, by notification, provide for the transfer of not less than ten shares of every such company to such persons as may be specified in the notification to enable the Indian insurance company to function as a Government company.
- (3)Every notification made under sub-section (2) shall specify the names and description of the persons to whom the shares are transferred and the particulars of the shares which are transferred to each such person.
- (4)A copy of every notification made under sub-section (2) shall, as soon as may be after it is made, be sent by the Central Government to the concerned Indian insurance company, who shall, on receipt of such copy, and notwithstanding anything contained in the Companies Act or in its articles of association, forthwith rectify its register of members by including therein the persons mentioned in the notification as the holders of the shares specified therein.
- (5)For the removal of doubts it is hereby declared that the transfer and vesting of shares effected under sub-section (1) shall not be deemed to affect any right of the Indian insurance company subsisting immediately before the appointed day against any shareholder to recover from him any sum of money on the ground that that shareholder has not paid or credited to the insurer the whole or any part of the value of the shares held by him or on any other ground whatsoever.
Summary
- This provision automatically transfers all shares of Indian insurance companies to the Central Government on the appointed day.
- These shares are transferred completely free of any trusts, liabilities, or encumbrances, meaning the government takes them with no strings attached.
- The government must then give at least ten shares to specific people so the company can legally function as a Government company.
- The company must immediately update its register of members to show these new shareholders.
- The transfer does not cancel the company's right to demand unpaid share money from the previous shareholders.
Practical examples
FAQ
1. Who gets the shares on the appointed day?
They are transferred to and vested in the Central Government.
2. Does the government keep every single share?
No, it must transfer not less than ten shares to specified persons.
3. Why are these few shares given to other people?
This is done to enable the Indian insurance company to function as a Government company.
4. If an old shareholder still owed money on their shares, are they forgiven?
No, the company keeps the right to recover any unpaid share values from the old shareholders.
Test yourself
Q1.Under Section 4 of The General Insurance Business (Nationalisation) Act, 1972, what happens to the existing trusts and liabilities attached to the shares when they transfer to the Central Government?
Q2.Under Section 4 of The General Insurance Business (Nationalisation) Act, 1972, what is the minimum number of shares the Central Government must transfer to other persons after taking ownership?
Q3.Under Section 4 of The General Insurance Business (Nationalisation) Act, 1972, what must an Indian insurance company do immediately upon receiving a copy of the notification about the new share transfers?
Q4.Under Section 4 of The General Insurance Business (Nationalisation) Act, 1972, if a shareholder had only paid half the value of their shares before the appointed day, what is their status after the transfer?