Section 6 of IA : Section 6: Requirements As To Capital

Explanation using Example

Imagine a group of entrepreneurs want to start a new insurance company in India that will provide health insurance policies to the public. Before they can register their company and begin operations, they must ensure they meet the requirements of Section 6 of the Insurance Act, 1938.

According to Section 6, they need to have a minimum paid-up equity capital of one hundred crore rupees (₹100,00,00,000) since they are planning to carry on exclusively the business of health insurance. This means they must secure this amount of funding before applying for registration with the insurance regulatory authority.

Furthermore, they have to comply with other relevant laws, like the Companies Act, 2013, and the Securities and Exchange Board of India Act, 1992, when increasing their paid-up capital in the future. If they incur any preliminary expenses during the formation and registration of their insurance company, these costs cannot be included in the calculation of their paid-up equity capital, as per the second provision of Section 6.