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			The Insurance Regulatory and Development Authority of India (Irdai) has expressed reservations about the deal structure in the proposed merger of Max Life Insurance Company with HDFC Life. Sources said the regulator&rsquo;s concerns are around Section 35 of the Insurance Act 1938, which specifies norms for merger of insurance companies.</div>
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			In a notification to the stock exchanges, Max India on Saturday said that Irdai has expressed reservations in accepting the scheme of amalgamation in its current form. &ldquo;Max Life and HDFC Life believe that the scheme of arrangement as submitted to the Irdai is in compliance with all applicable laws and propose to represent and clarify the matter to Irdai,&rdquo; it said.</div>
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			According to Section 35 of the Insurance Act 1938, no life insurance business of an insurer can be transferred to any person, or transferred to or amalgamated with the life insurance business of any other insurer, except in accordance with a scheme prepared under this Section and approved by the Authority.</div>
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			&ldquo;Since Section 35 talks about merger of one life insurance company with another life insurance company, Irdai officials are interpreting it as a merger between one insurance business and another (non-insurance) business,&rdquo; said an official involved in the merger deal.</div>
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			As per the deal structure, Max Life was to merge with Max Financial Services, which would in turn merge with HDFC Life. The deal structure was designed in this manner so that HDFC Life would automatically get listed on the stock exchanges since Max Financial Services is already listed.</div>
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			Max Financial Services is the holding company of Max Life Insurance. Sources said that regulatory officials expressed some concerns about the deal structure since the last stage of the merger was between a holding company and a life insurance company.</div>
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			&ldquo;This is only a temporary procedure. At the end of the day, one life insurer&rsquo;s business is merging with the other. It is only a matter of interpretation,&rdquo; said a senior company executive of one of the two insurance companies.</div>
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			Representatives of both the insurers will meet Irdai officials to apprise them of the deal contours. The companies had sought the advice of five legal firms, which were working with them to finalise the deal. Their legal opinions with respect to the proposed merger structure will also be presented to the regulator.</div>
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			An application was filed by Max Life and HDFC Life, seeking the in-principle approval of Irdai for the above-mentioned scheme on September 21, 2016.</div>
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			In June 2016, Max Financial Services and HDFC Limited had said their respective boards had approved entering a confidentiality, exclusivity and standstill agreement to evaluate a potential combination through a merger. Their joint venture partners, Mitsui Sumitomo Insurance of Japan and Standard Life of the UK, have also given the nod for the proposal. <span class="Apple-tab-span" style="white-space:pre"> </span></div>
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			When the final swap ratios of the deal were disclosed in August 2016, it was announced that Max Life Insurance will merge with HDFC Life in the next 12 months. The company officials are hoping to stick to this deadline for the merger, though they will now be required to get through the Irdai hurdle first.</div>
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			Earlier, the non-compete fee to be paid to Analjit Singh and his family was expected to be an obstacle for the merger. However, in September 2016, Max Financial Services said that its minority shareholders have given their assent to the payment of Rs 850 crore as non-compete fee to Analjit Singh and family as part of the deal to merge Max Life Insurance with HDFC Life. In the insurance industry, no merger between companies has taken place ever since the sector was thrown open to private companies in 2000. Hence, when this deal is successfully completed, it would be the first such merger in the private life insurance space post privatisation.</div>
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The regulator's concerns are around Section 35 of the Insurance Act 1938, which specifies norms for merger of insurance companies, said sources

Are M&amp;As the new normal for big IT players?

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	<a href="//datawrapper.dwcdn.net/MIwXk/1/" target="_blank"><strong><span style="font-size:14px;"><span style="color:#800000;">How the two insurers stack up</span></span></strong></a><br />
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HDFC Life-Max Life deal faces Irdai hurdle

The regulator's concerns are around Section 35 of the Insurance Act 1938, which specifies norms for merger of insurance companies, said sources

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