Nepal High Court Upholds Insurance Authority Decision: CEOs Cannot Serve as Directors in Other Companies
4th September 2025, Kathmandu
The High Court of Patan has dismissed a writ petition filed by Mr. Anjan Bhandari, upholding the Insurance Authority of Nepal’s decision that CEOs and employees of insurance companies cannot serve as directors in other insurance or investment-related companies.
CEOs Cannot Serve as Directors
This ruling reinforces the importance of corporate governance and conflict-of-interest regulations within the Nepalese insurance sector. The court’s verdict, delivered by Justices Rishi Raj Bhandari and Tej Prasad Sharma Sapkota, found the Insurance Authority’s regulation to be legally sound and consistent with the Insurance Act, 2022.
Background and High Court Verdict
The legal challenge began on June 15, when Mr. Anjan Bhandari filed a writ petition at the High Court of Patan. The petition, registered as Case No. 081WO2660, sought to overturn the Insurance Authority’s decision. Bhandari argued that the restriction on holding directorships in other investment or insurance companies was an illegal limitation on personal investment rights and professional opportunities for CEOs and key employees.
The Insurance Authority, represented by Deputy Director Birodh Bhatta, Sub-Director Suvita Thapa, and Assistant Director Bunu Ghimire, countered this argument. They emphasized that allowing such dual roles could lead to conflicts of interest, where individuals might favor their personal investments over the company’s fiduciary responsibilities. The Authority’s representatives maintained that strict governance rules are essential for protecting policyholders’ funds and ensuring the transparency and integrity of the insurance sector.
The High Court of Patan, after reviewing the arguments, sided with the Insurance Authority. The court’s reasoning was grounded in the principle that insurance companies manage public funds, and any conflict of interest at the executive level could lead to mismanagement. The court ruled that the regulation is a necessary preventive measure to maintain corporate discipline and uphold the standards of the Insurance Act, 2079. It concluded that the Authority’s decision to prohibit CEOs and employees from serving as directors in other companies with insurance or investment stakes is a valid exercise of its regulatory power.
Implications of the Ruling
The High Court’s decision is a landmark moment for corporate governance in Nepal’s insurance industry, setting a strong legal precedent. The verdict has several key implications:
Strengthened Regulatory Oversight: The ruling empowers the Insurance Authority to enforce its regulations more effectively. It ensures that CEOs and key employees will remain focused on their primary roles, reducing the likelihood of conflicting decisions that could potentially harm the company or its policyholders. This enhanced oversight promotes a more stable and accountable business environment.
Enhanced Investor Confidence: By reinforcing ethical standards and minimizing conflicts of interest, the ruling builds greater trust among both policyholders and investors. Knowing that insurance company leaders are legally bound to act solely in the interest of their primary company enhances confidence in the financial stability and ethical conduct of the sector.
Ethical Governance and Legal Precedent: The court’s judgment makes it clear that personal gains should not compromise fiduciary responsibilities. It sends a strong message that the legal framework is designed to protect stakeholders and maintain market integrity. This decision will serve as a legal precedent for future challenges regarding the Insurance Authority’s governance rules, strengthening compliance across the industry. This is a crucial step towards establishing a more robust and ethically sound financial market in Nepal.
In conclusion, the High Court’s decision underscores Nepal’s commitment to robust corporate governance and ethical standards in the insurance sector. By upholding the Insurance Authority’s directive, the court has reinforced the principle that executives must prioritize their companies’ interests over personal investments. This ensures that insurance companies operate with high ethical standards, maintain transparency, and protect the interests of policyholders, ultimately contributing to the stability and growth of the financial sector. The ruling serves as a reminder to CEOs and employees that professional growth must align with the legal framework designed to protect stakeholders and uphold market integrity.
For More: CEOs Cannot Serve as Directors
