What is NBFC?
A Non Banking Financial Company (NBFC) happens to be a company that is registered under the aegis of Companies Act, 2013 of India. It is involved in the trading of loans and advances, shares acquisition, stock, bonds, hire-purchase insurance business or chit-fund business.
Takeover of NBFC
Takeover of NBFC normally happens via the documents pertaining to the target firm. If Acquirer gets sanction to the takeover of the concerned NBFC, an MOU will be signed along with a token sum. Then Know Your Customer (KYC) Documents, Business Plan & Projection for 3 years have to be made with regard to incoming directors, as per the suggestion of the acquirer. Through this article, we intend to throw light on RBI regulation pertaining to the acquisition of NBFC.
Basic formalities
Relevant documents has to be submitted to the RBI by the acquirer. The acquirer has to reply to all RBI queries related to the takeover. After getting the approval letter from the RBI, the acquirer is required to issue a public notice in the 2 newspapers for 30 days in accordance with the RBI guidelines. This is done to invite any objection, if any, from the general public or any interested parties with regard to the change in management. The inking of Share Purchase Agreement & giving of change of management, payment of remaining considerations etc. has to happen on the 31st day of newspaper notice or as concurred by all the parties concerned.
The need of RBI Approval beforehand
Prior written consent of the RBI is needed for:
Any alteration in control of an NBFC, which might not lead to change of management;
Any change in the nature of shareholding, which would result in acquisition/ transfer of shareholding of 26 percent or more of the paid-up equity capital of NBFC. However, prior consent would not be mandatory if the nature of shareholding does not exceed 26 percent which is as a result of buy back of shares/ decrease of share capital and it has approval of the competent court. In such cases, the RBI has to be informed within 1 month from its occurrence.
Any change in the composition of the NBFC which would lead to an alteration in over 30 % of the directors, not including independent directors.
Beforehand approval is also not needed for those directors who are selected again post retirement on a rotational basis.
NBFCs will continue to concerning any alteration in their directors/ management as Financial Companies Acceptance of Public Deposits (Reserve inform the Reserve Bank required in Non-Banking Bank) Directions, 1998,
Non-Systemically Significant Non-Banking Financial (Non-Deposit Accepting or Holding) Companies Prudential Norms (Reserve Bank) Directions, 2015 & Systemically Important Non-Banking Financial (Non-Deposit Accepting Holding) Companies Prudential Norms (Reserve Bank) Directions, 2015.
Application for advance Approval
Applications pertaining to this can be submitted to the Regional Office of the Department of Non-Banking Supervision under whose authority the Registered Office of the NBFC is located.
The need of advance Public Notice regarding alteration in Control/Management
It is necessary to give public notice of at least 30 days in advance prior to conducting the sale of, or change of the ownership via selling shares, or alteration in control, either with or without the sale of shares. This type of public notice will have to be provided by the NBFCs & also by the other party or jointly by the relevant parties, post getting the advanced permission of the RBI.
The public notice should clarify the reason to sell or transfer ownership/ control, the details regarding transferee & the motive behind such sale or transfer of ownership/ control. The notice has to appear in at least one prominent national & in one popular local (covering the place of registered office) vernacular newspaper.
The guidelines mentioned above are applicable instantly i.e., the same will be valid for any takeover or acquisition of control, any diversion in the shareholding or any change in the management happening post the date of this circular.
Other laws apply as well
These guidelines will be including, & not in suppression of the essence of any other laws, rules, regulations or directions, till the time it is active.
Repeal & Saving
Non Banking Financial Company, (Approval of Acquisition or Transfer of Control) Directions 2014 dated May 26, 2014, will remain cancelled. Despite this, any thing done, purported to have been done or unleashed within the directions hereby nullified shall continue to be guided by the clauses of the stated directions.
Annex
Particulars about the suggested promoters/ directors/ shareholders of the Company
| Sr. No. | Particulars Required | Response |
| 1. | Name | |
| 2. | Designation | Chairman/ Managing Director/ Director/ Chief Executive Officer |
| 3. | Nationality | |
| 4. | Age (has be backed with the date of birth) | |
| 5. | Business Address | |
| 6. | Residential Address | |
| 7. | E-mail address/ Telephone number | |
| 8. | PAN Number under Income Tax Act | |
| 9. | Director Identification Number (DIN) | |
| 10. | Social security number/Passport No.* | |
| 11. | Educational/professional qualifications | |
| 12. | Professional milestone related to the task | |
| 13. | The area of business or vocation | |
| 14. | Any other information relevant to the Company | |
| 15. | Name/s of other companies in which the person has held the post of Chairman/ Managing Director/ Director/ Chief Executive Officer | |
| 16. | Name/s of the regulators (RBI, SEBI, IRDA, PFRDA, NHB or any other foreign regulator) of the entities mentioned in which the persons hold directorships | |
| 17. | Names of the NBFC, in case, the individual is related as Promoter, MD or Director comprising a Residuary NBFC, which has not been allowed to accept deposits/ prosecuted by the RBI? | |
| 18. | Details of the tribunal, if any, pending or commenced or resultant in a conviction in the past in contradiction of the person or against any of the entities he is associated with for violation of economic laws & regulations | |
| 19. | Cases, if any, involving the person or relatives of the person or the entities in which the person is associated with, are in default or have been in evasion in the last five years in related of credit services acquired from any entity or bank | |
| 20. | In case the person happens to a member of a professional association/ body, particulars of the disciplinary action, if any, pending or commenced or leading to conviction in the past against him/ her or whether he/ she has been barred entry of any professional occupation at any time | |
| 21. | Whether the person is eligible for disqualification provided under Section 164 of the Companies Act, 2013 | |
| 22. | Has the individual or any of the companies, he/ she belongs to, been under any kind of probe at the instance of the Government Department or Agency | |
| 23. | Has the person been found violating rules/ regulations/ legislative requirements by Customs/ Excise/ Income Tax// Foreign Exchange/ Other Revenue Authorities, if so, give particulars | |
| 24. | Involvement in the business of NBFC (number of years) | |
| 25. | Equity shareholding in the company No. of sharesFace valuePercentage of total paid up equity share capital of the company | |
| 26. | Name/s of the companies, firms & proprietary concerns in which the person holds substantial interest | |
| 27. | Names of the principal bankers to the concerns at 26 above | |
| 28. | Names of the overseas bankers * | |
| 29. | Whether the number of directorships held by the person goes beyond the limits permitted under Section 165 of the Companies Act, 2013 | |
| * For foreign promoters/ directors/ shareholders Note: Different form should be given with regard to each of the proposed promoters/ directors/ shareholders |
Information about Corporate Promoter
| Sr. No. | Particulars Required | Response |
| 1. | Name | |
| 2. | Business Address | |
| 3. | E-mail address/ Telephone number | |
| 4. | PAN Number under Income Tax Act | |
| 5. | Name & contact details of compliance officer | |
| 6. | Line of business | |
| 7. | The details of their major shareholders (more than 10%) & line of activity, if corporates | |
| 8. | Names of the principal bankers/ overseas bankers * | |
| 9. | Name/s of the regulators (RBI, SEBI, IRDA, PFRDA, NHB or any other foreign regulator) | |
| 10. | Names of Firms in the Group as defined in the Prudential Norms Directions | |
| 11. | Names of the firms in the Group that are NBFCs | |
| 12. | Specify the names of companies in the group which have been prohibited from accepting deposits/ prosecuted by RBI? | |
| 13. | Particulars of trial, if any, pending or started or led to a conviction in the past in contradiction of the corporation for violation of economic laws & regulations | |
| 14. | Cases, if any, wherein the corporate, has defaulted or have been in default in the last 5 years with regard to credit facilities sought from any entity or bank | |
| 15. | Whether the business has been under any kind of probe by the Government Department or Agency | |
| 16. | Has the Corporate been found guilty of violating rules/ regulations/ legislative requirements by Customs/ Excise/ Income Tax// Foreign Exchange/ Other Revenue Authorities, if so, give particulars | |
| 17. | Is the promoter corporate/ majority shareholder of the promoter business, if a business, ever applied to RBI for CoR which has been rejected |