Change in Management of NBFC
Change in management of NBFC arises when there is takeover or sale of NBFC.
What is Change in Management of NBFC?
Change in the management of companies is very usual. The changes that happen in the usual course of business in NBFC need to be done as per guidelines provided by the Reserve Bank of India.
Any change in management of NBFC that may or may not result in a change of management control needs prior approval of Reserve Bank of India. A written Prior permission of the Reserve Bank shall be required. Any change in the shareholding of an NBFC, including progressive increases over time in shareholding or of the paid-up capital up to 26% needs to be notified to the RBI in advance.
However, Prior approval is not required in case of an increase in shareholding beyond 26% due to the buyback of shares or reduction in the capital where approval of a competent court has already been granted. However, the change needs to be notified to RBI within one month of the event.
Any change in the management of the NBFC resulting in a change in the board of directors up to 30%, excluding independent directors, does not need any prior approval of RBI.
Also, if there is any sale/transfer of ownership/ control in NBFC the company needs to give 30 days prior public notice after obtaining prior approval of RBI. Also, the other party or jointly both the parties concerned, after obtaining prior permission of RBI needs to give 30 days prior public notice.
Procedure to be followed for making changes in management of NBFC
This notice is indicative of following:
This notice shall be given in one of the leading English language newspaper and in one vernacular newspaper where the registered office of the company is situated.
There are various Annexure prescribed by the RBI in its notifications entailing the information about the directors/promoters / shareholders of the company. The NBFCs needs to provide the required information to the Reserve Bank before applying for approval. If the information given is not correct, the application will not be entertained, and approval will be delayed.
The Reserve Bank has made the norms for change in management of non-banking financial companies (NBFCs) very stringent by making it mandatory to seek prior approval from it. Prior written permission of the Reserve Bank is a must for any takeover or acquisition of control of an NBFC, which may or may not result in a change of management.
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