RBI Regulation NBFC Takeover

Takeover shall mainly go through the documents of the target firm & once Acquirer sanctions the Acquisition of the said NBFC, MOU to be signed with some token money. KYC Documents, Business Plan & Projection for 3 years to be prepared in reference to incoming directors as suggested by the acquirer. In this article, we will tell RBI regulation NBFC takeover.

Giving of Documents those prepared to be submitted to the RBI were the registered office of the company is located. Coordinating with & replying to all RBI queries raised for the purpose of the takeover.

Subsequently receiving RBI approval letter to issue a public notice in the 2 newspapers for 30 days as per the RBI guidelines representing such modification of management & inviting any objections if any from the public or any interested parties. The signing of Share Purchase Agreement & handing over of alteration of management, payment of remaining considerations etc. to be carried out on the 31st day of newspaper notice or as mutually agreed by all the parties.

The requirement for obtaining prior approval of RBI in cases of acquisition/ transfer of control of Non-Banking Financial Companies (NBFCs)

The Requirement of Prior Approval of Reserve Bank of India

Henceforward, prior to writing consent of the Reserve Bank will be required for

  • Any takeover of NBFC or acquisition of control of an NBFC, which may or may not result in alteration of management;
  • Any alteration in the pattern of shareholding, which shall consequence in acquisition/ transfer of shareholding of 26 percent or more of the paid-up equity capital of NBFC & prior approval would, however not be obligatory in case of any shareholding pattern which goes behind 26 percentage which is due to buy back of shares/reduction of share capital where it has consent of the competent court. The similar is, however, obligatory to be stated to the reserve bank not later than 1 month from its occurrence.
  • Any alteration in the organization of the NBFC which would result in a change in more than 30 % of the directors, excluding independent directors.

Provided that Prior approval would not be required for those directors who get re-elected on retirement by rotation.

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 Prior Approval

Applications in this respect may be given to the Regional Office of the Department of Non-Banking Supervision in whose jurisdiction the Registered Office of the NBFC is situated.

The requirement of Prior Public Notice about change in Control/Management

  • A public notice of at least 30 days shall be given before effecting the sale of, or transfer of the ownership by the sale of shares, or transfer of control, whether with or without the sale of shares. Such public notice shall be given by the NBFCs & also by the other party or jointly by the parties concerned, after obtaining the prior permission of the Reserve Bank of India.
  • The public notice will specify the intention to sell or transfer ownership/ control, the particulars of transferee & the reasons for such sale or transfer of ownership/ control. The notice will be published in at least one leading national & in one leading local (covering the place of registered office) vernacular newspaper.
  • The directions contained above are applicable with immediate effect, i.e., the same will apply on any takeover or acquisition of control, any change in the shareholding or any change in the management occurring after the date of this circular.

Application of other laws not barred

The provisions of these Directions shall be in addition to, & not in derogation of the provisions of any other laws, rules, regulations or directions, for the time being in force.

Repeal & Saving

Non-Banking Financial Companies (Approval of Acquisition or Transfer of Control) Directions, 2014 dated May 26, 2014, shall stand repealed. Notwithstanding such repeal, any action taken, purported to have been taken or initiated under the directions hereby repealed shall continue to be governed by the provisions of the said directions.

Annex

Information about the proposed 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 (to be substantiated 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 Achievement relevant to the job

 

13. The line 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, if any, with whom the individual is related as Promoter, MD or Director comprising a Residuary NBFC, which has been forbidden from accepting deposits/ prosecuted by 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, where the person or relatives of the person or the companies 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. If the person is a member of a professional association/ body, details of the disciplinary action, if any, pending or commenced or resulting in conviction in the past against him/ her or whether he/ she has been banned from the entry of any professional occupation at any time

 

21. Whether the person attracts any of the disqualification envisaged under Section 164 of the Companies Act, 2013

 

22. Has the individual or any of the companies, he/ she is associated with, been subject to any investigation at the instance of the Government Department or Agency

 

23. Has the person at any time been found guilty of violations of 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 shares

Face value

Percentage 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 exceeds the limits prescribed under Section 165 of the Companies Act, 2013

 

* For foreign promoters/ directors/ shareholders

Note: Separate form should be submitted in respect of 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. Detail of trial, if any, pending or begun or resultant in a conviction in the past in contradiction of the corporation for violation of economic laws & regulations

 

14. Cases, if any, where the corporate, is in default or have been in default in the last 5 years in respect of credit facilities obtained from any entity or bank

 

15. Whether the business has been subject to any investigation at the example of the Government Department or Agency

 

16. Has the Corporate at any time been found guilty of violations of 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

 

 

 

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