NBFC takeover Procedure

Following is the Procedure for NBFC takeover.

• Acquirer of NBFC can first go through the documents of the Target company and once Acquirer confirms the Acquisition of the said NBFC, MOU to be signed with some token money.
• KYC Documents, Business Plan and Projection for three years to be prepared in reference to incoming directors as suggested by the acquirer.
• Submission of Documents those prepared to be submitted to the RBI were the registered office of the company is located.
• Coordinating with and replying to all RBI queries raised for the purpose of takeover.
• After getting RBI approval letter to issue public notice in the two newspapers for 30 days as per the RBI regulations indicating such change of management and inviting any objections if any from the public or any interested parties.
• Signing of Share Purchase Agreement and handing over of change of management, payment of remaining considerations etc to be carried out on 31st day of newspaper notice or as mutually agreed by all the parties.

General Terms and Condition

• Please note that, all assets as shown in the target company balance sheet will be liquidated and liabilities will be paid off and Acquirer will get neat and clean bank balance in the name of company which will be calculated as networth as on the date of takeover and which will also be taken over by the concerned acquirer after acquisition of the said Non Banking Financial Company.
• As per our experience time required for getting RBI approval for change of management of the NBFC (Non Banking Financial Companies) will take 3 to 4 Months approximately.
• Credential of incoming Acquirer’s is one of the most important criteria in addition to track record of the company present status with RBI for getting RBI Approval for change of management.

1.Approvals

Take over of NBFC requires prior approval of RBI. Application in the letterhead of the Company can be submitted to the regional office of RBI having jurisdiction with a covering letter.

a. Information about the proposed directors/ shareholders as per the Annex;

b. Sources of funds of the proposed shareholders acquiring the shares in the NBFC;

c. Declaration by the proposed directors/ shareholders that they are not associated with any unincorporated body that is accepting deposits;

d. Declaration by the proposed directors/ shareholders that they are not associated with any company, the application for Certificate of Registration (CoR) of which has been rejected by the Reserve Bank;

e. Declaration by the proposed directors/ shareholders that there is no criminal case, including for offence under section 138 of the Negotiable Instruments Act, against them;

f. Bankers’ Report on the proposed directors/ shareholders.

g. Financials Statements/Annual Report for last Three years

Apart from the above a public notice of at least 30 days shall be given before effecting the sale of, or transfer of the ownership by sale of shares, or transfer of control, individually or jointly by the parties, one in national daily and one in vernacular daily news paper.

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

Please refer to DNBS (PD) CC.No.376/03.10.001/2013-14 and Notification No. DNBS(PD) 275/GM(AM)-2014 dated May 26, 2014 on the ‘Non-Banking Financial Companies (Approval of Acquisition or Transfer of Control) Directions, 2014‘. The Reserve Bank has decided to review the above mentioned directions based on the representations received from the industry and the comments received on the Draft Directions issued on March 30, 2015. The revised directions are detailed below.

2. Requirement of prior approval of Reserve Bank

(i) Henceforth, prior written permission of the Reserve Bank shall be required for

a. any takeover or acquisition of control of an NBFC, which may or may not result in change of management;

b.any change in the shareholding of an NBFC, time, which would result in acquisition/ transfer of shareholding of 26 percent or more of the paid up equity capital of NBFC. prior approval would, however not be required in case of any shareholding going beyond 26% due to buy back of shares/reduction of share capital where it has approval of the competent court. the same is however required to be reported to the reserve bank not later than one month from its occurrence.

c. any change in the management of the NBFC which would result in change in more than 30 per cent 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.

(ii) Notwithstanding clause (i), NBFCs shall continue to regarding any change 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 Important Non-Banking Financial (Non-Deposit Accepting or Holding) Companies Prudential Norms (Reserve Bank) Directions, 2015 and Systemically Important Non-Banking Financial (Non-Deposit Accepting Holding) Companies Prudential Norms  (Reserve Bank) Directions, 2015.

3. Application for prior approval

Applications in this regard may be submitted to the Regional Office of the Department of Non-Banking Supervision in whose jurisdiction the Registered Office of the NBFC is located.

4. Requirement of Prior Public Notice about change in control/ management

i. A public notice of at least 30 days shall be given before effecting the sale of, or transfer of the ownership by sale of shares, or transfer of control, whether with or without sale of shares. Such public notice shall be given by the NBFCs and also by the other party or jointly by the parties concerned, after obtaining the prior permission of the Reserve Bank.

ii. The public notice shall indicate the intention to sell or transfer ownership/ control, the particulars of transferee and the reasons for such sale or transfer of ownership/ control. The notice shall be published in at least one leading national and in one leading local (covering the place of registered office) vernacular newspaper.

iii. 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.

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

6. Repeal and saving-(i) Non-Banking Financial Companies (Approval of Acquisition or Transfer of Control) Directions, 2014 dated May 26, 2014, shall stand repealed.

(ii) 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.

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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 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	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	Name/s of the NBFCs, if any, with which the person is associated as Promoter, Managing Director, Chairman or Director including a Residuary Non-Banking Financial Company, which has been prohibited from accepting deposits/ prosecuted by RBI ?
18	Detail of prosecution, if any, pending or commenced or resulting in conviction in the past against the person and/or against any of the entities he is associated with for violation of economic laws and 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 default in the last 5 years in respect of credit facilities obtained from any entity or bank
20	If the person is a member of a professional association/ body, details of 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 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 person 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	Experience in the business of NBFC (number of years)
25	Equity shareholding in the company
(i)	No. of shares	……………………………
(ii)	Face value	Rs. ………………………..
(iii)	Percentage to total paid up equity share capital of the company	……………………………
26	Name/s of the companies, firms and 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 number of directorships held by the person exceeds the limits prescribed under Section 165 of the Companies Act, 2013
		Signature :
	Date :	Name :
	Place:	Designation :
		Company Seal :
* For foreign promoters/ directors/ shareholders Note: (i) Separate form should be submitted in respect of each of the proposed promoters/ directors/ shareholders

ANNEX

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 and contact details of compliance officer
6	Line of business
7	The details of their major shareholders (more than 10%) and 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	Name/s of Company/ies in the Group as defined in the Prudential Norms Directions
11	Name/s of the company/ies 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 prosecution, if any, pending or commenced or resulting in conviction in the past against the corporate for violation of economic laws and 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 corporate has been subject to any investigation at the instance 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	Has the promoter corporate/ majority shareholder of the promoter corporate, if a corporate, ever applied to RBI for CoR which has been rejected
		Signature :
	Date :	Name :
	Place:	Designation :
		Company Seal :
* For foreign corporate