PROCEDURE FOR BUY-BACK OF SHARES OF A NBFC (NON – BANKING FINANCIAL COMPANY), with format of Application to RBI
The buy-back procedure for an NBFC (Non-Banking Financial Company) involves compliance with the applicable regulations and guidelines set forth by the Reserve Bank of India (RBI). Below is a general outline of the steps involved in the buy-back process:
1. BOARD RESOLUTION: The first step is to convene a meeting of the Board of Directors of the NBFC to discuss and approve the proposal for the buy-back of securities. A board resolution should be passed, authorizing the buy-back and appointing a committee to oversee the process.
2. SHAREHOLDER APPROVAL: Depending on the type of securities to be bought back and the provisions of the Companies Act, 2013, shareholder approval may be required through a special resolution passed at a general meeting.
3. OBTAIN RBI APPROVAL: The NBFC must seek prior approval from the RBI for the proposed buy-back. An application, as per the format prescribed by RBI, should be submitted to the Regional Office of the RBI where the NBFC is registered.
Application for prior approval
[Applications in this regard needs to be submitted to the Regional Office of the Department of Non-Banking Supervision in whose jurisdiction the Registered Office of the NBFC is located. This needs to be submitted through physical submission only. You are advised to keep acknowledgement and one set of copy submitted documents for future reference.]
4. COMPLIANCE WITH RBI REGULATIONS: Ensure that the proposed buy-back complies with the RBI regulations, including the RBI (Shareholding Pattern and Capital Adequacy Norms for NBFCs) Directions and any other relevant circulars or guidelines.
5. DISCLOSURE AND PUBLIC ANNOUNCEMENT: The NBFC must make a public announcement of the buy-back, providing details of the offer, the number of securities to be bought back, the buy-back price, and the timeline for completion.
Requirement of Prior approval before Public Notice
On Receipt of Prior permission of the Reserve Bank, a public notice of at least 30 days is required to 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 can 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.
The public notice should 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 needs to be published in at least one leading national and in one leading local (covering the place of registered office) vernacular newspaper.
6. OPEN OFFER PERIOD: The open offer period, during which shareholders can tender their securities for buy-back, should be at least 15 days and not more than 30 days from the date of the public announcement.
7. PAYMENT OF CONSIDERATION: The consideration for the buy-back must be paid to the shareholders whose securities are accepted for buy-back within 7 working days from the closure of the open offer period.
8. FILING WITH RBI: The NBFC should submit a report to the RBI within 20 working days from the date of completion of the buy-back, providing details of the buy-back, including the number and amount of securities bought back.
9. REPORTING AND COMPLIANCE: The NBFC must comply with the reporting requirements as specified by the RBI and ensure that all necessary filings and disclosures are made with the Registrar of Companies (RoC).
It’s essential to note that the above steps are a general outline and may vary based on the specific provisions and guidelines issued by the RBI and the Companies Act, 2013. Therefore, it is advisable to consult with legal and financial advisors to ensure full compliance with the applicable laws and regulations before proceeding with a buy-back by an NBFC.
FORMAT OF APPLICATION BY NBFC TO RBI FOR APPROVAL OF BUY-BACK:
The Regional Director
Reserve Bank of India
[Regional Office Address]
[City, State, ZIP Code]
Subject: Application for Approval of Buy-Back by [Name of NBFC]
I am writing on behalf of [Name of NBFC], a registered Non-Banking Financial Company (NBFC) under the provisions of the Reserve Bank of India (RBI) Act, [NBFC Registration Number]. We are seeking the approval of the RBI for conducting a buy-back of our outstanding securities, in compliance with the applicable regulations and guidelines.
Details of the proposed buy-back are as follows:
Purpose of the Buy-Back:
The primary purpose of the buy-back is to enhance shareholder value and optimize the capital structure of [Name of NBFC].
Types of Securities for Buy-Back:
The proposed buy-back will involve the repurchase of [Types of Securities to be bought back, e.g., Debentures, Bonds, etc.] issued by [Name of NBFC] to the public.
Total Amount for Buy-Back:
The total amount allocated for the buy-back shall not exceed [Amount in INR] (Indian Rupees [Amount in Words]).
Sources of Funds:
The funds for the buy-back will be sourced from our free reserves as per the provisions of the Companies Act, 2013, and RBI guidelines.
Compliance with RBI Regulations:
[Name of NBFC] assures full compliance with the RBI (Shareholding Pattern and Capital Adequacy Norms for NBFCs) Directions, [applicable year], and all other relevant RBI guidelines pertaining to the buy-back of securities.
Compliance with Companies Act, 2013:
The proposed buy-back will be carried out in strict adherence to the relevant provisions of the Companies Act, 2013, and any other applicable laws.
The proposed buy-back is expected to be completed within [duration in days/weeks] from the date of RBI’s approval.
We hereby request the RBI’s approval for the proposed buy-back and assure you that all information provided in this application is accurate and complete. We will promptly furnish any additional information or documents as required by the RBI in connection with this application.
Thank you for considering our application. We look forward to receiving your approval at the earliest convenience.
[Name of NBFC]