REQUIREMENTS AS PER RBI ACT, 1934
1. Requirement of prior approval of Reserve Bank
Requirement for obtaining prior approval of RBI in cases of acquisition/ transfer of control of Non-Banking Financial Companies (NBFCs).
2. Application for prior approval
NBFCs shall submit an application, in the company letter head, for obtaining prior approval of the Bank, along with the following documents:
a. Information about the proposed directors/ shareholders;
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; and
f. Bankers’ Report on the proposed directors/ shareholders.
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.
3. 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 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.
REQUIREMENTS AS PER COMPANIES ACT, 2013
1. Draft Memorandum of Understanding/ Offer of scheme:
The procedure for Non-Banking Financial Company Takeover triggers off from the Memorandum of Understanding (MOU) to get signed with the proposed company. It defines that both of the companies are ready to move into a takeover agreement. At the time when MOU gets approved, the acquirer company pays the token money to the target company.
2. Convene Board Meeting:
Hold and convene a Board Meeting for approving the Memorandum of Understanding/Draft offer of Scheme.
3. Send offer of scheme to the Transferor Company:
The Scheme so approved shall be sent to transferor Company for Considering the Terms & Conditions of the Scheme.
4. Sign Share Transfer Agreement:
Both the Parties shall Sign the Share Transfer Agreement. (Physical Form SH-4).
5. NOC from Creditors:
The Transferor Company is required to obtain No- Objection certificate from Creditors of the Company.
6. Valuation the entity:
The Transferor Company is required to obtain a Valuation Report from a Registered Valuer.
7. Convene Board meeting containing consideration of the offer and its acceptance:
After Scheme gets approved by Transferor Company the Transferee Company Convene 2nd BM for considering the Consideration payable and the Offer and Acceptance of the Scheme.
8. Transfer of Asset & Liabilities:
The Assets & Liabilities of the Transferor Company transferred to Transferee Company
9. Send notice to dissenting shareholders in CAA 14:
In case the Company acquires the 75% shares of the Company under the scheme or Contract the Transferee Company has right to squeeze out the Minority Shareholders (New Provision under takeover). A notice is required to be given to Minority Shareholders to transfer of rest the shares of the Transferee company in form CAA 14.
10. Within one month of sending notice in CAA 14 pay cash or other consideration the Transferor Company:
The Consideration should be paid to Minority Shareholders upon transfer within one month.