Clients
NBFCs are companies established under the Companies Act. They are granted the NBFC License by the Reserve Bank of India (RBI). NBFCs are intermediaries involved in the business of providing finances. They accept deposits, deliver credit and play a very significant role in channelizing the scarce financial resources towards infrastructure development and creation of earning opportunities. They supplement the organized banking sector by meeting the ever-increasing financial needs of the corporate sector, delivering credit to the unorganized sector and other small borrowers. However, they cannot be involved in any agricultural activity, industrial activity, sale, purchase or construction of immovable property.
NBFCs focus on activities related to loans and advances, acquisition of shares, bonds, debentures, stocks, securities issued by the government/local authority or other similar marketable securities, leasing, insurance business, hire-purchase, etc. The financial services offered by NBFCs include disbursement of finances and loans, acquisition of stocks/shares/ bonds, etc.
The sale of NBFC would involve two parties and a series of transactions between the NBFC, which is selling, with the larger entity, which is the buyer. It would merge these two companies into one. The buyer or the Acquirer Company would procure:
To sell NBFC, its balance sheet has to stand at null & void and all assets & liabilities transferred to the Acquirer. So to sell your NBFC, there must be a buyer or an Acquirer Company willing to buy. RBI has mentioned a detailed guide so any ambiguity about buying or selling NBFC has been eliminated. And experts advise having all the agreements & details of the deal, with the Acquirer, in the written and signed form to avoid any confusion and uncertainty.
Selling NBFC and getting RBI approval for the change in management of the NBFC takes approximately 2-3 months. Therefore, it is advised to check the credential of Acquirer Company and that the agreement with it will hold good during this period.
The first step to selling NBFC is that this sale is approved by the members, in a Board resolution, in both, the Target and the Acquirer companies.
Once both the Boards have consented, you’ll have to share the business and administration documents with the Acquirer Company. When it confirms to proceed with the process of closing down, you should sign an MOU (Memorandum of Understanding) with it. At this time, you should be provided some token money as proof of buying.
To sell your NBFC, you need to keep ready your KYC Documents, Business Plan and Projection prepared for the next 3-years for the new or replacing Directors of the Acquirer.
These documents are to be submitted to the Regional Office of RBI under whose jurisdiction the registered office of your NBFC comes.
Organizing with and responding to any questions being raised by RBI concerning the transaction.
As RBI approves of the deal, the public has to be notified. This is done to invite objections, if any, from the public or any interested parties. Therefore, a publication has to be issued, as per RBI guidelines, in one daily national and one daily local newspaper, indicating that a change in management is about to take place.
On the 31st day of the newspaper notice, both parties can sign the Share Purchase Agreement. Or some other day of the handover can be decided between both of you. The management & administration will be handed over to the Acquirer. And you would receive the balance payment.
Further, RBI stipulates that the assets as shown in your balance sheet are to be liquidated and liabilities are to be paid off. And that the Acquirer receives a clean bank balance in the name of the NBFC. The net worth of your NBFC is to be calculated on the date of sale, as per the method described by RBI.
After getting RBI’s approval for the sale, a public notice is to be given in one leading national daily and one leading local daily newspaper at least 30 days before the date when this transaction is about to take place. To indicate clearly that such a sale of shares, or transfer of control. To enable the members of the public to raise objection, if any.
The conditions are:
At least 30 days before the planned date when the actual sale or transfer of the ownership by sale of shares, and/or transfer of control, a public notice is to be issued. Such public notice is to be given by all the parties concerned, after receiving prior approval of the RBI. They may choose to do this together or separately.
The plan to sell or transfer ownership/control of the NBFC. All the particulars of the transferee, and the reasons for this transaction, must be indicated clearly in the public notice.
The notice shall be published in at least one leading national daily newspaper and another leading daily newspaper of the local language of the place of registered office of your NBFC.
As mentioned above, sale, takeover or certain changes in the Board of Directors of an NBFC requires prior approval from RBI. All documents to be submitted to RBI must be filed in agreement with the Acquirer Company.
An application and a cover letter, on the letterhead of the Company, are to be submitted to the regional office of RBI having jurisdiction.
Details about the proposed Directors/shareholder members, their KYC, ID/address proof, education & qualification proofs are to be enclosed with the application.
The sources from where the Acquirer is arranging the funds necessary to buy out your NBFC.
Statement by the proposed Directors/shareholders that they have not been involved with any other entity which is engaged in the business of loans and accepting deposits, but is not registered with RBI.
Declaration by the proposed Directors/members that they have not been involved with any such company, whose application for Certificate of Registration (CoR) was rejected by the RBI.
Statement by the proposed Directors/shareholders declaring that there is no criminal case against them, pending or convicted. Including any offense u/s 138 of the Negotiable Instruments Act.
Clean Banker’s Report on the proposed Directors/members.
Financial Statements and Annual Reports since the beginning of your NBFC or the last three years, whichever is more.
Apart from the above, a public notice is to be given, at least 30 days before actualizing the sale of, or transfer of the ownership by the sale of shares, or transfer of control, individually or jointly by the parties. This notice is to be published in at least one national daily and one in the vernacular daily newspaper.
Before selling your NBFC, you would need to first check whether prior approval from the RBI for the sale is required or not. RBI has specified certain cases when the sale transaction needs approval from RBI before the process is initiated.
For the following situations, prior approval is mandatory. And if proper documents are not submitted, the application shall be considered null and the transaction gets cancelled.
LegalRaasta was founded on the principle that sophisticated legal and taxation services should be simple, modern, and inexpensive. We can serve our clients more efficiently thanks to cutting-edge practise technology.
By continuing past this page, you agree to our Terms and Conditions Privacy Policy and Refund Policy | Copyright © 2015-2024 LegalRaasta.com| All Rights Reserved