NBFC Registration your trusted growth partner for Non-Banking financial companies (NBFCs).
NBFC Registration your trusted growth partner for Non-Banking financial companies (NBFCs).
Our NBFC Consultant team offers over 20+ years of collective expertise, featuring a dedicated team of former bankers and experienced CA and CS professionals. We deliver strategic, expert-driven solutions to support your business’s growth and success
NBFC takeover involves various forms of acquisition, including the purchase of shares, merger, or amalgamation of one NBFC by another. This process can bring several benefits and opportunities, but it also comes with its own set of challenges and considerations.
We see a time when creative solutions completely transform the way lending institutions operate. Our goal is to set the standard for NBFC advisory services by fostering an innovative and exceptional culture that transforms the market.
Acquiring another NBFC allows for geographical expansion, reaching new customer segments, and diversifying the business portfolio.
The takeover enables access to a larger customer base, which can lead to enhanced business opportunities and revenue growth.
Integration with another NBFC may bring complementary services or expertise, allowing for diversification of offerings and reducing dependency on specific products or markets.
Consolidating operations can lead to cost synergies, improved operational efficiency, and better utilization of resources.
Conduct a thorough due diligence process to assess the financial, operational, and legal aspects of the target NBFC.
Determine the fair value of the target NBFC to negotiate an appropriate acquisition price.
Negotiate the terms of the takeover, including the purchase price, payment structure, and any conditions precedent.
The acquisition must be approved by regulatory authorities, such as the RBI.
To formalize the takeover, prepare and execute legal documents, including share purchase agreements and transfer documents.
Implement integration plans to merge operations, systems, and processes of the acquired NBFC with the acquiring entity.
The eligibility criteria for an NBFC takeover typically depend on regulatory requirements set forth by the governing authority, such as the Reserve Bank of India (RBI) in the case of India. Here are some common eligibility criteria that potential acquirers must meet:
An NBFC shall require prior written permission of the Reserve Bank for the following:
1. Any takeover or acquisition of control of the NBFC, may or may not result in change of management;
2. Any change in the shareholding of the NBFC, including progressive increases over time, which would result in acquisition/ transfer of shareholding of 26 percent
3. Provided that, prior approval would not be required in case of any shareholding going beyond 26 percent due to buyback of shares/reduction in capital where it has approval of a competent Court. However, the same is to be reported to the Reserve Bank not later than one month from its occurrence.
4. Any change in the management of the NBFC which would result in change in more than 30 percent of the directors, excluding independent directors.
5. Provided that, prior approval would not be required in case of directors who get reelected on retirement by rotation.
NBFCs shall submit an application, in the company’s letter head, for obtaining prior approval of the Reserve Bank, along with the following documents:
1. information about the proposed directors/shareholders as per RBI Master Direction; click here
2. Sources of funds of the proposed shareholders acquiring the shares in the NBFC;
3. Declaration by the proposed directors/shareholders that they are not associated with any unincorporated body that is accepting public deposits;
4. Declaration by the proposed directors/shareholders that they are not associated with any company, the application for CoR of which has been rejected by the Reserve Bank;
5. 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
6. Bankers’ report on the proposed directors/ shareholders.
Applications in this regard shall be submitted to the Regional Office of the Department of Supervision of the Reserve Bank in whose jurisdiction the Registered Office of the NBFC is located.
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 NBFC and also by the other party or jointly by the parties concerned, after obtaining the prior permission of the Reserve Bank.
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.
Investments in NBFCs from FATF non-compliant jurisdictions shall not be treated at par with those from the compliant jurisdictions. New investors from or through non-compliant FATF jurisdictions, whether in existing NBFCs or in companies seeking CoR, should not be allowed to directly or indirectly acquire ‘significant influence’ in the investee, as defined in the applicable accounting standards. In other words, fresh investors (directly or indirectly) from such jurisdictions in aggregate should be less than the threshold of 20 percent of the voting power (including potential voting power8) of the NBFC.
Investors in existing NBFCs holding their investments prior to the classification of the source or intermediate jurisdiction/s as FATF non-compliant, may continue with the investments or bring in additional investments as per extant regulations so as to support continuity of business in India.
